The nation's cities are continuing to be hammered by the effects of the recession.

According to the National League of Cities' (NLC) annual report on cities' fiscal conditions, cities are now less able to meet their fiscal needs in 2011 and beyond. Financial officers are reporting the largest spending cuts and loss of revenue in the 25-year history of the survey.

In the research brief, "City Fiscal Conditions in 2010," 87 percent of city finance officers report their cities are worse off financially than in 2009. City revenues -- as generated in property, sales, and income taxes -- will decline -3.2 percent in inflation-adjusted dollars according to finance officers.

Severe cuts

To compensate, city officials are cutting back spending, with expenditures declining by -2.3 percent. These are the largest cutbacks in spending in the history of the survey and the fourth year in a row that revenue declined.

Financial pressures are forcing cities to fire workers (79 percent), delay or cancel capital infrastructure projects (69 percent), and modify health benefits (34 percent). There were also significant increases in the number of officers reporting across-the-board services cuts (25 percent) and public safety cuts (25 percent). Public safety is usually reduced only as a last resort option.

"This historic recession has forced city officials to make difficult decisions that impact the social and economic fabric of their communities," said Ronald O. Loveridge, mayor of Riverside, CA and president of NLC. He continued, "This recession is making city officials fundamentally rethink and repurpose the provision of services in their communities. Some are innovating and finding creative solutions but, regrettably, without the necessary resources, cities will continue to have a difficult time assisting their residents through these trying economic times."

Revenue crunch

The continuing weakness in the housing market, along with poor retail sales, has reduced the available revenue by significant margins. The responses from the finance officers clearly illustrate that the effects of the economic crash are intensifying in cities.

Because most tax revenue is collected at specific points during the year, and since it takes time for housing assessments to catch up to current values, cities will still be feeling the full effect of the downturn in 2011. The national economy's slow recovery to date also means the recession's effects will potentially linger in cities for several more years.

Spotty recovery

"These stark numbers continue the trend we've been seeing for the past several years: lower revenue and reduced services at a time when there is an increased demand for services," said co-author Christopher Hoene, director of the Center for Research and Innovation for the National League of Cities. He continued, "Unfortunately, because of the loss in revenue, cities will face even more difficult circumstances in the months, if not years, to come."

Cities have been forced to confront low consumer spending, unemployment, and cuts in state aid that have severely affected the types of services and the manner in which they are offered by cities. In response, many cities are revisiting the range of services provided and looking for new service-delivery models in order to balance budgets and minimize the impacts of cuts on residents.

"While certain segments of the economy may be under recovery, cities as a whole are not yet experiencing growth," said co-author Michael A. Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago. He continued, "As a consequence, cities are facing very serious financial hurdles right now in providing basic public services."