CITY FISCAL
CONDITIONS
IN 2001
By
Michael A. Pagano
Professor of Political Science, Miami University
and
Research Fellow, Center for Public Management and
Regional Affairs
July 2001
A Research Report of the National League of Cities
Copyright © 2001 by the
National League of Cities
Washington, D.C. 20004
City Fiscal Conditions in 2001
TABLE
OF
CONTENTS
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
iii
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
v
I.
Overview of the Fiscal Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General Fund Revenue Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Ability to Meet Financial Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
II.
City Responses to the Fiscal Environment . . . . . . . . . . . . . . . . . . . . . . .
Revenue & Expenditure Actions in 2001
Growth in Revenues/Expenditures and Ending Balances
Ending Balance Goals
Mid-Year Adjustments
2000 Census
11
14
18
22
25
33
Appendix A. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
Appendix B. Responding Cities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
Appendix C. About the Center for Public Management & Regional Affairs . . 47
National League of Cities • Research Report on America’s Cities
City Fiscal Conditions in 2001
FOREWORD
This annual report of city fiscal conditions describes the results of the National
League of Cities’ survey of municipalities conducted during the months of March and
April of 2001. The survey findings are supplemented by several narrative descriptions based on interviews with city officials
The report focuses on recent trends in municipal finance and fiscal policy actions.
The survey data show that the percentage of cities reporting improvements in their
financial situations is at its lowest point since 1994. Despite this, the majority of
cities continue to report improved financial conditions and ending balances remain
high. The report also highlights city concerns about the cost of employee health
benefits and reveals that public safety and infrastructure needs are top spending priorities for cities.
NLC has conducted this study annually for more than a decade in order to provide
timely and reliable research that more clearly focuses the public debate on municipal
finance. This study is intended to help city officials, policy makers, and citizens better understand the affairs of the nation’s municipal governments and their important
roles in shaping the political and economic vitality of the nation. This study also
examines how a broad array of developments – changes in the economy, shifts in
population, and the reshaping of the regulatory landscape for cities – are impacting
municipal finance systems. This research report is one of a series of NLC publications on trends and issues affecting America’s cities and towns.
Dr. Michael A. Pagano, Director of Graduate Studies and Professor of Political
Science at Miami University, Oxford, Ohio, conducted this survey analysis. The
Center for Public Management and Regional Affairs at Miami University, directed by
i
National League of Cities • Research Report on America’s Cities
Dr. Phillip Russo, Jr., handled the incoming surveys and recorded the data. Kyan
Bishop and Tracy Von Ins at NLC conducted interviews with city officials and wrote
the narrative summaries that are included in the report. Dr. Christopher Hoene,
Research Manager at NLC, provided overall management of the study.
Donald J. Borut
Executive Director
National League of Cities
ii
William R. Barnes, Ph.D.
Director
Center for Research and Program
Development, NLC
City Fiscal Conditions in 2001
ACKNOWLEDGEMENTS
The author would like to acknowledge the 325 respondents to this year's fiscal survey. The commitment of these cities' fiscal officers to this project is greatly appreciated.
Data entry was provided ably once again by David Shock, a doctoral student in the
Department of Political Science at Miami University, and by Anthony Ferguson, an
undergraduate public administration major. Additional support was provided by
Andrea M. Pagano.
Chris Hoene, Research Manager at NLC, guided this research endeavor from the redesign of the survey instrument through its administration phase to providing helpful
and useful commentary on the analysis. His wisdom on fiscal policy matters and
public finance was influential in the structure and organization of this report.
Kyan Bishop, NLC research associate, and Tracy Von Ins, NLC intern, interviewed city
officials on mid-year adjustments to revenue forecasts for the vignettes that are interspersed throughout the report. They also provided important research to this project.
Finally, I would like to acknowledge the institutional support provided for the twelfth
consecutive year by the Center for Public Management and Regional Affairs at Miami
University and particularly to its director, Dr. Philip A. Russo, Jr. His continuous
encouragement in behalf of the fiscal conditions project and the financial support
from the Center are deeply appreciated.
Michael A. Pagano
July 2001
iii
iv
City Fiscal Conditions in 2001
CITY FISCAL CONDITIONS
IN
2001
EXECUTIVE SUMMARY
Michael A. Pagano
Miami University
Oxford, Ohio
Based on survey responses from 325 cities, the following are significant findings on
city finances in 2001:
■
■
The percentage of cities that say they are better off financially is the lowest since
1994. 56% of cities stated that their cities were in a better financial situation this
year than in 2000; 44% believed that their cities were in a less advantageous financial situation. While still positive overall, this represents the first significant drop
in an eight-year trend of cities reporting that they are better off financially.
■
Less than half of cities (46%) expect to be in a better financial situation in 2002
than in 2001. This is the lowest percentage since 1993 and it is the first time
since 1994 that less than a majority of cities expect to be better off financially in
the next year.
■
The nation’s largest cities (over 300,000 in population) are especially pessimistic.
Only 22% expect 2002 to be better than 2001.
Growth in state and federal revenues continues to outpace growth in municipal
revenues. Since 1988, municipal general fund revenues have grown 69%, while
states’ general fund revenues have increased 97% and the federal government’s
federal funds have risen by 136%.
v
National League of Cities • Research Report on America’s Cities
■
■
On the services and spending side of the ledger, the cost of employee health benefits was the factor most often cited (89%) by cities as having a negative impact
on their budgets.
■
53% of cities reported that the cost of health benefits was “among the most negative impacts” on their budgets, surpassing “infrastructure needs” (47%), and
reaching its highest point since 1993. The percentage has been increasing rapidly since 1997 (19%).
■
More than four-fifths (83%) of all responding cities increased their public safety
spending, and nearly two-thirds (65%) increased capital spending.
The municipal sector’s ending balance as a percentage of expenditures leveled off
in 2000 at 18.7%. This is the highest point since the general fund survey was initiated in 1986, but an insignificant increase over the 1999 ending balance percentage of 18.5%. High ending balances, often used to save revenues in rainy day
funds, indicate that cities are balancing their budgets and preparing for more constrained times in the future.
■
The growth rate in ending balances from the previous year was 1.4%, the second lowest rate in the past eight years.
Other findings include:
■
The most positive factor affecting cities’ ability to meet their budgetary needs
remained the “city’s economic base,” identified by 8 in 10 cities.
■
Increasing fee rates is still the most widespread revenue action taken by cities,
selected by 35% of responding cities.
■
Constant dollar revenue growth for the General Fund in 2000 increased by 2.1%,
while spending increased by 1.9% over previous year levels. (The current-dollar
revenue growth rate was 6.22%; the current-dollar expenditure growth rate was
5.99%.)
vi
■
The increase in sales tax revenues was greater than for any other general tax
revenue, growing by 7.7% (current dollars) in 2001 and averaging 6.5% over the
past five years.
■
Property tax revenues grew 5.8% over 2001 levels, and averaged 4.2% over the
past five years.
City Fiscal Conditions in 2001
I. OVERVIEW OF THE
FISCAL ENVIRONMENT
The purposes of this study are to detail cities' fiscal situations in 2001 and over the
past decade and a half, to examine the effect of taxing authority and revenue diversity on revenue growth, to identify important factors affecting cities’ ability to balance
budgets, and to delineate policy actions taken by cities in the past year that were
designed to address their fiscal needs.1
Economic indicators in 2000 and 2001 resemble roller coasters, pointing to both
underlying strengths and weaknesses in the nation’s economy. Investors have taken
both losses and gains; high-tech companies have expanded and contracted; consumer confidence since last September dropped for five straight months then picked
up and dropped twice in the past four months; the Congress has been persuaded
that lowering taxes will stimulate the economy while the federal budgetary surplus
surges; and the Federal Reserve lowered the federal funds rate 275 basis points in six
separate actions since January 1 after raising it 100 basis points in the preceding
twelve months. Some of the nation’s major retailers (Wal-Mart, Target) reported small
increases in sales for the month of May; others (Federated, Sears, Penney, Kmart)
1 The data for this report were derived from the 325 respondents to a survey administered in March and April
2001 to all cities with populations exceeding 50,000 and to a sample of cities with populations between 10,000
and 50,000. The response rate was 31% (see Appendix A for a discussion of the methodology.) In this report, the
“municipal sector” refers to the sum of all responding cities’ financial data included in the survey. As a consequence, when reporting on general-fund revenues and general-fund expenditures for the “municipal sector,” it
should be noted that those aggregate data are influenced by the relatively larger cities that have very large budgets and that deliver services to a preponderance of the nation’s cities’ residents. “Cities,” on the other hand, refers
to municipal corporations. Therefore, when averages are presented for “cities” (as opposed to the “municipal sector”), the unit of analysis is the municipal corporation. Average city spending, for example, is equal to the sum of
each city’s average spending level divided by the total number of responding cities. Thus, the contribution of a
small city’s budgetary situation on the average statistic is weighed equally to the contribution of a large city’s.
1
National League of Cities • Research Report on America’s Cities
reported a small decline and still others closed their doors entirely. These apparently
contradictory acts and outcomes indicate a changing and unsettled national economy
that has analysts talking about a soft economy or possibly a recession.
Governmental revenue collection systems, which are linked to various elements of
the economy, likewise reflect the different indicators. At the federal level, the debate
on fiscal policy has shifted significantly in the past year. During the 2000 presidential
campaign, advocates of tax reduction argued that rapidly growing surpluses should
be returned to taxpayers. In early 2001, the argument shifted to issues of tax reductions as a means of supporting a sagging or sluggish economy. Federal receipts were
predicted to grow by 5% per year between 2002 and 2006, according to the OMB,
an estimate that was readjusted to 3.6% after passage of the recent (June 2001) tax
act that reduced tax rates, HR 1836, the Economic Growth and Tax Relief
Reconciliation Act of 2001.
Although federal budget forecasts continue to predict a steady growth rate in revenues for the next several years, states are starting to show signs of the ambivalence
of the economy. States’ revenue growth in 2000 was 8.7%, the strongest of any year
in the last decade.2 After highlighting the better-than-expected growth rate in revenues and in rainy-day and other “reserve” accounts, one forecast for 2001 began on
an ominous note, “This year is different.”3 The most recent data reported in State
Fiscal Brief, for instance, show state estimates of retail sales tax revenue in 2001 will
increase 4.4%, down from 6.5% in 2000, and that real (inflation-adjusted) GDP would
grow 3.2% in 2001 after a 5% growth rate in 2000. The National Conference of State
Legislatures reported that the number of states experiencing revenue collections “on
target or above projected levels” in December 2000 totaled 44; just two months later
the tally had dropped to 31.4
Both the federal government and the states rely on one or both of the elastic general
tax sources, namely, the income tax and the sales tax. During eras of rapid economic
growth in which both incomes and consumption increase, governmental budgets
increase at a growth rate that tends to be strong. Without increasing tax rates, tax
revenues surge for those governments that levy a sales or an income tax. Because
economic growth is not capitalized entirely in real estate investment and land ownership, governments that rely more heavily on a property tax do not usually experi2
Nicholas W. Jenny and Elizabeth I. Davis, “Fiscal 2000 Tax Revenue Growth: Strongest of the Last Decade,”
State Fiscal Brief (February 2001, No. 61).
