City finances improve but remain tenuous.

• Position: News & Numbers

A majority of city finance officers report that their cities are better able to meet financial needs in 2013 than in 2012, according to the National League of Cities' latest City Fiscal Conditions report. This is largely a result of slowly improving housing markets and increased consumer spending, which are strengthening local tax bases and economic outlooks in local and regional economies. However, continued high levels of unemployment, uncertainty about federal and state actions, and long-term pension and health benefit obligations continue to constrain the potential for strong economic growth for many cities.

Beyond 2013, the report finds that a number of factors will play roles in determining the fiscal conditions of cities, including the strength of the real estate market and its impact on property tax revenue; the level of consumer confidence, employment, and wages; the costs of health-care coverage and pensions; and the continuation of cities operating with reduced workforces and service levels. In addition, external policy shifts in the face of an economic recovery, including cuts in federal spending and threats to regional-local economic conditions from political gridlock on issues such as the federal budget and U.S. debt ceiling.

Below is a summary of findings.

Revenue and Spending Trends

* For 2013, city finance officers project a small year-over-year increase in general fund revenues, the first increase since 2006.

* In a shift from prior years, more city finance officers report increases in the local tax base (51 percent) and the overall health of the local economy (66 percent).

* Property tax revenues continued to decline in 2012 and are projected to decline in in 2013, as well, reflecting the lagging impact of real estate market declines.

* Sales tax revenues and local income tax revenues increased markedly in 2012, with projections for further growth in 2013.

* Ending balances increased in 2012 as cities began to rebuild reserves that were used to help weather the aftermath of the Great Recession. Similarly...