Agenda - Council - 07/22/1980 - Laserfiche WebLink

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State of the Cities, Belt tightening Ahead Intensified political competition between local, state and federal governments for available resources will surely be a hallmark of the 1980's: While some observers are more san- guine about the "down-sizing" of government, others foresee dif- ficulties for the cities. "I think I see hardscrabble" ahead for the cities, says John Petersen of the Government Finance Research Center of the Municipal Finance Of- ricers Association (MFOA) in Wash- ington, D.C., "... I see some hard times for the cities.'" As a report last year by' the iommittee on Future Horizons of the nternational City Management Association (ICMA) pointed out: "... the era of massive growth in the public sector is over... All levels of government will need. to adapt to less growth in real resources... It is an era of the policies of the shrinking pie." If the states are not able--because of their constraints--to step into the fiscal breach as' federal aid declines, then the cities may face a very lean decade. The ICMA panel of urban ex- pens concluded that this will mean fiscal scarcity, political skepticism Fd reduced services. A recent 100-city survey by theU.S.. Conference of Mayors found that 62 were experiencing serious budget problems, and had either cut services and laid off employees or raised taxes. A study which John Petersen of MFOA co-authored for the Congres- sional Joint Economic Committee (JEC) found that for 300 cities w/th populations greater than I0,000, the fiscal future holds budget deficits and employee layoffs. The JEC study con- cluded: )n the coming decade, one can expect a growing number of cities to experience severe fiscal stress. Most cities enhanced their solvency in recent years as a result of three factors: national economic recovery, in- creased direct federal assis- tance, and deferred capital ex- penditures. These factors,. however, are changing. For most cities, the unexpectedly high rate of inflation will prob- ably increase city expenditures more than revenues.. Cleveland, for example, is a well- known city beset with urban ills: it has defaulted three times since 1978 and needs $700 million in capital im- provements. Philadelphia faces a 5;30 million deficit this fiscal year; next year's deficit' is projected at $100 million. San Francisco and Washing- ton, D.C. are other big cities coping with large deficits. "The prospects for external assis- tance are greatly dimminished," said The Urban Institute's Peterson. And he believes there will be neither signifi- cant federal countercyclical aid nor substantial emergency fmanciat assis- tance to localities in thi~ recession.. With the. cities retrenching, Peter- sen of the MFOA said the programs most likely to be reduced will be"'a lot of'the human services activities, com- munity training programs," and so forth~ He also predicts a"deculturali- zation" of the cities as programs such as libraries, zoos and museums are cut back. One major development in .city finances, though, could be the shift to higher service fees to regulate the de- mand for city services, and mining back some municipal services to the public, the ICMA panel said. Some analysts, said ihe' ACIR's Myers, stress that one of the results of Pro- position 13 in California has been" 'an increasing emphasis on charging fees for services provided." Other cities, the panel said, may begin to -regain xheirSndependence from federal controls by foregoing federal aid programs. New Orleans Major Ernest Morial, for example, has said he would take less federal money for his city if he had more discretion to spend what he-did receive. If city services are to be funded by city revenues, then major changes will be needed in-tax systems at the local. level, the ICMA panel said, especially if cities are to be weaned from federal funds. The panel said property taxes should be based on "peoples current ability to pay" and made less sensitive to inflation-induced increased in real estate values. But Myers of the ACIK points out that some contend that too-many restrictions on the local property tax hampers it as a local revenue source for which, in a number of ways, it is quite appropriate. If local revenues are undermined, then state aid may carry restrictions, which assure "the relinquishment, in some sense; of local independence of action," Myers said: The erupting cost of financing- municipal employee pension plans is forcing many dries to cut services to. fund the plans, according to reporter Robert Lindsey of The New York T/mex. In a recent three-pan series on pensions, Lindsey pointed out that pensions consume up to 20 percent' of the San Francisco city budget, forcing deferral of such tasks as routine street maintenance. Other cities which Lindsey reports have pension plans in poor shape in- clude Los Angeles, New Orleans, Philadelphia, Pittsburgh, Indian- apolis and Detroit. The Urban Institute's Peterson predicts labor problems throughout the decade for the cities. Revenue shortfalls will mean layoffs and cut- backs, he said, while city employees will be trying to recoup the "very large wage decreases" which have occurred as inflation has outrun their wages.