3 Nicholas W. Jenny and Donald J. Boyd, “State Budgetary Assumptions in 2001 – States Will Be Lowering Their
Economic Forecasts,” State Fiscal Brief (May 2001), p. 2.
4 See NCSL, “State Fiscal Outlook for 2001: February Update” http://www.ncsl.org/programs/fiscal/upsfo2001.htm
2
City Fiscal Conditions in 2001
ence revenue growth as rapidly or immediately as the sales or income-tax governments during rapid economic expansion. Nor do these property-tax levying governments experience the sharp declines in revenue generation during economic recession. Unlike the quick responsiveness of sales and income tax revenue collection to
surges in the underlying economy, the growth in property tax collections changes
more slowly. And most municipalities (with the notable exception of those in
Oklahoma) depend at least in part on property tax revenues to provide funding for
their General Funds.
General Fund Revenue Index
Figure 1 presents the index in General Fund revenue growth for the federal government, state governments and municipal governments from 1988 to 2000 (1988=100).
The federal government has experienced considerable and prolonged growth in revenues, especially since 1996. The index for the federal government’s Federal Fund
for 2000 was 236, meaning revenues have grown 136% over their 1988 levels. States
have also experienced robust growth.5 The index in 2000 for states was 197 or nearly double the 1988 level. And municipalities have experienced a slower overall
growth rate in revenue generation. The index in 2000 for municipalities’ General
Fund was 169. The state and municipal indexes continue to mirror the growth in
GDP and personal income, respectively, while the federal index is outpacing these
measures by a considerable margin.
Although access to the property tax by municipalities is ubiquitous, their revenue
structures are anything but homogeneous. The revenue trendline in Figure 1 masks
the influence of diverse revenue structures. Although all municipalities are granted
property tax authority by their states, municipal access to a sales or income (payroll)
tax is not universal. For example, of the approximately 555 US cities with populations greater than 50,000, roughly 34% have access to the property tax only, 8% have
access to the income tax (in addition to having access to the property tax), and nearly 58% have some retail sales-taxing authority.6 Besides nearly universal access to the
income tax by municipalities in Ohio, Pennsylvania, and Kentucky (and 20 or so in
Michigan), most other municipalities with an income tax authority tend to be among
a state’s largest (e.g., New York City, Kansas City, St. Louis, San Francisco) and are
granted that authority by a special action of the state legislature.7
5
General Fund revenue data are not tracked by NASBO, but expenditure data are. These expenditure data are
used as reasonable estimates of General Fund revenue data.
6 Calculation by author. General taxing authority derived from Appendix A, Michael A. Pagano, City Fiscal
Conditions in 1999 (Washington, DC: National League of Cities, 1999) and revised by the author.
3
National League of Cities • Research Report on America’s Cities
Sales tax authority is granted to some or all cities in 28 states. In Oklahoma, cities
rely on the sales tax as the only source of general tax revenues. In other states,
municipalities’ sales tax revenues are supplemented with one or both of the other
general tax revenues, namely the property or income tax.
Figure 1
Federal, State, and Municipal General Fund Revenue Index
(1988=100)
240
220
200
180
160
140
120
100
Per Capita Income
Gross Domestic Product
Federal
State
Municipal
1988
100
100
100
100
100
1989
106
107
110
109
106
1990
112
114
113
116
112
1991
115
117
114
121
115
1992
120
124
117
127
120
1993
124
130
126
131
124
1994
128
138
138
138
129
1995
134
145
149
146
134
1996
139
153
163
153
141
1997
146
162
180
161
146
1998
153
171
198
170
152
1999
160
182
207
183
159
2000
167
195
236
197
169
The predominant general tax revenue for some cities, then, is the property tax (e.g.,
Milwaukee, Portland, Buffalo), for others it’s the sales tax (e.g., Oklahoma City,
Shreveport), and for others the income tax (e.g., Columbus, Philadelphia, New York,
Louisville, Cincinnati).
The composition of municipalities’ General Funds is presented in Figure 2. Although
the property tax does represent the largest piece of the General Fund pie (24.8%),
the sales tax and the income tax components taken together amount to nearly the
same size (22.4%) as the property tax element. Other tax revenue accounts for 13.5%
of General Fund receipts in 2000.
7
Tracy Von Ins, “Some Cities Turning to Local Income Taxes for Revenue,” Nation’s Cities Weekly, July 9, 2001,
p. 1.
4
City Fiscal Conditions in 2001
Figure 2
General Fund Revenue Composition for the Municipal Sector, 2000
Other Revenue
12%
Property Tax
25%
Federal Aid
1%
State Aid
16%
Sales Tax
14%
Fees/Charges
10%
Income Tax
8%
Other Tax
14%
Figure 3
Percent of Cities that Are "Better Able/Less Able" to Meet Financial Needs This Year Than in
Last Year
80%
60%
Percent of Cities
40%
20%
54%
58%
-46%
-43%
65%
68%
-35%
-32%
69%
75%
73%
56%
34%
33%
21%
22%
0%
-20%
-63%
-25%
-27%
-44%
-66%
-79%
-40%
-32%
-78%
-60%
-80%
1990
1991
1992
1993
1994
1995
Less able
1996
1997
1998
1999
2000
2001
Better able
5
National League of Cities • Research Report on America’s Cities
Ability to Meet Financial Needs
Fiscal officers’ assessment of their cities’ current and future budgetary situations provides a comparative perspective on municipal fiscal conditions. In 2001, city finance
officers signaled a retreat from the optimistic assessment of the previous eight years,
marking the first significant decline in their assessment since 1991 (Figure 3). A
majority (56%) of responding city finance officials indicated that their cities’ fiscal situation was better than in the previous year, a marked decline from responses to the
2000 fiscal survey in which 73% of the nation’s chief financial officers assessed the
2000 fiscal year was better than the previous year. The 44% whose assessment of the
current year’s fiscal situation was worse than the prior year’s is the largest percentage
since 1994 when 46% assessed their fiscal situation as worse than the previous year.
Cities without access to the elastic revenue sources of income or sales taxes held a
somewhat brighter assessment of their fiscal position than did other cities, although
the difference is not statistically significant. Figure 4 shows that 61% of the finance
officers in property-tax dependent cities thought their cities’ fiscal position in 2001
was better than in 2000. A much smaller 44% of finance officers in income-tax
dependent cities held such a perspective, as did a slightly smaller 56% of finance
Figure 4
Percent of Cities that Are "Better Able/Less Able" to Meet Financial Needs This Year Than In
Last Year By Taxing Authority for 2001
-39%
Property Tax Cities
N=74
-56%
Income Tax Cities
N=42
44%
-44%
Sales Tax Cities
N=209
-60%
61%
-40%
-20%
56%
0%
20%
Percent of Cities
Better Able
6
Less Able
40%
60%
80%
City Fiscal Conditions in 2001
officers in sales-tax cities. There was little difference in the responses when cities
were sorted by population category or by Census region. (Figures 5 & 6).
Figure 5
Percent of Cities that Are "Better Able/Less Able" to Meet Financial Needs This Year Than in
Last Year By City Size for 2001
-42%
Small Cities
10,000-50,000
N=118
-45%
Medium Cities
50,000-100,000
N=106
55%
-43%
Large Cities
100,000-300,000
N=71
57%
-48%
Largest Cities
>300,000
N=30
-60%
58%
-40%
52%
-20%
0%
20%
40%
60%
Percent of Cities
Better Able
Less Able
Figure 6
Percent of Cities that Are "Better Able/Less Able" to Meet Financial Needs This Year Than in
Last Year By Census Region for 2001
-39%
Western Cities
N=99
-48%
Southern Cities
N=99
52%
-46%
Midwest Cities
N=91
55%
-40%
Northeast Cities
N=35
-60%
61%
-40%
-20%
60%
0%
20%
40%
60%
80%
Percent of Cities
Better Able
Less Able
7
National League of Cities • Research Report on America’s Cities
When asked their assessment of their cities’ ability to meet financial needs the next
fiscal year (2002) compared to the current fiscal year, there was a noticeable decline
in the proportion of fiscal officers who registered a “better able” response compared
to earlier years (Figure 7). In fact, after seven consecutive years of more widespread
assessments of increased fiscal strength, a smaller proportion of fiscal officers than at
any time since 1993 assessed the next fiscal year in a positive light. Slightly less than
half of the responding cities (46%) agreed that their cities’ budgetary capacity to
meet cities’ needs in the next fiscal year (2002) would be better than in ethe current
fiscal year. This perception did not vary according to the region of the country in
which the city is located, nor to the general taxing authority of the municipality.
More of the nation’s big cities, however, perceived the fiscal future to be less rosy
than the smaller cities. Only 22% of the fiscal officers in the nation’s largest cities
(>300,000 population) believed that their cities’ fiscal situation in FY 2002 would be
better than in FY 2001, compared with 52% of the medium-sized cities (50,000100,000), 49% of the small cities (10,000-50,000), and 42% of the large cities
(100,000-300,000).
