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NLC's 1993 City Fiscal Survey: executive summary.

* After a substantial downturn in 1990, cities' fiscal positions did not show much improvement for the next two years. NLC's annual survey suggests that city fiscal conditions in 1993 will continue that trend.

* 53.1 percent of all cities reported that 1993 General Fund expenditures are expected to exceed current-year revenues, slightly more than the 46.1 percent reported for 1992.

* The rate of growth in average per capita revenues (0.8 percent) and average per capita expenditures (2.2 percent) of the General Fund is expected to decline in 1993 compared to the growth rates of the previous year; and those growth rates are less than the expected inflation rate of 3.3 percent for 1993.

* Average per capita ending balances for 1993 are expected to drop by nearly 10 percent from 1992 ending balances, a decline from $101.30 per capita to $90.70 per capita. The impact of this decline is not uniform for all cities. Some cities can absorb the ending balance decline better than others.

* A disproportionately higher percentage (27.1 percent) of rural cities (cities located in non-Metropolitan Statistical Areas) and cities in the Western

(26.1 percent) and Midwestern (22.9 percent) census regions expect their 1993 General Fund expenditures to exceed their 1993 revenues by more than 5 percent, compared to 19.5 percent of all cities. Some of those Western and rural cities have positioned themselves to weather the economic recession by building up reserves in earlier years.

* Higher percentages (21.4 percent) of the nation's largest cities (population greater than 300,000), central cities (11.8 percent), and Northeastern cities (24.7 percent) had General Fund ending balances in 1993 that were estimated to be less than 1 percent of expenditures, compared to 9.3 percent of all cities.

* On the positive side, almost three of four U.S. cities expect that General Fund ending balances will amount to more than 5 percent of expenditures in 1993. 83.0 percent of all Southern cities expect 1993 ending balances to exceed 5 percent of expenditures.

* 70.5 percent of all cities raised taxes or fees and/or imposed new taxes or fees during the past 12 months, generating approximately $1.7 billion in new city revenues nationwide. In 1992, $3.7 billion in new taxes and fees were raised.

* Intergovernmental aid to cities has declined by 19.4 percent since 1980 in constant dollars. Federal aid amounted to $63.6 per capita in 1980, dropping to $29.4 per capita in 1993, a decline of 53.8 percent. State aid increased from $72.4 per capita in 1980 to $80.2 in 1993, a 10.8 percent increase. Constant-dollar state aid has not replaced the decline in federal aid during the period, 1980-1993.

* While two in five cities identified areas in which productivity levels were improved, 17.0 percent of all cities have actually reduced city service levels. 38.1 percent of the nation's largest cities and 29.3 percent of Western cities reported that this action had been taken. Cities reported a wide range of productivity improvements and service level reductions. Lasts of each are included in the report.

The Survey

A survey of city fiscal conditions was sent to all 536 cities over 50,000 population and a sample of 1,068 cities with populations between 10,000 and 49,999 in March and April 1993. Questionnaires were received from 688 cities, for a response rate of 42.9 percent. The following are other major findings from the survey:

General City Fiscal Conditions

* 66.3 percent of all cities say that they are less able to meet their cities' financial needs in 1993 than last year.

* Enacted tax and fee increases are expected to generate approximately $1.7 billion in 1992-93 for all cities with 10,000 population or more. Coupled with state tax and fee increases of $3 billion in 1993, states and cities (excluding cities with fewer than 10,000 population) hiked taxes and fees by nearly $4.7 billion in 1992-93.

* The average ending balance in 1993 for all cities is expected to be $5.9 million, a 6.3 percent decline from the 1992 average ending balance of $6.3 million.

* Nearly one-fifth (19.5 percent) of all cities expect their current-year expenditures to exceed current-year revenues by more than the standard 5 percent. This figure is only somewhat larger than the 14.2 percent in 1992 and the 15.2 percent in 1991, suggesting that the fiscal situations of cities are not worsening significantly.

