Study: Cities Facing Increased Financial Woes

The unprecedented economic conditions facing the nation are increasingly straining the ability of cities to meet their financial needs, according to a study released Wednesday by the National League of Cities. Precipitous drops in home prices have helped drain cities of much-needed tax revenue, leaving 84 percent of cities surveyed facing fiscal difficulties, up from 64 percent only 6 months ago, the group said. The 84 percent figure is the highest percentage in the history of NLC’s surveys, dating back to 1985. Not surprisingly, almost all cities responding expect the current economic hardship to continue well into 2009. 92 percent of the cities surveyed expected to have trouble meeting their city needs during this year, and are implementing hiring freezes and layoffs, delaying capital expenditures and instituting service cuts. “Cities are responding as best they can,” said Donald J. Borut, executive director, NLC. “Their citizens have increasing needs for services just at the same time that revenues are declining. Cities are implementing creative solutions and making very difficult decisions amid rapidly changing economic circumstances.” City finances tend to lag the overall economy by 12 to 24 months — which means that the degrading economic conditions seen during the fall months will be felt by cities through 2009 and likely through most of 2010, as a result. Write to Paul Jackson at [email protected].