Figure 7
Percent of Cities that Expect to be "Better Able/Less Able" to Meet Financial Needs Next Year
Than in Current Year
80%
60%
Percent of Cities
40%
20%
49%
50%
53%
55%
1994
1995
1996
1997
-51%
-50%
-48%
-45%
61%
63%
46%
29%
0%
1993
-20%
-40%
1998
1999
2000
-39%
-36%
-37%
-72%
-60%
-80%
Less able
8
64%
Better able
2001
-54%
City Fiscal Conditions in 2001
Figure 7A
Percent of Cities that Expect to be "Better Able/Less Able" to Meet Financial Needs Next Year
(2002) Than in Current Year (2001) By City Size
-51%
Small Cities
-48%
Medium Cities
52%
-58%
Large Cities
42%
-78%
Largest Cities
-80%
49%
-60%
-40%
22%
-20%
0%
20%
40%
60%
Percent of Cities
Better Able
Less Able
9
National League of Cities • Research Report on America’s Cities
10
City Fiscal Conditions in 2001
II. CITY RESPONSES TO THE
FISCAL ENVIRONMENT
A set of 18 factors that could affect municipal budgets was presented to finance officers in the survey. They were asked to identify whether the factor had “increased”
or “decreased” from FY 2000 and whether the change had a “positive” or “negative”
effect on the city’s fiscal profile. Figure 8 presents the results. 43% of the respondents indicated that the health of the local economy increased. In addition, 79%
Figure 8
Change in Selected Factors from FY 2000
100%
90%
80%
Percentage of Cities
70%
60%
50%
40%
30%
20%
10%
0%
Empl
wages
Increased 95.5%
Decreased 0.5%
Infrast
Empl
Fed
St
St tax
Pub
Prices
Empl
Human
ructur
health
enviro enviro Popula
&
Safety
inflatio pensio
Serv.
e
benefit
manda manda
expen
tion
needs
n
ns
needs
needs
s
tes
tes
d
St nonEduca
enviro
Amt
tion
fed aid manda
needs
tes
80.7% 75.7%
0.6%
0.3%
29.8% 23.5%
24.3% 0.7%
94.2% 86.2%
0.6%
0.3%
50.8% 36.8%
15.5% 0.7%
30.4% 60.0%
0.0% 14.0%
47.2% 11.1%
0.7%
3.7%
Amt
state
aid
29.3% 46.4%
0.4% 22.7%
Fed
nonenviro
manda
City
tax
base
13.5% 79.0%
0.3%
5.6%
Health
of
local
econ
43.4%
25.4%
11
National League of Cities • Research Report on America’s Cities
noted that the city tax base has increased during the past year. Nearly all of the
respondents noted that employee wages and salaries (96%) and the costs of employee health benefits (94%) had increased from FY 2000. On another important personnel issue, 51% of responding cities indicated that costs associated with employee
pensions increased over the previous year.
Similar to responses to the fiscal surveys of the past several years, both infrastructure
needs and pubic safety needs were identified by roughly four of five respondents as
having increased from the previous year, at 81% and 76% respectively. In addition,
nearly half indicated that human service needs (47%) had increased over FY 2000
levels. One in three indicated that education needs (29%) and federal (37%) and
state (30%) environmental mandates had increased over the previous year. Fewer
cities cited increases in federal (14%) and state (24%) non-environmental mandates.
Nearly 46% of cities stated that state aid had increased and 30% noted that federal
aid had increased. On the other hand, 24% and 23% of cities indicated that federal
and state aid, respectively, had declined from FY 2000 levels.
The positive and negative impacts of the changes identified in Figure 8 are plotted in
Figure 9. Changes in the “city tax base” and changes in the “health of the local
economy” were cited by 76% and 43% of responding cities, respectively, as having
had a positive impact on municipal budgets. Changes in state aid to cities was
Figure 9
Impact of Selected Factors on FY 2000 Budgets and Their Ability to Meet Cities' Overall Needs
100%
90%
80%
Percentage of Cities
70%
60%
50%
40%
30%
20%
10%
0%
Infrast
Empl
Fed
St
Pub
Prices Empl
Empl ructur
health
enviro enviro Popul
Safety
inflatio pensio
wages
e
benefi
manda manda ation
needs
n
ns
needs
ts
tes
tes
Huma St tax
n
&
Serv. expen
needs
d
Amt
fed
aid
St nonEduca
enviro
tion
manda
needs
tes
Amt
state
aid
Fed
City
nontax
enviro
base
manda
Health
of
local
econ
3.0% 5.1% 5.7%
1.6% 3.0% 16.8% 1.7% 2.8% 24.7% 3.1% 2.5% 27.5% 2.1% 2.7% 42.2% 1.4% 76.4% 42.5%
Positive Impact
Negative Impact 83.9% 72.0% 66.6% 89.1% 76.2% 47.0% 38.7% 31.2% 39.0% 42.4% 18.8% 21.4% 26.1% 24.7% 22.6% 16.4% 7.0% 29.4%
12
City Fiscal Conditions in 2001
noted by 42% of cities as having a positive impact, while 23% of cities noted that
this factor negatively affected the ability of cities to meet overall needs. In addition,
28% of responding cities indicated that changes in federal aid positively affected the
ability of cities to meet overall needs, while 21% noted that it had a negative impact.
Changes in population also had a notable impact upon the ability of cities to meet
needs. Nearly 25% of cities stated that changes in population had positively affected
their ability to meet needs, while 39% said that it had a negative impact.
On two key personnel items, employee wages/salaries and employee health benefits,
an overwhelming majority (84% and 89%, respectively) of respondents indicated that
changes in these factors from FY 2000 had a negative impact on the ability of cities
to meet their overall needs in FY 2001. Also, changes in costs associated with
employee pensions were cited by 47% of cities as having had a negative impact.
The factors associated with the levels of city services were also cited as having negative impacts on city budgets. Increased infrastructure needs and public safety needs,
in particular, were noted by 72% and 67% of cities, respectively, as negatively affecting the ability of cities to meet their financial needs. In addition, human service
needs (42%) and education needs (25%) were cited as having had a negative impact
during the past year. Furthermore, increases in intergovernmental mandates generally
had negative impacts on cities. Roughly one in six cities and one in four cities,
respectively, felt that changes in federal and state non-environmental mandates negatively affected the ability of cities to meet overall needs.
Cities were asked to select three factors from among the 19 potential factors that had
the “most negative impact” on the 2001 budget. Figure 10 highlights the historical
trends in three of the most frequently cited negative factors. For the past seven
years, infrastructure needs have been cited as having the most negative impact on
city budgets by the largest majority of responding cities. In 2001, 47% of all
responding cities once again selected “infrastructure needs” among the three most
negative factors, but its overall ranking slipped to second behind the “cost of
employees’ health benefits.” During the mid-1990s, a decline in the percentage of
cities citing the costs of employees’ health benefits as a “most negative impact” is
discernible. However, since 1998, this factor has once again become increasingly
important in negatively affecting city budgets. In 2001, 53% cited the cost of “health
benefits” as one of the three most important factors adversely affecting city finances.
This represents a more than doubling of the cities that listed the factor as among the
top three factors in 1997, and is identical to the percentage of cities citing it in 1993.
Moreover, the cost of health benefits was cited by more cities as among the “most
negative,” replacing “infrastructure needs” for the first time since 1994.
13
National League of Cities • Research Report on America’s Cities
Figure 10
Percent of Cities Reporting Item Has Had Among the Most Negative Impacts on Budget
60
55.5
55.3
50
51.4
52.9
44.3
42.1
40
Percentage of Cities
51
55.1
52.6
49.2
47.4
44.3
41.1
38.6
35.7
32.9
30
31.6
29.3
27.7
27.3
26.4
23.2
24.4
21.7
20
18.9
16.9
10
8.6
7.8
5
4
0
1992
1993
1994
1995
Infrastructure
1996
1997
Health benefits
1998
1999
2000
2001
Local economy
The factor “changes in the health of the local economy” has increased substantially
as having the most negative impact on city finances since 2000. In 2001, 17% of
cities viewed the local economy as a negative factor, whereas in 2000 it was viewed
by only 5% of cities as a negative factor. Only 2% of Northeastern cities noted the
negative impact of the local economy, compared with 21% and 22% of Midwestern
and Western cities, respectively.
Revenue & Expenditure Actions in 2001
The most common revenue action taken by cities in 2001 was to increase fees and
charges for services. 35% of all cities increased levels of fees and charges (Figure
13). The most significant variation in this revenue action was by city size; 27% of the
small cities increased their fee rates, while 43% of the medium cities increased rates
(Table 1). Slightly more than one-fifth of all cities (22%) increased property tax rates
with high levels of variation among every size of city. One-tenth of the largest cities,
one-tenth of the large cities, 22% of the medium cities, and 32% of the small cities
reported increased property taxes. Another 16% of all cities also reported decreases
in property tax rates in 2001. Roughly one in six (17%) of all responding cities
increased the number or level of impact fees, increased the number of other fees or
charges, and reduced property tax rates (all with little variation due to city size).
In 2001, 83% of all cities increased public safety spending (Figure 14). Almost twothirds of cities increased infrastructure spending (65%) with little variation by city
14
City Fiscal Conditions in 2001
Figure 11
Expenditure Actions, 1987-2001
80
70
Percentage of Cities
60
50
40
30
20
10
0
1987
1988
1989
1990
Reduce Operating Bud.
