Cities Report Declining Revenues

The National League of Cities (NLC) published its 2019 "City Fiscal Conditions" report yesterday. The key findings promoted on the NLC's website are less than optimistic:

• Almost two in three finance officers in large cities are predicting a recession as soon as 2020.
• Cities' revenue growth stalled in the 2018 fiscal year, but this year's continued drop indicates mounting pressures on city budgets
• The Midwest is bearing the brunt of declining conditions, the report found. Overall general fund revenues in midwestern cities dipped by 4.4% in fiscal year 2018

An article by Bill Lucia shares insights into the report's findings, including some more optimistic notes. While the pessimism about the potential of recession is coming from the largest cities, only 35-38 percent of respondents from cities with less than 100,000 residents predicted a looming recession, for instance.

Driving a lot of the conclusions and predictions reported in these findings is a softening and even, in some cases, declining revenue base for local governments.

Overall, for the cities NLC surveyed, the growth rate for general fund revenues softened to 0.59% in fiscal year 2018, from 1.25% in fiscal 2017. Expenditures grew at a rate of 1.8% among the surveyed cities in fiscal 2018, slightly lower than the 2017 rate of 2.1%.

The property tax revenue growth rate for surveyed cities was 1.8% in fiscal 2018, down from 2.6% in 2017. The income tax revenue growth rate slipped to 0.6% from 1.3%. Sales tax revenues grew by 1.9%, roughly in line with the growth rate for 2017, according to the report.

In Midwestern cities, general fund revenues declined sharply, at 4.4 percent, with declines in big cities like Chicago and Minneapolis driving the trend.