Revenue and spending shifts in 2010 and 2011 portray a worsening fiscal picture for America's cities.
With a national economic recovery that has been weak or stalled, and taking into account a lag between economic shifts and the effects for city budgets, it seems very likely that cities will confront further revenue declines and cuts in city spending in 2012.
Cities ended fiscal year 2010 with the largest year-to-year reductions in general fund revenues and expenditures in the 25-year history of the survey. In constant dollars (adjusted to account for inflationary factors in the state-local sector), general fund revenues in 2010 declined -3.8% from 2009 revenues, while expenditures declined by -4.4%. Looking to the close of 2011, city finance officers project that general fund revenues will decline by -2.3% and expenditures will decline by -1.9%.
The fiscal condition of individual cities varies greatly depending on differences in local tax structure and reliance.
City finance officers are predicting decline or little growth in all three major sources of tax revenue for cities in 2011.
The effects of the well-publicized downturn in the real estate market in recent years are increasingly evident in city property tax revenues in 2011. Property tax revenues in 2010 dropped by -2.0% compared with 2009 levels, in constant dollars, the first year-to-year decline in city property tax revenues in fifteen years. Property tax collections for 2011 point to worsening effects from the downturn in real estate values, projected to decline by -3.7%. The full weight of the decline in housing values is now evident in city budgets, and property tax revenues will likely decline further in 2012 and 2013 as city property tax assessments and collections catch up with the market.
City sales tax receipts declined in 2010 over previous year receipts by -8.4% in constant dollars, the largest year-to-year decline in fifteen years. However, city sales tax revenues appear to have stabilized in 2011. They are projected to essentially remain flat (increase of 0.3%) over 2010 levels.
City income tax projections for 2011 are for a decrease of -1.6% in constant dollars, as wages and salaries continue to reflect local job losses and a national unemployment rate hovering around 9%