Reduce Service Levels
1991
1992
1993
1994
Reduce Capital Spending
Interlocal Agreements
1995
1996
1997
Contract Out
Increased Productivity
1998
1999
2000
2001
Reduce Employment
Figure 12
Revenue Actions, 1987-2001
90
80
Percentage of Cities
70
60
50
40
30
20
10
0
1987
1988
1989
1990
1991
Increased Fees/Charges
Development Fees
1992
1993
1994
1995
New Fees/Charges
Other Tax Rates
1996
1997
1998
1999
2000
2001
Increased Property Tax Rate
New Tax
15
National League of Cities • Research Report on America’s Cities
Figure 13
Revenue Actions in 2001
40%
Percentage of Cities Taking Revenue Actions
35%
30%
25%
20%
15%
10%
5%
0%
Fee Levels
Decreased
Increased
1.0%
35.4%
Property Tax
Rate
16.3%
21.6%
Number of
Fees
1.0%
16.2%
Level of
Impact Fees
2.9%
17.4%
Other Tax
Rate
1.6%
5.9%
Tax Base
3.1%
6.2%
Sales Tax
Rate
1.6%
3.1%
Number of
Other Taxes
0.7%
2.6%
Income Tax
Rate
1.6%
0.7%
Figure 14
Expenditure Actions in 2001
Percentage of Cities Taking Expenditure Actions
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Decreased
Increased
16
Public
Safety
Spending
Capital
Spending
1.6%
83.2%
8.1%
64.8%
Operating
Spending
Growth
Rate
4.5%
62.1%
Municipal
Workforce
Human
Services
Spending
Productivity
Levels
Contracted
Out
Services
City
Service
Levels
9.9%
51.4%
2.3%
52.1%
1.3%
42.9%
1.6%
28.5%
2.4%
30.6%
Number of
Interlocal
Agreement
s
1.0%
24.3%
Education
Spending
1.3%
15.4%
City Fiscal Conditions in 2001
TABLE 1
ACTIONS THAT CITIES HAVE TAKEN DURING THE PAST 12 MONTHS
Revenue Actions
TOTAL
Increased level of fees/charges
Increased property tax rates
Increased number/level of impact or
development fees
Increased number of other fees or
charges
Reduced property tax rates
Increased tax base
Increased rates of other taxes
Increased sales tax rates
Reduced tax base
Increased number of other taxes
Reduced rates of other taxes
Reduced number/level of impact or
development fees
Increased income tax rates
Reduced income tax rates
Reduced sales tax rates
Reduced level of fees/charges
Reduced number of other fees or
charges
Reduced number of other taxes
Largest
Cities
Large
Cities
Medium
Cities
Small
Cities
35.6%
21.8%
39.3
10.7
37.1
10
43.1
22
26.8
32.1
17.4%
17.9
22.5
18.6
12.7
16.5%
16.3%
6.1%
5.9%
3.6%
3.1%
2.6%
1.6%
11.1
21.4
0
3.6
3.6
3.7
3.6
3.6
18.8
18.6
7.2
11.4
5.6
2.9
2.9
1.4
17.6
15
8.6
4
4
5.4
3
1
15.2
14.7
4.8
4.5
1.8
1
1.8
1.8
2.9%
0.7%
1.6%
1.6%
2.9%
0
3.6
3.6
7.1
3.6
4.2
0
0
0
0
2.9
0
0
2
1
2.7
0.9
3.7
0.9
0.9
1.0%
0.7%
0
3.6
1.4
0
1
0
0.9
0.9
Expenditure Actions
TOTAL
Increased infrastructure spending
Increased growth rate of operating
spending
Increased size of city workforce
Increased city service levels
Increased contracting out services
Improved productivity levels
Increased interlocal agreements
Reduced size of city workforce
Reduced infrastructure spending
Largest
Cities
Large
Cities
Medium
Cities
Small
Cities
64.6%
64.3
67.1
67
61.1
62.1%
51.3%
30.8%
28.4%
43.0%
24.2%
9.9%
8.0%
57.1
64.3
34.8
23.1
44.4
18.5
17.9
3.6
64.8
60.6
35.4
38.6
51.4
30
12.7
11.4
63
44.1
27.8
27.7
46
22.2
12.7
8
60.7
48.7
29.8
23.9
34.8
23.6
3.4
7.1
4.5%
1.0%
2.4%
1.3%
1.6%
14.3
0
4.3
0
3.8
4.2
0
3.1
0
2.9
2
1
3.1
1
1
4.5
1.9
1
2.7
0.9
Increased human service spending
52.3%
46.4
61.4
54.2
46.4
Decreased human service spending
Increased public safety spending
Decreased public safety spending
Increased education spending
Decreased education spending
2.3%
83.3%
1.6%
15.4%
1.3%
10.7
78.6
3.6
19.2
3.8
1.4
88.6
1.4
17.6
0
1
85.3
2.9
12.2
2
1.8
79.3
0
15.9
0.9
Reduced growth rate of operating
spending
Reduced interlocal agreements
Reduced city service levels
Reduced productivity levels
Reduced contracting out services
17
National League of Cities • Research Report on America’s Cities
size (Table 1). Approximately half (51%) of the cities that responded increased the
size of the city workforce, with a notable variation by city size: 64% of the largest
cities increased the size of the municipal workforce, while 44% of the medium cities
increased the number of city employees. Nearly one in three cities (31%) increased
city service levels, 29% increased contracting out services, 43% improved productivity
levels, and 24% increased inter-local agreements (all with little variation in these
actions based on city size or location.) The action “reduced growth rate of operating
spending” showed notable variation based on city size as 14% of the largest cities
reported a reduction in the growth rate in operating spending, while only 4% of all
responding cities reported this same action. Variation by city size in the “increased
human service spending” action was also significant. Although slightly more than
half (52%) of the total cities reported this action, 46% of the largest cities, 61% of the
large cities, and 46% of the small cities increased their human service spending.
Growth in Revenues/Expenditures and Ending Balances
City revenue and expenditure streams are influenced not only by the underlying
growth of the city's tax base, but also by purposive fiscal actions taken by city officials. Changes in city revenues depend on tax and fee actions and on changes in a
city's tax and fee base, in addition to state and federal aid shifts. Changes in city
expenditures reflect council actions to enhance or reduce city services and management practices to enhance efficiency. The combination of these factors over the past
eight years has been generally beneficial to cities’ fiscal conditions.
General Fund revenues in the “municipal sector” grew by 2.09% in constant dollars
between 1999 and 2000, which is higher than the revenue growth rates in 1997 and
1999 but lower than the 2.51% growth rate in 1998 and the 3.03% rate in 1996
(Figure 15). Figure 16 presents the annual growth rate in the municipal sector’s
General Fund revenues in current dollars. Revenues have been increasing each of
the last four years, reaching 6.2% year-to-year growth in 2000. General Fund expenditures in the municipal sector increased 1.88% in constant dollars in 2000 (5.99% in
current dollars), a decline in the constant-dollar growth rate from 1999 (2.58%).
Because sales and income tax collections increase immediately in response to shifts
in retail sales and income growth, cities with authority to tax sales and income are
poised to generate tax revenues at a higher rate than property tax cities during
expansionary economic eras. Property-tax collections tend to lag the growth in real
estate because of assessment and equalization policies. Figure 17 charts the general
tax revenue growth for cities by the source of taxation for 1996-2000. The average
growth in aggregate sales tax collections for the General Fund of cities with the
18
City Fiscal Conditions in 2001
Figure 15
Change in General Fund Revenues and Expenditures
(constant dollars)
5.0%
4.25%
4.04%
4%
4.0%
3.84%
3.03%
2.96%
3.0%
2.58%
2.51%
2.43%2.44%
2.34%
2.09%
2.0%
1.91%
1.88%
1.79%
1.59%
1.53%
1.68%
1.61%
1.43%
1.27%
1.06%
0.99% 1.00%
1.0%
0.71%
0.60%
0.66%
0.60%
0.60%
0.0%
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
-0.66%
-1.0%
Change in Constant Dollar Revenue (General Fund)
Change in Constant Dollar Expenditures (General Fund)
19
National League of Cities • Research Report on America’s Cities
Figure 16
Change in General Fund Revenues and Expenditures
(current dollars)
8.0%
7.55%
7.06%
7.0%
7%
6.66%
6.32%
6.20%
5.99%
5.98%
6.0%
5.46%
5.32%
5.30%
4.86%
5.0%
5.50%
5.31%
4.96%
4.75%
4.19%
4.0%
3.64%
3.44%
3.64%
4.31%
4.14%
3.87%
3.78%
3.72%
3.48%
3.24%
3.22%
4.52%
3.0%
1.90%
2.0%
1.0%
0.0%
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
Change in Current Dollar Revenue (General Fund)
19
94
19
95
19
96
19
97
19
98
19
99
20
00
Change in Current Dollar Expenditures (General Fund)
authority to levy a sales tax was 7.7% in 2000, up from the 5.5% growth rate in 1999
and nearly identical to the 1998 growth rate of 7.8%. The growth rate in property-tax
collections for those cities authorized to collect only the property tax (and no other
general tax) was a very strong 6.1% in 2000, up from the 1999 level of 4.7% and
much stronger than the 0.9% and 2.8% growth rates in the previous two years. The
growth in aggregate income-tax collections for the General Fund of income-tax cities
averaged 4.8% in 2000, up from the 1999 rate of 4% and the 1997 growth rate of
3.2%, but below the 1998 growth of 5.9%.
The property tax is authorized for all cities to collect, although cities with a sales-tax
authority or an income-tax authority tend to reduce their reliance on the property
tax. Figure 17 shows that the growth rate in property-tax collections for those cities
that do not have access to any other general tax source (i.e., those cities that have
access to the property tax only) is different from the growth rate in property tax collections for other cities. In 2000 and 1999, property-tax only cities experienced a
slightly stronger growth rate in property tax collections than did other cities.
Property-tax only cities increased their collections in 2000 by 6.1% and in 1999 by
4.7%, while property-tax collections for cities that also collect an income or sales tax
increased by a slightly smaller 5.6% and 4.5% in 2000 and 1999. Nevertheless, in the
two prior fiscal years, 1997 and 1998, the property-tax collection growth rate for
20
City Fiscal Conditions in 2001
8%
Figure 17
Year-to-Year Change in General Fund Tax Collection by Revenue Source
Sales Tax Collections
6%
Income Tax Collections
4%
Property Tax Collections (property-tax cities
only)
Property Tax Collections (all cities)
2%
Property Tax Collections (sales and income tax
cities only)
0%
1996-97
1997-98
1998-99
1999-2000
2000-01
(budget)
property-tax only cities was noticeably less (0.9% and 2.8%, respectively) than the
property-tax collection growth rate for cities that also have access to an income or
sales tax (4.2% and 4.7%, respectively).
Figure 17 also shows that the growth in budgeted revenue collections for the sales
tax in 2001 is 3.49%, compared with the growth in budgeted property-tax collection
for property-tax only cities of 1.71% and 2.82% for cities with income tax authority.
Although the property-tax collection outlook for 2001 appears less favorable than the
forecasts for income tax and sales-tax collection growth, the growth in property tax
collections for all cities is brighter. Budgeted property-tax collections for all cities is
expected to increase 3.5%, while the budgeted property-tax collections for cities with
access to the income and sales tax is expected to increase by 4.3%.
The annual growth in property-tax collections by all responding cities for the five fiscal years between 1996 and 2000 has averaged 4.2%, compared with 6.5% for sales
tax collections and 4.0% for income tax collections. Moreover, the projected growth
in property-tax collections for all municipalities in 2001 is 3.49%, identical to the projected growth rate for sales-tax collections in 2001. Yet, after separating the responding cities into two categories, namely, those cities with access to both the property
tax and the sales or income tax and those cities with access to the property tax only,
there is a noticeable difference in the property-tax growth rate. The average annual
increase in property tax collections for those cities with access to the property tax
only was 3.7% over the five-year period, compared to a higher property-tax growth
21
National League of Cities • Research Report on America’s Cities
rate of 4.45% over the same period for those cities that had access to both the property tax and to either the sales or income tax. The slower growth rate in cities with
access only to the property tax, compared with the property-tax growth rate for all
cities, suggests that those cities without access to any other source of general tax
revenues increase their tax collections at a rate slower than the increase for all cities.
Further, because property-tax only cities do not have the authority to tax retail sales,
they are not benefiting from the surge in retail sales tax growth that have helped
sales tax cities’ fiscal positions for at least the past five years.
Ending Balance Goals
Cities are required by their states to balance their operating budgets, which means
they normally cannot borrow funds legally to cover budgetary shortfalls. The balanced-budget requirement means that cities almost always plan on ending the fiscal
year with a surplus. This surplus, which is referred to as a “carryover balance” or a
“reserve,” becomes available revenue for the next fiscal year. The reserves are built
into the annual budget in anticipation of (1) an economic downturn (i.e., “rainy
days”); (2) the need to upgrade credit ratings; (3) reductions in state or federal aid;
(4) start-up and operational costs associated with new projects; and (5) unpredictable
costs, such as natural disasters.8 But these budgeted reserves are also supplemented
with unanticipated revenues or a windfall during an exceptionally strong year. Since
revenue windfalls are not anticipated or planned for, they tend to accumulate as
“reserves” or unobligated funds of cities’ general funds.
