Research Brief on America’s Cities

By Christopher W. Hoene & Michael A. Pagano1 October 2010

City Fiscal Conditions in 2010

The nation’s city finance officers report that the fiscal condition of the nation’s cities continues to weaken in 2010 as cities confront
the effects of the economic downturn.2 Local and regional economies characterized by struggling housing markets, slow consumer
spending, and high levels of unemployment are driving declines in city revenues. In response, cities are cutting personnel, infrastructure
investments and key services. Findings from the National League of Cities’ latest annual survey of city finance officers include:
n N
 early nine in ten city finance officers report that their cities are less able to meet fiscal needs in 2010 than in the
previous year;
n A
 s finance officers look to the close of 2010, they report declining revenues and spending cutbacks in response to
the economic downturn;
n P
 roperty tax revenues are beginning to decline in 2010, after years of annual growth, reflecting the gradual, but
inevitable, impact of housing market declines in recent years;
n C
 ity sales tax revenues declined dramatically in 2009 and are declining further in 2010;
n F
 iscalpressures confronting cities include declining local economic health, public safety and infrastructure costs,
employee-related costs for health care, pensions, and wages, and cuts in state aid;
n T
 o cover budget shortfalls and balance annual budgets, cities are making a variety of personnel cuts, delaying or
cancelling infrastructure projects, and cutting basic city services; and,
n Ending balances, or “reserves,” while still at high levels, decreased for the second year in a row as cities used
these balances to weather the effects of the downturn.
Figure 1: % of Cities "Better Able/Less Able" to Meet Financial Needs in FY 2009

Meeting Fiscal Needs 100%

80% 75% 73%

In 2010, nearly nine in ten (87%) city finance 58%
65%
68% 69%
63% 65%
70%

officers report that their cities are less able to 60% 54% 56%

45%
meet fiscal needs than in 2009 (See Figure 40% 33% 34%
37% 36%

1). City finance officers’ assessment of their 21% 22%

19%
20%
% of Cities

13%
cities’ fiscal conditions in 2010 is essentially at
12%

the same level as their 2009 assessment, when 0

88 percent of city finance officers said their -20%

cities were less able to meet fiscal needs than -32% -31%
-25% -27%
-30%
-40% -35% -35%
in 2008. Concern about cities’ fiscal health -46%
-42%
-44%
-37%

remains at the highest level in the history -60% Better able

-55%
-63% -64%
of NLC’s 25-year survey. Finance officers -80%
-67% -66% Less able
-78%
in cities that rely upon property taxes and
-79% -81%
-88% -87%

-100%
sales taxes – the two most common local tax
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
sources – are equally likely to say that their
cities are less able to meet fiscal needs in 2010 Figure 1: Percent of Cities “Better Able/Less Able” to Meet Financial Needs in FY 2010

1 C hristopher W. Hoene is Director of the Center for Research and Innovation at the National League of Cities. Michael A. Pagano is Dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago. He has written the annual City Fiscal
Conditions report for NLC since 1991. The authors would like to acknowledge the 338 respondents to this year’s fiscal survey. The commitment of these cities’ finance officers to the project is greatly appreciated.
2 All references to specific years are for fiscal years as defined by the individual cities. The use of “cities” or “city” in this report refers to municipal corporations.

The City Fiscal Conditions Survey is a national mail and online survey of finance officers in U.S. cities conducted in the spring-summer of each year.
This is the 25th edition of the survey, which began in 1986.
Issue 2010-3

CENTER
FOR RESEARCH
& INNOVATION
Research Brief on america’s cities

(See Figure 1A). Finance officers in the West are slightly more likely to say that their cities are worse off in 2010 than finance officers
in cities
Figure inof other
1A: % regions
Cities "Better (See
Able/Less Figure
Able" 1B).3 Relatively
to Meet Financial similar
Needs in FY 2010 by Tax levels
Authorityof concern were
Figure 1B: % expressed
of Cities across
"Better Able/Less Able" Tocities of varying
Meet Financial Needs in FYsizes.
2010, by Region

Better Able
-91% Less Able
-88% Better Able
Western 9%
Property Less Able Cities
12%
Tax Cities
-83%
Southern 17%
-70% Cities
Income 30%
Tax Cities
-88%
Midwest 12%
Cities
-87%
Sales 13% -76%
Tax Cities
Northeast 24%
Cities
-100% -80% -60% -40% -20% 0% 20% 40%

