Double Decline Dooms Municipal Finances

A new report explains why the double whopper of declining property tax revenue and state aid to local governments is causing the worst municipal fiscal crisis in a generation, and may not get better any time soon, explains Nate Berg.
June 4, 2012, 12pm PDT | Jonathan Nettler | @nettsj
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Outlined in a new report from the Pew Charitable Trusts' American Cities Project, hitting the 90,000 counties, cities and school districts in the U.S. for the first time since 1980, the double decline in taxes and aid coincides with an increased demand for public services due to the recession, making for an especially dire situation. According to Berg, "These two funding sources typically amount to more than half of city revenues, and to have them both declining at the same time is like taking a city's wallet and then punching it in the stomach."

Unfortunately the situation is likely to get worse before it gets better. "Because some cities don't assess their property taxes annually, the negative impacts of the housing market crash haven't been fully felt," notes Berg. 

Stretching for a silver lining amongst the dark clouds of the recession, "the report notes that some local governments have been able withstand the cuts in state aid and property tax revenue by investing in new technologies or forming partnerships that allow them to maintain levels of services at lower costs."

"That's one of the opportunities that can come out of this crisis, is to find ways to either use technology or to partner with counties or other local governments in the region to deliver services more efficiently," says Robert Zahradnik, research director at the American Cities Project.



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Published on Friday, June 1, 2012 in The Atlantic Cities
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