This story by Michael Cooper was published Oct. 6, 2010 in the New York Times.
The nation’s cities are in their worst fiscal shape in at least a quarter of a century and have probably not yet hit the bottom of their slide, according to a report released on Oct. 6.
The report, by the National League of Cities, found that many cities, which are in their fourth straight year of declining revenues, are only now beginning to see lower property values translate into lower property tax collections, which are the backbone of many city budgets.
It can take several years for city assessors to catch up to real estate market conditions, and this year, for the first time since the housing bubble burst, cities are projecting a 1.8 percent decrease in property tax collections.
With sales tax collections still down, and unemployment and stagnant salaries taking a toll on cities that rely on income-tax revenues, cities are seeing their revenues drop even faster than many of them have been able to cut spending. They also face the additional burden of paying rising health care and pension costs for their employees.
“The effects of a depressed real estate market, low levels of consumer confidence, and high levels of unemployment will likely play out in cities through 2010, 2011 and beyond,” the report said.
Cities around the country have made steep cuts to stay afloat, from layoffs of firefighters and police officers to turning off street lights. The report, which surveyed finance officers in 338 cities, found that two-thirds of them were canceling or delaying construction and maintenance projects, a third were laying off workers and a quarter were cutting public safety.
Christopher W. Hoene, one of the authors of the report, said in an interview that the length of the downturn had dealt cities an unusual blow: in most recessions, he said, sales tax collections start to improve by the time property tax collections drop to reflect lower home values.
“This time around, the recession has been deep enough that we have the two major sources of revenue down at the same time,” Mr. Hoene said.
And cities have few places to turn for help, leaving tax increases and service cuts as their main options.
“Right now there isn’t really anywhere to turn,” Mr. Hoene said, noting that many states are now cutting aid to cities, not increasing it. “The state budgets are in a position where they are more likely to hurt than to help.”