Most cities, according to survey respondents, have created “reserve” or “ending-balance” goals for their general funds (Figure 18). A substantial majority of cities either
have an “official” ending balance or reserve goal (43%) or a “generally recognized”
goal (32%) that they try to reach. Almost two in five cities (18%) follow an “informal”
reserve goal policy, while fewer than one in ten (7%) claim not to have a reserve
policy.
The survey asked cities to indicate the dollar value of their cities’ official or “generally accepted” ending balances. More than four in five cities (84%) exceeded their
8
See, e.g., Michael A. Pagano and Jocelyn M. Johnston, “Life at the Bottom of the Fiscal Food Chain: Examining
City and County Revenue Decisions,” Publius: The Journal of Federalosm 30:1 (Winter 2000):159-170; U.S.
General Accounting Office, State and local Finances: Some Jurisdictions Confronted by Short- and Long-Term
Problems (Washington, D.C.: GAO, 1993), GAO/HRD-94-1; Charlie Tyler, “Local Government Reserve Funds,”
Public Budgeting & Finance 13 (Summer 1993); 75-84; Michael J. Wolkoff, “An Evaluation of Municipal Rainy Day
Funds,” Public Budgeting & Finance 7 (Summer 1987): 52-63.
22
City Fiscal Conditions in 2001
Figure 18
Ending Balance Goal Policies, 2001
7%
18%
No Goal
Informal Goal
Official Ending Balance Goal
43%
Unofficial, But
Generally Recognized
Goal
32%
cities’ ending-balance goals, while 16% did not reach the goal. Forty-seven cities fell
short of their ending balance goals by an accumulated total of $58 million and 221
cities exceeded their targets by $2 billion (39 cities either had no target or failed to
provide the data).
The average ending balance for the nation’s largest cities was $77.5 million in 2000,
and $31.9 million for cities with populations between 100,000 and 300,000 (Figure
19). The nation’s small cities (10,000-50,000 population) averaged $5.0 million ending
balances, while the medium cities (50,000-100,000 population) averaged $11.8 million. The ending balance goal for the largest cities was $31.1 million, indicating that
the largest cities’ average ending balance exceeded the actual goal by $46 million on
average. The ending balance goal for the large cities (100,000-300,000 population)
was $17 million. The average large city exceeded the goal by $14 million. The ending balance goal for medium cities was $7.6 million, which places the actual ending
balances $4.2 million over the goal. And the small cities average ending balance of
$5 million exceeded the goal of $3.5 million by $1.5 million.
The municipal sector’s aggregate ending balance as a percentage of expenditures in
2000 increased to 18.7%, or slightly above the 1999 mark of 18.5% (Figure 20). Only
once during the series has cities’ budgeted ending balances exceeded the actual ending balances, and that was in 1992. Since then, budgeted ending balances have been
generally within 1-3 percentage points of the actual ending balances. That ending
balances appear to have leveled off during the past few years might be indicative of
a slowing economy or of cities’ having reached their upper political limits of what
they can keep in unspent reserves. What is indisputable, however, is that most cities
have exceeded their cities’ ending balance goals and have increased the dollar
amount of their ending balances.
23
National League of Cities • Research Report on America’s Cities
Figure 19
Average Ending Balance by City Size
$80,000
($000)
$60,000
$40,000
$20,000
$0
Ending Balance 1999
Ending Balance 2000
Medium Large Largest
Small
Ending Balance 2001
Figure 20
Ending Balances as a Percentage of Expenditures
(General Fund)
20.0
16.2
15.7
16.1
17.1
15.0
15.0
13.4
11.5
15.3
10.5
12.2
11.6
14.1
12.0
11.8
11.1
10.0
16.9
16.6
13.2
12.7
12.3
18.7
18.5
18.0
12.3
12.2
10.5
10.3
9.8
9.6
9.0
8.9
5.0
0.0
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
Actual Ending Balance (all cities)
24
19
93
19
94
19
95
19
96
19
97
19
98
Budgeted Ending Balance (all cities)
19
99
20
00
20
01
City Fiscal Conditions in 2001
Figure 21
Year-to-Year Change in Ending Balances as a Percentage of Expenditures
(General Fund)
30.0%
21.0%
21.6%
20.9%
18.5%
20.0%
17.4%
14.3%
15.3%
13.6%
11.4%
11.9%
9.8%10.4%
10.0%
6.5%
5.4%
3.2%
0.0%
-10.0%
2.5%
-0.5%
19
85
19
86
19
87
19
88
19
89
19
90
-7.3%
-9.7%
19
91
19
10.3%
7.0%
92
19
93
19
94
19
95
19
-1.1% 7
9
96
19
19
98
-7.1%
1.4%
99
00
1 9 -3.1%2 0
20
01
-7.8%
-10.5%
-15.3%
-20.0%
-26.6%
-30.0%
Change in Ending Balances as Percent of Expenditures (actual) (all cities)
Change in Ending Balances as Percent of Expenditures (budgeted) (all cities)
Even though ending balances are at their high point since data were first collected
15 years ago, the growth rate has slowed considerably. That is to say, after fairly
substantial increases in cities’ ending balances between 1992 and 1998, the annual
growth rate in the ending balances for the last two years has been meager. Figure
21 demonstrates that the year-to-year growth rate in ending balances in 1999 and
2000 was only 2.5% and 1.4%, respectively.
Mid-Year Adjustments
Budget processes begin well in advance of the fiscal year. Municipal departments
and offices receive requests from the budget office, the budget and finance offices
estimate the next year’s receipts, and city councils are asked to approve requests. By
the time the fiscal year starts, the original requests and revenue projections may not
reflect the budgetary reality of the moment. An unexpected natural disaster might
require a request for additional appropriations for the public works department. The
closing of a major factory might reduce expected payroll taxes. These and other
events require cities to constantly monitor spending and revenue collection during
the course of the fiscal year.
25
National League of Cities • Research Report on America’s Cities
The changing economic and political environment for states in 2000 and early 2001,
as monitored by the National Association of State Budget Officers, the National
Conference of State Legislatures, and the Rockefeller Institute of Government, hinted
that adjustments in revenue projections had been and would be forthcoming.
Likewise, cities’ fiscal environments were likely changing and revenue projections
were likely re-calculated as city treasuries monitored revenue collections. Cincinnati,
for example, was preparing to trim over $8 million from its budget earlier this year
due to a shortfall in corporate earnings tax revenues in 2000. The City of New York
also made a substantial adjustment to its projections. A survey of city officials conducted in March 2001 revealed that nearly half the responding cities had made midyear adjustments to their revenue forecasts with related spending adjustments.9
The 2001 NLC fiscal survey asked cities to identify which revenue sources had been
readjusted during the fiscal year to reflect the changing fiscal environment.
Respondents were presented with six revenue categories and were asked to indicate
whether projections for those categories were “increased,” “decreased” or unavailable
to them, and to estimate the dollar value of the adjustment (positive or negative) in
each category. The categories were property taxes, sales taxes, income taxes, other
taxes, fees/charges, state aid, federal aid, and “other revenue.” Results are presented
in Figures 22 and 23, and are supplemented by follow-up interviews conducted with
individual cities that responded to the survey.
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Figure 22
Net Changes In Estimated Revenues After Mid90
Year Adjustments
Chris Hoene and Kyan Bishop, “Cities Adjust Budgets to Economic Realities,” Nation’s Cities Weekly, 16 April
2001, p. 1.
26
City Fiscal Conditions in 2001
100
Figure 23
Cities that Made Formal Mid-Year Adjustments to Revenue
Collection Estimates
80
Increased
Estimates
60
40
Decreased
Estimates
20
er" R
even
ues
"Oth
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0
Adjustments to Property Tax Estimates. Nearly three in ten responding cities
adjusted their projections of property tax collections. Two-thirds (60) of the 83 cities
that adjusted property-tax collections increased their estimates, while 23 reduced
them. The cities that increased their property tax estimates added another $44.7 million to their cities’ budgets, while those that decreased property tax estimates
reduced collection projections by $2.3 million. The net gain in property tax collection from these cities, then, was $42.4 million. Of significance among the cities that
adjusted their property tax estimates is the fact that more Midwestern cities (N=10)
reduced their property tax projections than cities from other Census regions (only 13
cities in the other Census regions reduced property tax projections). And fewer
Midwestern cities (N=9) increased their property tax projections, compared to cities
elsewhere (N=51). Neither city size nor revenue authority (authorization to levy a
property tax only or a property tax and a sales or income tax) corresponded to this
revenue adjustment estimate.
27
National League of Cities • Research Report on America’s Cities
Adjustments to Property Tax Revenues
Cities reporting increases in property tax revenue estimates cited growth in residential and commercial real estate markets
as key factors. Economic development programs that provided tax abatements to business, and focused on traditionally
underserved areas of cities were identified as responsible for the growth in these markets. Cities heavily dependent on the
high-tech industry generally reported declines in property tax revenues, stating that the rate of investment had markedly
slowed. These cities remained optimistic and reported that various efforts to counteract the decline are underway.
Increased property tax revenues
Fort Worth, TX (pop. 447,619):
Specific areas of Fort Worth that were previously underserved have been targeted and annexed through the creation of business and
residential corridors. This has lead to increases in the value of property, mainly residential, resulting in increased property tax revenue estimates. Businesses have also fared well thanks to tax abatements for eligible companies that hire inner-city residents, provided through municipal economic development programs.
Antioch, CA (pop. 81,549):
Like many California cities, Antioch experienced an increase in property tax revenue estimates in 2001. Unexpected growth in residential homebuilding and rising home sales are the factors that city officials said contributed increased revenue estimates, as well
as a statewide rebate. Antioch forecasts increases in property tax revenue for next year due to further increases in home buying and
building.
Philadelphia, PA (pop. 1,585,580):
Robust growth in the commercial real estate market has led to a mini-boom in Philadelphia’s economy. City officials noted that
extensions of tax abatements, as well as other economic development programs provided by the city, have led to additional commercial investment. Likewise, additional business has generated more jobs and competition, resulting in greater than expected
income tax revenue growth. (See also Adjustments to Income Tax Revenues)
Decreased property tax revenues
Seattle, WA (pop. 516,259):
Seattle has been hit relatively hard by high-tech industry declines and lay-offs, and property tax revenues reflect the local economic
slowdown. The situation in Seattle is complicated by the fact that the city does not set a specific property tax rate. Rather, Seattle’s
local government projects a total dollar amount to be generated from property taxes, and this past year’s projections were overstated. Since the projected dollar amount is based on previous year’s collections, revenue estimates are typically slow to recognize economic shifts. Another factor in the property tax revenue reductions is a technical adjustment - as more people appeal their assessed
property value, the total tax burden falls over time. As a result, total property tax collections are lower than expected. (See also
Adjustments to Sales Tax Revenues)
Lubbock, TX (pop. 186,206):
Finance officials in Lubbock report that the real estate market in Lubbock has leveled off, resulting in decreases in the city’s revenue estimates. New home sales, permits for new homes, and commercial real estate applications have all been declining recently.
