November 6, 2009
By the close of 2009, city revenues are projected to decline by 0.4% while expenditures rise by 2.5% compared to the previous year. Three top city revenue sources are expected to be flat or decline: sales tax revenues are predicted to fall by 3.8%, income tax receipts to drop by 1.3% and property tax receipts to rise by just 1.7%.
The survey found that 88% of the municipal finance officers surveyed report that their community will be less able to meet fiscal needs in 2009 than in 2008.
The City Fiscal Condition Survey is a national survey of U.S. municipal officers authored by Michael Pagano of the University of Illinois at Chicago and Christopher Hoene of the NLC. It includes a representative statistical sample from municipalities with different populations from all regions of the country.
When asked about the factors that have a negative impact on municipal finances, the following items made the top of the finance officers’ list:
• employee wages (83%);
• the state of the economy (81%);
• employee health benefit costs (79%);
• infrastructure costs (75%);
• pensions (75%); and
• public safety costs (71%)
Most respondents (91%) reported making budget cuts in 2009 and 82% reported more cuts were likely in 2010. The most common areas identified for cuts were freezing hiring and/or laying off staff (67%) or cancelling capital projects (62%). On the revenue side, 45% of cities responding reported increasing fees and 25% increased property tax rates.
The effects of the downturn in the real estate market have not been fully felt, but projections point a declining trend. In 2008, property tax collections rose by 6.9%. However, in 2009 they are expected to rise by only 1.7%.