The Pew Charitable Trusts studied the finances of the nation’s 30 largest cities.
Researchers say local government revenue has recovered to pre-recession levels in one-third of 30 U.S. cities they studied and detailed in a report published this week.
The report by the Pew Charitable Trusts also notes that local officials’ financial recovery efforts often are frustrated by state regulations – which Pennsylvania’s municipal officials and financial experts often bemoan.
“States impose significant constraints on cities, and cities are creatures of the state, so they have limited flexibility in responding to not just the Great Recession, but other revenue volatility going forward,” says Mary Murphy, a Pew researcher on the project team behind the report.
“Even in cities where revenues were rebounding, those rebounds may be tenuous,” Murphy says.
1. Recovery seems inconsistent in most places.
Nine cities lost revenue in 2011, but that doubled to 18 in 2012. Pittsburgh was one of four cites with revenues that in 2011 exceeded, then the next year fell below, pre-recession peaks. Atlanta, Dallas and Chicago were the others.
2. Cities increased spending, as government funding and property tax collections both dropped 4 percent in 2012 alone across the entire group.
Pittsburgh lost 28 percent of its state and federal funding – the most of all cities studied.
The American Reinvestment and Recovery Act initially delayed state and federal funding cuts. But local governments started feeling the effects in 2010.
That’s about the time the housing market tumult cut into municipalities’ tax collections.
Although the real estate market is getting stronger again, that’s not consistent in all U.S. regions.
And even where it is happening, its benefit to property tax collections will be delayed, according to the report.
3. To make up for property tax and government funding losses, Philadelphia and other cities have instituted or increased fees, charges and rates for income and sales taxes.
Those revenues dropped during 2008 through 2010 in most cites. But since then, that trend has reversed.
Murphy says she and her colleagues did not parse how much higher rates that drove revenues above pre-recession peaks versus outright economic growth.
4. Critical services remain vulnerable, and officials say they don’t have enough money to maintain, repair and replace infrastructure.
Half cut public safety spending, with seven reporting record-low spending in 2012.
And cities cut parks, recreation and culture spending more often than anything else since 2007; social services and health, least frequently.
But spending on public works and transportation rose recently: Atlanta is launching a downtown street carline, San Diego’s diving into $900 million in deferred drainage infrastructure projects, and Denver’s building a regional rail-bus system.
5. Cities are still rebuilding savings tapped during the recession. Eighteen of 30 improved reserves to an average 14 percent of operating expenses – just shy of the 16 percent target recommended by financial experts.
The pair of Florida cities fell on opposite ends of the spectrum in this respect: Orlando’s reserve was among the best-funded at 40 percent of its budget, while Tampa’s 15 percent drop in 2012 was the most dramatic.
It even surpassed Detroit, whose infamous bankruptcy was preceded by city officials “repeatedly transferr(ing) money from other funds … to plug budget gaps.”
Not all cities suffered cuts to their most critical revenue sources.
Government aid increased steadily since 2007 and a surge in 2012 pushed the city’s revenues above pre-recession peaks.
Asked why that happened, Murphy says she’s not sure. But she says other government agencies remain volatile income sources for municipalities.
2. Kansas City
Missouri’s capital city gets more money from local income tax than any other source. Typically, property tax revenue tops the list.
Voters, however, must approve the rate each year, which creates an effect City Manager Troy Schulte likens to “walking a razor blade” – which has been exacerbated by its record-low property tax collections.
3. Cities with revenue that’s above pre-recession peaks, by between 1 and 13 percent.
In addition to Cincinnati, the group of 10 includes Washington, D.C. (13 percent higher), San Francisco, Portland, Seattle, Boston, San Antonio, St. Louis and Minneapolis (1 percent higher).
4. New York’s revenue in 2012 was the same as in 2007.
5. Baltimore built its reserves by 9 percent in 2012, the largest increase that year among the cities.