Additionally, the city council voted for a slight reduction in property tax rates. Budget officials foresee little change in Lubbock and
predicted that the situation will not worsen, but is also unlikely to improve.
28
City Fiscal Conditions in 2001
Adjustments to Sales Tax Estimates. A slightly smaller number of cities (81) adjusted their sales-tax estimates. Of these, 51 increased their estimates, while 30 reduced
them. A smaller number (71) provided the dollar value of those changes in estimates. The 27 cities that reduced their sales tax collection estimates and provided
the dollar value of the decline expected to lose $38 million, and the 45 cities that
increased their sales tax collection estimates added another $119 million. The net
gain in sales tax collection from these cities, then, was $81 million for the responding cities. Noteworthy in this category of mid-year adjustments is the fact that 25 of
the 51 cities that increased their sales tax revenue projections are located in one
state, California. (These 25 also account for three-fourths of all of the cities in the
Western Census region that reported increasing their estimated sales tax revenues.)
City size was not correlated with the sales-tax revenue adjustment action.
Adjustments to Sales Tax Revenues
Increases in sales tax revenue adjustments were predominantly reported by cities in California during the past year. Many
said that their adjustments were driven by economic growth and prosperity that dominated the national level over the past
decade had finally become a reality in their communities. Other city officials noted the important link between the hightech industry and their localities. Growth in high-tech sectors has led to increased commercial development and reduced
unemployment rates. More people with jobs and higher incomes generated higher than expected sales tax receipts.
Outside of California, downward adjustments were made in many cities, both large and small. Declines in retail sales
were notable in cities whose growth is linked to the stock market, which remains highly unpredictable. Some budget officials
noted that people are still unsure of what is going to happen to their investments and are subsequently delaying big purchases that fuel sales tax revenues. Declining retail sales have also contributed to the revenue decline in many cities, and
the reshuffling of shopping districts within city boundaries has been a key factor.
Increased sales tax revenues
Stockton, CA (pop. 243,673):
Stockton’s story is indicative of many cities in California’s Central Valley. Stockton has experienced strong sales tax revenue performance due to the migration of families from the Bay Area to surrounding communities. Newcomers are selling their high
priced homes, cashing out, and buying relatively cheaper homes in their new areas of residence. As a result, they have extra cash
to spend. In Stockton, the influx of people has greatly enhanced retail purchases and auto sales above expected levels.
Salinas, CA (pop. 131,128):
Increased retail sales accounted for the boost in sales tax revenues in Salinas. New commercial development combined with a
strong local economy has driven sales tax estimates upward. A major factor contributing to increased estimates in Salinas has been
a new Costco that opened its doors in the past year. City budget officials said they did not fully appreciate the revenue impact that
the new store would generate.
(CONTINUED)
29
National League of Cities • Research Report on America’s Cities
Fullerton, CA (pop. 126,757):
The economic slowdown has yet to hit Fullerton, CA, where sales tax revenue estimates increased last year. City officials said that sales
tax collected on gasoline is partially responsible for the increase in estimates, as well as unexpected tax revenue carried over from a
local technology firm that recently left the city. Nevertheless, the city expects a drop off in the level of sales tax revenue collection next
year due to the departure of that company and the expectation of an overall economic slowdown.
Decreased sales tax revenues
Fayetteville, AR (pop. 42,099):
Two factors contributed to decreased sales tax revenues in Fayetteville. In Fayetteville, as in many localities, the county (Washington)
is responsible for collecting sales tax revenue from the municipalities within its jurisdiction. Sales tax revenue is then disbursed on
the basis of population. Recently released census data revealed that Fayetteville experienced a decline in population since the last
census, while the rest of the county showed increases in population. Fayetteville subsequently lost a percentage of the sales tax revenue it was receiving prior to the collection of 2000 census data. The second reason for the decline in sales tax revenue collection
stems from the relocation of an airport away from Washington County. Many businesses that were located near the airport attracted
shoppers from counties in the north. With the relocation of the airport, city officials report that shoppers are not coming to
Washington County as frequently as before. Fayetteville therefore expects that sales tax revenue will be lower than budgeted in the
coming fiscal year.
Lombard, IL (pop. 39,408):
Lombard is highly dependent on the generation of revenue via retail sales and estimates were lower than expected in the past year.
One reason for the low estimates is that a nearby shopping center, the primary source of sales tax revenue, experienced a decline in
sales. Projections for the next year are conservative and city officials expect a slight improvement in revenue generation due to the
planned arrival of retail businesses, including a large furniture store.
Seattle, WA (pop. 516,259):
With Microsoft and other software industries suffering from economic uncertainty, retail sales have fallen off considerably in Seattle.
The declining stock market (falling dividends) has also been a factor, especially in the case of luxury purchases. Actual revenues were
less than anticipated in the Puget Sound area as well as throughout the state. The state government has revised its revenue forecast
downward and a private contractor in the four-county Seattle metro area has recently reduced its estimates as well. Both residential
and commercial investment has suffered; however, budget officials do not foresee a worsening situation. Rather, they believe that the
local economy is resilient enough to sustain itself in the midst of the recent downturn. (see also Adjustments to Property Tax
Revenues)
Adjustments to Income Tax Projections. Fewer than one in ten municipalities are
authorized to levy, and indeed do levy, a tax on income, payroll, or earnings.
Therefore, only 20 respondents indicated that they had revised their estimates of
income tax collections for the fiscal year, and only 14 provided dollar estimates of
the changes. Six of those 14 cities that adjusted their income tax projections reduced
their estimates by $7 million, and eight increased their estimates by $42 million, for a
net gain of $35 million. It should be noted that nearly all of the increased revenues
pertain to one city, Philadelphia, which projected an additional $38 million in
income tax revenues above initial estimates.
30
City Fiscal Conditions in 2001
Adjustments to Income Tax Revenues
Mid-year adjustments to income tax revenue estimates were strongly linked to the business sector. City officials identified
unemployment, primarily in the high-tech sector, as a key factor in influencing projected income tax revenues. Cities with
successful commercial development programs, specifically those offering business incentives, reported increased estimates. In
contrast, cities experiencing slowed growth in business profits, and cities suffering from large industry lay-offs, reported
decreased income-tax revenue estimates.
Increased income tax revenues
Philadelphia, PA (pop. 1,585,580):
Income tax revenues have been the largest source of revenue for the city of Philadelphia for many years and recent increases in
income-tax collection estimates are the result of economic revitalization. City officials report that the number of jobs, as well as the
quality of jobs, has improved, leading to an increase in wages that has boosted income tax receipts. Furthermore, the local economy
remains solid due in large part to rapid growth in commercial investment. (see also Adjustments to Property Tax Revenues)
Decreased income tax revenues
Sidney, OH (pop. 18,710):
In Sidney, officials reduced their income tax revenue estimates due to declining business profits. The city expects to rebound next year,
under the expectation that the business slowdown was a one-time occurrence. This expectation is based upon the fact that the city
has not witnessed a corresponding decline in the employment rate and the health of the local economy has remained steady.
Lexington, KY (pop. 225,366):
Decreased income tax revenue estimates in Lexington were the result of lower than expected net profits in the business sector.
Businesses are reported to have suffered significant losses, resulting in employees being laid off. Budget officials remain optimistic,
predicting that by the second half of the next fiscal year there will be improvement and that the worst part of the downturn is now
over.
Warren, OH (pop. 50,793):
Steel industry lay-offs in Warren have significantly reduced income tax revenues. City officials reported that businesses are leaving the
city and the work force has suffered as a result. To counteract the declining revenues, the city has passed a .5% temporary increase in
income taxes, hoping that this will help bolster revenue growth.
Adjustments to “Other Tax” Projections. The category “adjustments to ‘Other Tax’
revenue estimates” elicited a response by 69 cities, 15 of which reported a downward adjustment and 54 reported increasing their estimated collections. Forty-seven
of the 54 estimated the value of the increase at $69.6 million, while 14 of the 15
reporting a decline in “other tax” revenue estimated an $8.9 million loss. The net
change in “other tax” revenue estimates, then, was a $60.7 increase. Of particular
importance here is that six of the 15 cities reporting declines in their forecasts of
“other tax” revenue were among the nation’s largest in population (>300,000).
Neither the regional location of the city (defined by Census categories) nor the taxing authority of the city was correlated with this revenue adjustment action.
31
National League of Cities • Research Report on America’s Cities
Adjustments to Fees and Charges Projections. Ninety-five cities indicated that
they either reduced (26) or increased (69) revenue projections from user fees and
charges. Twenty-two of the 26 provided dollar estimates of the reduction and indicated that reducing fees resulted in a decline of $7.6 million below estimates. On the
other side, 62 cities provided dollar value of the increased fees, which amounted to
$81 million more than projected. The net increase, then, as a result of adjusting fees
and charges was $73.4 million for these cities. A city’s size, regional location, and
taxing authority were not correlated with making adjustments to fees and charges
projections.
Adjustments to State Aid Projections. Many cities also made adjustments to
expected revenues from their states. Sixty-six cities increased their estimates of state
aid, while 25 reduced their estimates. Of those cities that could provide the dollar
value of those adjustments, 23 cities reduced the estimated collections from their
states by $37.7 million and 59 increased their estimates by $45.2 million. The net
result, then, was an increase in state aid of $7.5 million to the 82 cities that provided
dollar values for state aid changes. One city, again, dominated a category.
Philadelphia reduced its estimates of state aid collection by $28 million.
Of the 25 cities that noted a reduction in state aid forecasts, 10 are located in the
Midwest census region. Re-adjusting state aid forecasts was also correlated with city
size. A larger proportion of the medium-sized cities (between 50,000 and 100,000
population) increased their estimates of state aid projections (24 or 92% of the
responding “medium” cities) than other cities (68% of the small cities, 65% of the
large cities, and 57% of the largest cities). And taxing authority was also correlated
with this readjustment action. A larger proportion of cities with access to the income
tax reduced their estimates of state aid (7 or 54% of the responding cities), while a
larger proportion of the cities with access to the property tax only increased state aid
projections (17 or 90% of the responding cities).
Adjustments to Federal Aid Projections. Fifty cities noted that they had made
changes in their estimates of federal contributions to their fiscs. Many more (38) indicated that federal aid had increased than had decreased (12). Of the 38 indicating an
increase, 34 provided dollar estimates amounting to $26.4 million. Ten of the cities
reporting a decrease in federal aid estimated the loss at $2.6 million. The net
increase in federal aid for these 44 cities, then, was $23.8 million. A city’s size, location or taxing authority was not correlated with this action.
