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Study: Cities slash services amid economic slump

September 1, 2009 by The Associated Press / BETH FOUHY (Associated Press Writer)

NEW YORK (AP) — The economic downturn has taken a toll on U.S. cities, forcing them to slash jobs, raise taxes and fees and limit hours of operation at libraries, zoos, parks and other popular facilities, according to a survey.

The National League of Cities' 2009 report on city fiscal conditions released Tuesday had some good news for city residents: About half of all cities maintained or even increased spending on public safety.

But NLC research director Christopher Hoene warned that cities including Los Angeles, Dallas and Chicago have explored cuts to public safety as a way to cope with future budget shortfalls.

"The worst of the recession's impact for cities still isn't here yet. We'll be feeling it in 2010 and 2011," Hoene said. "That means service cuts and quality-of-life changes that define who you are as a city."

Because of how cities raise and collect their revenues, the report found they will be weathering the effects of the downturn long after a national economic recovery is under way. Persistent state budget shortfalls will also contribute to cities' fiscal woes, as states continue to slash aid to local governments.

The NCL report was based on data collected from fiscal officers in 380 cities across the country. Nearly all of those surveyed have populations of 50,000 or more.

A steep drop in property tax revenues has had a major impact on cities, about 95 percent of which collect and rely on property tax revenue to fund services. About half have a local sales tax and 10 percent have a local income tax.

Hoene said cities that suffered the worst of the housing and foreclosure crisis like Phoenix and Las Vegas were the first to feel the effects of the downturn. The next wave were cities that rely most heavily on sales and property tax, including San Diego, Dallas, Miami, Chicago and other, smaller cities in the Midwest.

To meet their fiscal challenges, the report found that 67 percent of cities have cut jobs or enacted a hiring freeze while 62 percent have delayed or canceled capital projects. Only 14 percent have cut public safety so far, the report found.

To boost revenue, 27 percent of cities reported raising fees on services like water use and garbage collection; 25 percent hiked property taxes; and five percent raised their sales tax.

Even as city revenues have dropped, their wage, pension and health care costs have steadily climbed and will continue to do so even without an economic recovery, the report found.

The report did not measure the effects of the recession on city schools because only about a dozen states allow cities to run their own school systems.

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National League of Cities: http://www.nlc.org