% of Cities -100% -80% -60% -40% -20% 0% 20% 40%

% of Cities

Figure 1A: Percent of Cities “Better Able/Less Able” to Meet Financial Needs in Figure 1B: Percent of Cities “Better Able/Less Able” To Meet Financial Needs in
FY 2010 by Tax Authority FY 2010, by Region
Figure 2: Year-to-Year Change in General Fund Revenues and Expenditures (Constant Dollars)
Revenue and Spending Trends
Cities
10% ended fiscal year 2009 with year-to-year general fund expenditures outpacing general fund revenues.4 In constant dollars
(adjusted to account for inflationary factors in the state-local sector), general fund revenues in 2009 declined -2.5% over 2008 revenues,
while expenditures increased marginally by 0.7%.5 Looking to the close of 2010, city finance officers project that general fund revenues
will decline by -3.2% and expenditures will decline by -2.3% (See Figure 2).
8%
Recession 3/01 - 11/01

Recession 12/07 - 6/09

Recession 7/90 - 3/91

6%

4.1%
4.1%
3.8%
4% 3.7%
3.1%
3.3%

2.5% 2.8%
2.2%2.2% 2.5% 2.3%
1.6% 2.0% 1.6%1.6% 1.6%
2% 1.4% 1.5%
1.2% 1.3% 1.5%
1.1% 1.8%
1.0% 0.9% 1.3% 1.7% 0.6% 0.8%
0.7% 0.2%
0.5% 0.5%
0.2% 0.2% 0.7%
0.0% 0.0%
0%
-0.2% -0.1%
-0.6% -0.6%
0.7%

-2% -1.7%
1.9%
2.3% -2.3%
Change in Constant Dollar Revenue (General Fund) -2.5%
Change in Constant Dollar Expenditures (General Fund)

-4% -3.2%
1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Figure 2: Year-to-Year Change in General Fund Revenues and Expenditures (Constant Dollars)

3 R egional classifications are based on U.S Census-defined regions: “Northeast” includes cities in CT, ME, MA, NH, NJ, NY, PA, RI, VT; “Midwest” includes cities in IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI; “South” includes cities in AL, AR, DE, DC, FL, GA, KY, LA,
MD, MS, NC, OK, SC, TN, TX, VA, WV; “West” includes cities in AK, AZ, CA, CO, HI, ID, MT, NV, NM, OR, UT, WA, WY.
4 The General Fund is the largest and most common fund of all cities, accounting for approximately two-thirds of city revenues across the municipal sector.
5 “ Constant dollars” refers to inflation-adjusted dollars. “Current dollars” refers to non-adjusted dollars. To calculate constant dollars, we adjust current dollars using the U.S. Bureau of Economic Analysis (BEA) National Income and Product Account (NIPA) estimate for
inflation in the state and local government sector. Constant dollars are a more accurate source of comparison over time because the dollars are adjusted to account for differences in the costs of state and local government.

2
 City Fiscal Conditions in 2010

Revenue and spending shifts in 2009 and 2010 paint a worsening fiscal picture for America’s cities. The declines in 2010 represent
the largest downturn in revenues and cutbacks in spending in the history of NLC’s survey, with revenues declining for the fourth
year in row (since 2007). In comparison to previous periods, the most recent decade, with recessions in 2001 and 2008-09, was one
characterized by little stability in city fiscal conditions, and the effects of the current downturn are already more significant for city
budgets that for the previous recessions tracked in NLC’s survey. City budgets tend to lag economic conditions by 18 months to several
years, which suggests that 2011 will likely confront further revenue declines and cuts in city spending. (For more on the lag between
economic changes and city revenues see page 7).

Tax Revenues
The fiscal condition of individual cities varies greatly depending on differences in local tax structure and reliance. While an overwhelming
majority of cities have access to a local property tax, many are also reliant upon local sales taxes and some are reliant upon local income
taxes. Understanding the differing performance of these tax sources and the connections to broader economic conditions helps explain
the forces behind declining city revenues.6
Local property tax revenues are driven primarily by the value of residential and commercial property, with property tax bills determined
by local governments’ assessment of the value of property. Property tax collections lag the real estate market because local assessment
practices take time to catch up with changes in the market. As a result, current property tax bills and property tax collections typically
reflect values of property from anywhere from eighteen months to several years prior.
The effects of the well-publicized downturn in the real estate market in recent years are now evident in city property tax revenues,
but do not yet reflect the full effects of the economic downturn. Collections for 2009 continued to reveal strong revenue growth as
assessments caught up with the previous growth in the real estate market. Property tax revenues increased in 2009 by 4.2%, compared
with 2008 levels, in constant dollars. Projected property tax collections for 2010, however, point to some of the impact of the downturn
in real estate values. Property tax revenues for 2010 reveal the first constant dollar decline (-1.8%). The full weight of the decline in
housing values has yet to hit the budgets of many cities and property tax revenues will likely decline further in 2011 and 2012 as
declining property values continue to be reflected in city property tax assessments and collections (See Figure 3).
Figure 3: Year-to-Year Change in General Fund Tax Receipts (Constant Dollars)

