Trumped up expectations continue even as earnings deteriorate:
Cities may be facing a new period of economic stress — even as the national economy continues to improve.
According to a National League of Cities (NLC) report released on Tuesday, municipal finance officers are expecting minimal growth this year — less than 1 percent — after dealing with slower revenue growth last year. If that happens, NLC Research Director Christiana McFarland says it would “be the first time we are seeing two consecutive years of slowing growth since the start of the recession.”
The report also reveals a decline in public officials’ confidence in their cities’ finances. This year, 69 percent said they are better able to meet the financial needs of their communities — down from at least 80 percent in each of the last three years.
This all may be “the start of fiscal contraction” for municipalities, the report concludes, and city revenues may never fully recover from the recession before the next economic downturn hits.
The wary outlook this year comes after a disappointing 2016. Last year, city revenues were expected to finally rebound from the Great Recession. But the reality fell short: City revenues (accounting for inflation) reached just under 98 percent of what they were in 2006 — the year before the recession started. While property tax revenue increased by a healthy 4.3 percent, sales and income tax revenue growth were slower than normal.
Now, city officials are expecting much lower rates of growth in property tax revenue — 1.6 percent for fiscal 2017 — and budgeted for an outright decline in sales and income tax revenues.