Adjustments to “Other Revenue” Projections. Finally, 94 cities adjusted their forecasts for the collection of “other revenues.” Most (83) of these cities reported an
32
City Fiscal Conditions in 2001
increase in revenues, while 11 reported a decline. Ten of these 11 estimated the
reduction at $2.9 million, while 75 reported a $67.2 million increase in other revenues. The net change in “other revenue” estimates, then, was an increase of $64.3
million. A larger proportion of Midwestern cities (30%) projected a reduction in
“other revenue” than cities in other census regions (10% of Northeastern cities, 12%
of Southern cities, and 3% of Western cities).
2000 Census
Population growth can signal an increase in both city revenue growth and demand
in service levels. That is to say, as cities grow, often the revenue base grows as well;
and city growth adds pressure to provide a higher level of services. Population pressure, then, does not necessarily harm or help cities’ fiscal positions; rather it can cut
both ways.
The Census Bureau has released its 2000 population count. The population growth
rate in the last decade grew at a higher rate than the growth rate in the previous
decade, according to early assessments.10 Population growth in “large” cities—
“large” defined by Glaeser and Shapiro as those cities with populations over
100,000—averaged 11.2% between 1990-2000 (median value was 8.7%). But they also
found enormous variation. Las Vegas, the fastest growing large city, increased its
population by 85.2% during the 1990s placing it in a category with 86 other cities the
authors call “high flying” cities, that is, cities whose population growth rates exceeded 10% during the decade. At the other end of the spectrum in their study, 33 cities
witnessed a growth rate below –2% between 1990 and 2000 and are labeled “declining” cities. Among these 33 cities, only 2 experienced a positive growth rate in the
1980s, meaning that the other 31 have lost population for at least the past 20 years.
Another 55 cities grew at a decennial rate between 2% and 10% (“moderate” growth
cities), while 20 were considered “unchanged” (their population growth rate was
between + 2% and – 2% for the decade).
In general, the cities that experienced a higher population growth rate in the 1990s
had a statistically significant higher growth level in 1999-2000 general-fund revenues
as well as in their ending balances. The 1999-2000 growth rate in general-fund revenues for the “high flying” cities averaged 8.8%, while the revenue growth rate for
the “unchanged” and “declining” cities was between 4% and 5% (Table 2). Ending
10
See, e.g., Edward Glaeser and Jesse Shapiro, “City Growth and the 2000 Census: Which Places Grew, and
Why,” Survey Series, Brookings Institution (May 2001).
33
National League of Cities • Research Report on America’s Cities
balances as a percentage of expenditures were also higher for the growing cities
(over 2% growth in the 1990s) than for the unchanged or declining cities.
Nevertheless, the more rapidly growing cities were no more likely in a statistical
sense to contend that their cities were “better able” to meet their cities’ budgetary
needs than were the slower-growing cities.
Table 2: Population Growth Rates and Fiscal Indicators
Population Growth Categories
High Fliers (>10%)
Modest Growers (2-10%)
Unchanged Cities (+/- 2%)
Declining Cities (-2% or more)
Total
Growth In
General Fund
Revenues,
1999-2000
Mean
8.793
N
128
Std. Dev
6.739
Mean
6.814
N
88
Std. Dev.
6.168
Mean
4.162
N
35
Std. Dev.
7.3768
Mean
4.927
N
54
Std. Dev.
5.47
Mean
7.006
N
305
Std. Dev.
6.65
Ending
Balances as
Percentage of
Expenditures
1999
0.3146
130
0.2251
0.3366
88
0.3208
0.2659
35
0.2253
0.1951
55
0.1735
0.294
308
0.2528
Ending
Balances as
Percentage of
Expenditures,
2000
0.3178
128
0.2337
0.3413
88
0.3137
0.2788
35
0.2416
0.1903
53
0.173
0.2979
304
0.2561
Table 3: “High Flier” Cities (Decennial Population Growth >10%)
Tax Authority (property
only or sales and/or
income)
property
sales and/or income
Total
34
Mean
N
Std. Deviation
Mean
Growth in
GF
Needs
Needs
revenues, EB as % EB as %
2001
2002
of EXP,
of EXP, (1=better; (1=better;
19992000
1999
2000
2=less)
2= less)
5.585
0.2307
0.2247
1.42
1.37
20
20
20
19
19
7.0784
0.1226
0.1423
0.51
0.5
9.3877
0.3298
0.335
1.41
1.62
N
Std. Deviation
108
6.5375
110
0.2363
108
0.2435
100
0.49
102
0.49
Mean
N
Std. Deviation
8.7935
128
6.7399
0.3146
130
0.2251
0.3178
128
0.2337
1.41
119
0.49
1.58
121
0.5
City Fiscal Conditions in 2001
The analysis proceeded to disaggregate the four population-growth categories to
examine differences within each category. Although there were no statistically significant findings with respect to three of the four categories, significant correlations with
fiscal variables were found within the “high flier” city category (Table 3). For the
other three categories of cities (“modest growers,” “unchanged” cities, and “declining” cities), access to the sales tax or to the income tax as opposed to just the property tax proved not to be important in explaining revenue growth, ending balances,
or the fiscal officers’ assessments of their cities’ budgetary capacity to meet needs.
Only with the “high flier” cities does tax authority explain these conditions.
The “high flier” cities that have access to a sales tax or an income tax, which are
more elastic revenue sources than the property tax, enjoyed a higher growth rate in
their 1999-2000 general fund revenues (9.4%) than those “high flier” cities that do
not have an income or sales tax authority (5.6%). Moreover, the average ending balances as a percentage of expenditures for income or sales tax cities were also significantly larger (33%) than the average ending balances for property-tax dependent
cities (23%). Both sets of findings reach a significance level considered acceptable by
statistical standards. Neither group, however, differed in their assessment of their
city budgets’ capacity to meet their cities’ budgetary needs in 2001, although the
property tax cities were slightly more optimistic that their budgets could meet budgetary needs in 2002 than income or sales tax cities. Of the 19 “high flier” cities that
are restricted to the property tax only, 12 (63%) noted that their cities’ budgetary
condition in 2002 would be better than it was in 2001. Of the 102 “high flier” cities
that have access to either the income tax or the sales tax, 39 (38%) thought their
cities’ budgetary condition in 2002 would be better than in 2001. This finding is also
statistically significant.
35
National League of Cities • Research Report on America’s Cities
36
City Fiscal Conditions in 2001
Appendix A
METHODOLOGY
This 2001 report on city fiscal conditions is based on two sets of data: (1) a national
mail survey of finance officers in U.S. cities during March through April 2001, and (2)
supplemental interviews with municipal officials who were contacted after receipt of
their fiscal survey and were asked questions about changes to their revenue forecasts
for the 2001 fiscal year.
Survey data for this report are taken from the 325 cities that responded to the mail
survey, for a response rate of 30.7 percent (see Appendix B for a list of all responding cities), allowing us to generalize for all cities with populations over 10,000.
In March and April 2001, NLC sent surveys to all cities with populations greater than
50,000 and, using established sampling techniques, to a randomly generated sample
of 520 cities with populations between 10,000 and 50,000. Questionnaires were
mailed to 1,060 cities. They were returned to the Center for Public Management and
Regional Affairs, Miami University, Oxford, Ohio, where they were compiled and
coded and the data were put into computer-readable format (see Appendix C).
The number of usable responses totaled 325, for a response rate of 30.7 percent.
The response rate was higher for the larger cities than for smaller cities. Thirty of the
55 largest cities (>300,000 population), or 54.5 percent, responded as did 71 of 155
cities, or 45.8 percent, in the larger city category (100,000-299,999 population). Less
than one-third (31.4 percent) of the medium-sized cities (50,000-99,999 population)
responded, or 106 of 338. And 118, or 23 percent, of the remaining cities that were
sent surveys returned the form. Cities that responded to the survey are listed in
Appendix A. The responses received allow us to generalize about all cities with populations of 10,000 or more. Due to the lower response rates from smaller cities and
37
National League of Cities • Research Report on America’s Cities
cities in the Northeast (15.6% response rate), any conclusions regarding these cities
remain tentative.
Table A-1:
Cities Surveyed In 2000 And Response Rate By City Size*
City Population
>300,000
Number of cities Number of Number
in this Class
Surveys Sent Returned
Response
Rate
55
55
30
54.5 percent
100,000-299,999
155
155
71
45.8 percent
50,000-99,999
338
338
106
31.4 percent
10,000-49,999
2,041
512
118
23.0 percent
TOTAL
2,589
1,060
325
30.7 percent
*All cities with populations greater than 50,000 were mailed surveys, and a random
sample of cities between 10,000 and 50,000 were selected and mailed surveys.
Population groupings in this report are based on Census data. The “largest” cities
were defined as those with populations of 300,000 or more; “large” cities had
between 100,000 and 299,999; “medium” cities between 50,000 and 99,999; and
“small” cities had populations of 10,000-49,999.
It should be remembered that the number and scope of governmental functions
influence both revenues and expenditures. For example, many New England cities
are responsible not only for general government functions but also for public education. Some cities are required by their states to assume more social welfare responsibilities than other cities. Some assume traditional county functions. Cities also
vary according to their revenue-generating authority. Some states, notably Indiana,
Ohio and Pennsylvania, allow their municipalities to tax earnings and income. Other
cities, notably those in Colorado, Louisiana, New Mexico, and Oklahoma, depend
heavily on sales tax revenues. Moreover, state laws may require cities to account for
funds in a manner that varies from state to state. Therefore, much of the statistical
data presented herein must also be understood within the context of cross-state variation in tax authority, functional responsibility, and state laws. City taxing authority,
functional responsibility, and accounting systems vary across the states.
38
City Fiscal Conditions in 2001
The dollar amounts presented in this report are in either current or constant dollars.
Nominal dollars are deflated using the state and local government implicit price
deflators.
The survey asked for the following statistical data for fiscal years ending in 1999,
2000, and 2001:11 FEDERAL AND STATE AID; REVENUE COMPOSITION of the city's
General Fund (property tax revenue, sales tax revenue, income tax revenue, other
local taxes, fees and charges, state funds, federal funds, all other revenue); LONGTERM G.O. DEBT OUTSTANDING and LONG-TERM REVENUE DEBT OUTSTANDING; PRINCIPAL AND INTEREST PAYMENTS ON G.O. DEBT; COMBINED FUNDS
BUDGET; and CAPITAL SPENDING. The survey also asked for financial data for
2000-01 on the amount of ADDITIONAL CITY REVENUE the city generated during
the past year as a result of raising tax rates and of raising fees and charges.