8%

6.3% 6.2%
6%
6%

4.4%
4.2% 4% 4.2%
4% 3.6%
3.4% 3.3%
3%
2.8% 2.3%
2.4% 2.2% 2.3% 2.2%
2% 2%
2%
1.3% 1.2% 1.5% 1.4% 1.8%
1% 1.3%
0.9% 1%
0.6% 0.5%
-.05% -.1% -0.2%
0%

-0.3%
-1.2%
-2% 1.8%
Sales Tax Collections
-2.3%
Property Tax Collections -2.5%

Income Tax Collections -3.4%

-3.2%
-4%
-5%

-4.7%
-5.3% -5.1%
-6%
-6.6%
96

97

98

99

00

01

02

03

04

05

06

07

08

09

10
)
ed
19

19

19

19

20

20

20

20

20

20

20

20

20

20

20
t
ge
ud
(b

Figure 3: Year-to-Year Change in General Fund Tax Receipts (Constant Dollars)

6 For
 more information on variation in local and state tax structures, see Cities and State Fiscal Structure, NLC (2009) at http://www.nlc.org/resources_for_cities/publications/1637.aspx.

3
Research Brief on america’s cities

Changes in economic conditions are also evident in terms of changes in city sales tax collections. When consumer confidence is
high, people spend more on goods and services and city governments with sales-tax authority reap the benefits through increases
in sales tax collections. For much of this decade, consumer spending was also fueled by a strong real estate market that provided
additional wealth to homeowners. The struggling economy and the declining real estate market have reduced consumer confidence,
resulting in less consumer spending and declining sales tax revenues. City sales tax receipts declined in 2009 over previous year
receipts by -6.6% in constant dollars and city finance officers project further decline in 2010 by -4.9%.
City income tax receipts have been fairly flat, or have declined, for most of the past decade in constant dollars. Local income tax
revenues are driven primarily by income and wages, not capital gains. The lack of growth in these revenues suggests that economic
recovery following the 2001 recession was, as many economists have noted, a recovery characterized by a lack of growth in jobs,
salaries, and wages. Projections for 2010 are for an increase of 1.8%. These small, but seemingly counter-intuitive, results are likely
the function of a couple of factors. First, because relatively few cities have a local income tax, the results from a few larger cities can
often drive overall trends. Second, there is often a considerable lag between economic changes and shifts in income tax collections.
Unemployment often lags other economic indicators and the effects of high unemployment
Figure onFactors
4: Change in Selected wages Fromand compensation will likely
FY 2010
intensify in future years. For 2010, for in-
stance, the City of Columbus implemented 100%
a voter-approved increase in the city’s local 90%
income tax. The City of Indianapolis’ and 83% 81%
Increased Decreased
80%
many other Indiana cities’ income tax distri- 76%
74%

butions from the state increased in 2010, but

68%
70%
% of Cities

61%
many are projected to decrease significantly 60%
60%
53% 52%
in 2011. 50% 49% 47%
48%

City finance officers are therefore predicting 40%

little growth or actual declines in all three

33%
30%
30% 28%

major sources of tax revenue for cities in 22% 23% 24%

20% 17% 17%

2010. With national economic indicators 9%
12%
10% 7%
pointing to continued struggles, the impacts 4%
2%
3%
5%
3%
1% 1%
6%
3% 2% 2%
1%
0%
of those economic conditions on local revenue 0%
es s n ons s s s ts s s
ag tur
e
fet
y eft tio i ate date latio
n
ice mi Aid date ation e Aid ate ase Eco
n
sources, and the lag between declining W ruc b Sa h Ben Infla Pens nd n u erv ax Li ral n uc t nd ax B cal
f r ast P u a lt e s / Ma v Ma P op a nS T e de Ma Ed Sta Ma T L o
In c v F v v f
He Pri En e En Hu
m
n-E
n
n-E
n ho
economic conditions and local revenue Fed Stat
te
No No He
alt
Sta Fed
impacts, all indications point to worsening
Figure 4: Change in Selected Factors From FY 2010
city fiscal conditions in 2010 and 2011.
Figure 5: Impact of Selected Factors on FY 2010 Budgets and Ability to Meet Cities' Overall Needs
Factors Influencing 100%

City Budgets 90%

81%
79%
80%
A number of factors combine to determine 73%
Positive Impact
77%

the revenue performance, spending levels, 70% Negative Impact

64%
and overall fiscal condition of cities. Each
61%
60%
60%
54%
year, NLC’s survey presents city finance
% of Cities