* 26.1 percent of cities in the Western census region, 22.9 percent of Midwestern cities, and 27.1 percent of rural cities expect expenditures to exceed revenues by more than 5 percent in 1993. A much smaller 14.4 percent of the nation' s central cities, none of the largest cities, and only 9.2 percent of cities in the Northeastern census region expect such a revenue-expenditure imbalance m 1993.

* More than 50 percent of all Northeastern cities, 51 percent of the nation's largest cities, and 32 percent of central cities have drawn down their ending balances to less than 5 percent of their expenditures, signaling an erosion in their fiscal cushion.

Causes of Fiscal Problems

Respondents were asked to select three factors from a set of 19 that most significantly created difficult city fiscal situations. The most frequently identified factors were identical to those named in the last year's fiscal conditions survey:

* City employee health benefits were mentioned as one of the three most important factors by 51.1 percent of all cities;

* infrastructure needs were mentioned by 32.5 percent;

* unfunded federal and state mandates by 28.9 percent; and

* the state of the local economy by 25.1 percent.

Fiscal Policy Adjustments

Nearly two in five cities identified areas in which productivity levels were improved, more than the 33.6 percent that reported such action in 1992. Moreover, as a means of reducing cities' fiscal burdens in service delivery, 23.1 percent of all cities engaged in interlocal agreements or cost-sharing arrangements with other levels of government, almost identical to last year's response of 22.8 percent.

* 38.0 percent of the nation's cities froze municipal hiring, and 40.4 percent actually reduced municipal employment. Aggregate data for all cities shows a no-growth pattern m average per capita full-time and part-time employment in 1993.

* The nation's largest cities are expected to reduce full-time employment by 3.0 percent in 1993, while the medium-sized cities (50,000-100,000 population) expect a 2.1 percent increase.

* The large cities (population between 100,000 and 300,000) expect a 5 percent increase in part-time employees, while the small cities expect a 3.8 percent decline.

* 17.0 percent of all cities have actually reduced city service levels, up slightly from the 14 percent that reported such action in 1992.

* 71.5 percent of all cities reduced the growth rate in operating spending, nearly identical to last year's 73.4 percent.

* 55.4 percent reduced actual levels of capital spending, also nearly equal to 1ast year's 61.2 percent.

* After increasing per capita general obligation debt outstanding in 1992 by 6.2 percent, cities expect to reduce their outstanding general obligation debt by 1.3 percent in 1993.

* After an 8.5 percent surge in revenue debt outstanding in 1992 to $344.30 per capita, cities expect this statistic to inch upward to $348.60 per capita in 1993, a 1.2 percent increase, and nearly identical to per capita general obligation debt outstanding ($348.90 per capita).

* 70.5 percent of all cities raised taxes or fees and/or imposed new taxes or fees during the past year. This response varied little by city size and region, although small cities (population between 10,000 and 50,000) were more likely to have raised existing, or imposed new, taxes or fees (86.0 percent) than the largest cities (67.0 percent).

* 51.5 percent of all cities have responded to their fiscal situations by increasing fees and charges; 24.6 percent have adopted new fees.

* 29.1 percent of all cities raised the property tax rate.

* As a result of raising tax rates, the average increase in tax revenue to city budgets amounted to $7.87 per city resident. As a result of raising fees and charges or imposing new ones, the average increase in fee revenue amounted to $3.99 per city resident.

NLC's report, "City Fiscal Conditions in 1993," was compiled on the basis of nearly 700 responses from municipal budget officials across the country. This yearly report provides an accurate and timely assessment of the fiscal shape of our nation's cities and towns.

The findings are not surprising. City budgets remain stressed. Ending balances are down. City revenues continue to grow more slowly than inflation. In response, cities and towns have increased productivity, reduced services, and increased taxes and fees.

Complete copies of the report (order #5611) can be obtained from the NLC Publications Center, P.O. Box 491 Annapolis Jct. MD 20701 (301) 725-4299 Fax: (301) 206-9789.

The cost of the report is $20.00 for NLC member cities and $30.00 for non-members, plus $4.00 shipping and handling. Checks should be made payable to the National League of Cities.
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Title Annotation:includes related information about the survey; National League of Cities
Author:Pagano, Michael
Publication:Nation's Cities Weekly
Date:Jul 12, 1993
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