City finance officials were also asked to provide data on their city's GENERAL FUND.
The General Fund is the largest fund of all cities accounting for an average of 50.8
percent of total city budgets in 2000, according to the survey respondents. And this
statistic remains remarkably stable despite differences in city size. The General Fund
accounts for approximately 46.9 percent of the total city budgets of the responding
cities nation's largest cities (defined as cities with populations greater than 300,000),
46.7 percent of the total budget of large cities (cities between 100,000 and 299,999),
50.1 percent of the total budget of medium-sized cities (cities between 50,000 and
99,999), and 54.9 percent of the total budget of small cities (cities between 10,000
and 49,999).
The following were requested:
■
Beginning balance: These are the resources with which the city's General Fund
begins the year. If the city's General Fund were a personal checking account,
this would be roughly equivalent to the balance carried forward from the previous month.
■
Revenues (and transfers in): This is the grand total of all taxes, fees, charges,
federal and state grants, and other monies deposited into the General Fund.
While revenues are generally recurring items, the “transfers into general fund”
11
Most cities end their fiscal year on June 30 or December 31; a few cities end their fiscal years in April and
September. As a result, most of the data requested in the survey are the legislatively approved estimates for the
2001 fiscal year. Data for previous years are actual or preliminary actual.
39
National League of Cities • Research Report on America’s Cities
also lumped into this item probably are not. These transfers occur when, for a
variety of reasons, a city brings funds from one of its other specialized funds into
the General Fund.
■
Expenditures (and transfers out): This is the total of all spending by the city's
General Fund and may include both operating and capital spending. Transfers
out of the General Fund to other funds are also included here.
■
Ending balance: This is defined as the resources with which the city's General
Fund is left at the end of the year. The ending balance of one year becomes the
beginning balance of the next. The ending balance is easily calculated as:
Beginning Balance + Revenues - Expenditures = Ending Balance
■
Reserves: This is defined as the portion of ending balances that cities have earmarked for a capital project or for any other purpose, rendering those funds
unavailable for general-purpose spending.
Cities were also asked to identify which of a list of 19 possible fiscal policy actions
were taken during the 12 months prior to receiving the survey (April 2000 through
April 2001), how many of a list of 18 factors inhibited or helped the city's ability to
balance its budget, what three factors most adversely affected city revenues and city
expenditures, what three factors most positively affected city revenues and city
expenditures, whether the city is better able or less able to meet its financial needs
in 2001 compared with the previous year, and whether the city will be better able or
less able to meet its financial needs in 2002 compared with 2001.
40
City Fiscal Conditions in 2001
For this report, regional analysis is based on the Bureau of the Census' definition of
regions:
Northeast
Connecticut
Maine
Massachusetts
New Hampshire
New Jersey
New York
Pennsylvania
Rhode Island
Vermont
Midwest
Illinois
Indiana
Iowa
Kansas
Michigan
Minnesota
Missouri
Nebraska
North Dakota
Ohio
South Dakota
Wisconsin
South
Alabama
Arkansas
Delaware
District of
Columbia
Florida
Georgia
Kentucky
Louisiana
Maryland
Mississippi
North Carolina
Oklahoma
South Carolina
Tennessee
Texas
Virginia
West Virginia
West
Alaska
Arizona
California
Colorado
Hawaii
Idaho
Montana
Nevada
New Mexico
Oregon
Utah
Washington
Wyoming
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National League of Cities • Research Report on America’s Cities
42
City Fiscal Conditions in 2001
Appendix B
RESPONDING CITIES
Dothan
AL
Huntsville
AL
Mobile
AL
Fayetteville
AR
Fort Smith
AR
Little Rock
AR
Russellville
AR
Glendale
AZ
Lake Havasu City AZ
Mesa
AZ
Peoria
AZ
Phoenix
AZ
Scottsdale
AZ
Tempe
AZ
Tucson
AZ
Yuma
AZ
Anaheim
CA
Antioch
CA
Bakersfield
CA
Bellflower
CA
Benicia
CA
Burbank
CA
Camarillo
CA
Carlsbad
CA
Chula Vista
CA
Compton
Davis
Diamond Bar
El Monte
Escondido
Fremont
Fullerton
Glendale
Hawthorne
Irvine
La Mesa
Laguna Beach
Lakewood
Lodi
Los Angeles
Lynwood
Milpitas
Montebello
Mountain View
Norwalk
Orange
Oxnard
Palmdale
Pico Rivera
Pittsburg
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
Pleasant Hill
Porterville
Redding
Redlands
Riverside
Rosemead
Sacramento
Salinas
San Diego
San Leandro
Santa Ana
Santa Barbara
Santa Clara
Santa Maria
Santee
Simi Valley
Stockton
Sunnyvale
Thousand Oaks
Tustin
Vacaville
Vista
Walnut Creek
Watsonville
Brighton
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CA
CO
43
National League of Cities • Research Report on America’s Cities
Canon City
Colorado Springs
Commerce City
Denver
Fort Collins
Greeley
Lakewood
Louisville
Thornton
Ansonia
Cheshire
Groton
New Haven
Ridgefield
West Haven
Boca Raton
Cape Coral
Coconut Creek
Coral Springs
Dania
Ft Lauderdale
Greenacres
Inverness
New Prt Rchy
North Miami
Palm Bay
Pembroke Pines
Pinellas Park
Pompano Beach
Venice
Albany
Lagrange
Savannah
Burlington
Dubuque
Iowa City
Mason City
Ottumwa
44
CO
CO
CO
CO
CO
CO
CO
CO
CO
CT
CT
CT
CT
CT
CT
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
FL
GA
GA
GA
IA
IA
IA
IA
IA
Sioux City
Boise
Aurora
Bloomingdale
Bloomington
Evanston
Lombard
Mt Prospect
Naperville
Orland Park
Skokie
Springfield
Wheaton
Woodridge
Evansville
Portage
Atchison
Kansas City
Lawrence
Leawood
Topeka
Lexington
Louisville
Owensboro
Baton Rouge
Eunice
Lake Charles
Slidell
Athol
Bedford
Boston
Cambridge
Medford
Westborough
Annapolis
Greenbelt
New Carrolltn
Battle Creek
IA
ID
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IL
IN
IN
KS
KS
KS
KS
KS
KY
KY
KY
LA
LA
LA
LA
MA
MA
MA
MA
MA
MA
MD
MD
MD
MI
Cadillac
Detroit
Farmington
Ferndale
Grand Rapids
Hamtramck
Kalamazoo
Lansing
Mt Pleasant
Oak Park
Port Huron
Saginaw
St Clair Shrs
Sterling Hts
Warren
Westland
Austin
Bemidji
Cottage Grove
Duluth
Minneapolis
Moorhead
North Mankato
Belton
Independence
Kansas City
Kirksville
Liberty
Richmond Hts
Springfield
St. Joseph
Billings
Great Falls
Asheville
Cary
Charlotte
Durham
Greensboro
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MI
MN
MN
MN
MN
MN
MN
MN
MO
MO
MO
MO
MO
MO
MO
MO
MT
MT
NC
NC
NC
NC
NC
City Fiscal Conditions in 2001
Havelock
Lexington
Matthews
Monroe
Raleigh
Reidsville
Salisbury
Winston Salem
Lincoln
Omaha
Berlin
Bayonne
Hamilton
Middletown
Monmouth Jct
New Providence
Pt Pleasant
Albuquerque
Gallup
Santa Fe
Las Vegas
Reno
Buffalo
Lackawanna
New Rochelle
Rochester
Troy
White Plains
Akron
Bedford
Berea
Brook Park
Brunswick
Cleveland Heights
Columbus
Conneaut
Elyria
Fairfield
NC
NC
NC
NC
NC
NC
NC
NC
NE
NE
NH
NJ
NJ
NJ
NJ
NJ
NJ
NM
NM
NM
NV
NV
NY
NY
NY
NY
NY
NY
OH
OH
OH
OH
OH
OH
OH
OH
OH
OH
Fairview Park
Fremont
Lima
Mansfield
Perrysburg
Seven Hills
Sidney
Springfield
Tiffin
Toledo
Warren
Chickasha
Lawton
Mcalester
Midwest City
Moore
Oklahoma City
Ponca City
Shawnee
Tulsa
Eugene
Portland
Salem
Bethlehem
Coatesville
Columbia
Eagleville
Harrisburg
Mechanicsburg
Philadelphia
Pittsburgh
West Chester
Pawtucket
Greenwood
Mt Pleasant
North Charleston
Brookings
Mitchell
OH
OH
OH
OH
OH
OH
OH
OH
OH
OH
OH
OK
OK
OK
OK
OK
OK
OK
OK
OK
OR
OR
OR
PA
PA
PA
PA
PA
PA
PA
PA
PA
RI
SC
SC
SC
SD
SD
Rapid City
Chattanooga
Springfield
Abilene
Balch Springs
Baytown
Brownsville
Burleson
Carrollton
College Station
Coppell
Corpus Christi
Dallas
Denton
Eagle Pass
Fort Worth
Gainesville
Galveston
Garland
Houston
Irving
League City
Lewisville
Longview
Lubbock
Mc Kinney
Midland
Mission
Pasadena
Richardson
Robstown
Tyler
University Park
Waco
Salt Lake City
Sandy
W Valley City
Alexandria
SD
TN
TN
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
TX
UT
UT
UT
VA
45
National League of Cities • Research Report on America’s Cities
Chesapeake
Newport News
Portsmouth
Radford
Roanoke
Virginia Beach
Bellevue
Bellingham
46
VA
VA
VA
VA
VA
VA
WA
WA
Bremerton
Redmond
Seattle
Spokane
Tacoma
Walla Walla
Brookfield
WA
WA
WA
WA
WA
WA
WI
Greenfield
Manitowoc
Marshfield
Mequon
Milwaukee
New Berlin
Waukesha
WI
WI
WI
WI
WI
WI
WI
City Fiscal Conditions in 2001
Appendix C
ABOUT THE CENTER FOR PUBLIC
MANAGEMENT AND REGIONAL AFFAIRS
The Center for Public Management and Regional Affairs, Miami University, Oxford,
Ohio, engages in applied research, technical assistance services, training and education, and database development to serve rural and other small local governments in
southwestern Ohio. Funded by the Rural University Project, the center assists local
governments in such areas as public administration, technical assistance, capacity
building, local government economic development and planning, public program
evaluation, and policy research.
The center draws upon faculty and graduate and undergraduate students in such
fields as public administration, policy analysis, political science, environmental sciences, geography, and economics.
The Director of the center is Dr. Philip A. Russo, Jr.
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National League of Cities • Research Report on America’s Cities
48