54%
50%
50%
directors with a list of factors that affect city 42%

budgets.7 Respondents are asked whether 40%

each of the factors increased or decreased 30% 27% 27%

30%

from the previous year and whether the

26% 24% 24%
22% 22%
20%
change is having a positive or negative 11%
14% 11%
16%

influence on the city’s overall fiscal picture. 10%

4% 4%
6%
8%
5% 4%
7%

Leading the list of factors that finance 2% 1% 2% 2% 2%

1%
0%
officers say have increased over the previous ag
es
ctu
re
afe
ty
ne
fits ion
lat ensio
ns
nd
ate
s
nd
s
ate latio
n
rvi
ces Limits lA
id s
ate tio
nd uca
n
te
Aid
s
ate as
nd x B
e
al
Eco
n
W stru Pub S lth Be Inf P Ma Ma Pop
u Se Tax era Ma Ed Sta Ma Ta Loc
fra es/ ed
year are employee health benefit costs (83%) I n H e a
Pr i c
Fed
E n v
te
E n v
Hu
m an F
n-E
n v
n-E
n v
alt
h o f
Sta No No He
and pension costs (81%). Infrastructure Sta
te Fed

needs (76%) and public safety (68%) costs

were most often noted as increasing among Figure 5: Impact of Selected Factors on FY 2010 Budgets and Ability to Meet Cities’ Overall Needs

7 T he factors include: infrastructure needs, public safety needs, human service needs, education needs, employee wages, employee pension costs, employee health benefit costs, prices and inflation, amount of federal aid, amount of state aid, federal non-environmental
mandates, federal environmental mandates, state non-environmental mandates, state environmental mandates, state tax and expenditure limitations, population, city tax base, and the health of the local economy.

4
 City Fiscal Conditions in 2010
Figure 7: City Spending Cuts in 2009 and 2010

specific service arenas. Leading factors that

city finance officers report to have decreased 79%
Personnel
are the health of the local economy (74%) Cuts 67%

and levels of state aid to cities (61%) (See 69%

Delay/Cancel
Figure 4). Capital Projects 62%

When asked about the positive or negative 44%

Cuts in
impact of each factor on city finances Other Services
33%

in 2010, four in five city finance officers 34%

cited employee health benefit costs (81%), Modify Health
Care Benefits
25%

pension costs (79%) and the health of the 25%

local economy (77%) as having a negative Public
14% 2010
Safety Cuts
impact. Three in five or more city finance 2009
25%
officers also cited infrastructure costs (73%), Across the Board 17%
the level of state aid (64%), and public safety Services Cut
23%
costs (61%) as having a negative impact (See Renegotiate 12%
Figure 5). Debt
22%
Modify Pension
Spending Cuts and
12%
Benefits/Plans
17%

Revenue Actions Human

Services Cuts
11%

When asked about the most common 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
responses to prospective shortfalls this fiscal
Figure 8: City personnel-Related Cuts 20
year, by a wide margin the most common Figure 6: City Spending Cuts in 2009 and 2010
% of Cities

responses were instituting some kind of

personnel-related cut (79%) and delaying
or cancelling capital infrastructure projects (69%). Two
in five (44%) reported that their city is making cuts in
74%
services other than public safety and human-social Hiring freeze
services – types of services that tend to be higher in
demand during economic downturns. One in three (34%) Reduce/eliminate 59%
travel budget
reported modifying health care benefits for employees.
For all of the listed cuts, in comparison to 2009, the Salary/wage 54%
percentages of cities taking action 2010 increased (See reduction or freeze
Figure 6). Reduce/eliminate prof 46%
The 2010 survey also asked about specific types of development budget

personnel-related cuts made in 2010. The most common

Layoffs 35%
cut was a hiring freeze (74%). Over half (54%) of cities
reported salary or wage reductions or freezes and one in
Early
three (35%) cities reported employee layoffs. Cuts were retirements
23%
also made in employee development-related activities,
including reducing or eliminating travel budgets (59%) Furloughs 22%
and reducing or eliminating professional development
budgets for training, education, and skill building (46%) Reduce health
17%
(See Figure 7). care benefits

City finance officers were also asked about specific Revise union
15%
revenue and spending actions taken in 2010. The most contracts
common action taken to boost city revenues has been to Reduce pension
increase the levels of fees for services. Two in five (40%) benefits 7%
of the responding city finance officers reported that their
city has taken this step. One in four cities also increased 0% 20% 40% 60% 80% 100%
the number of fees (23%) or increased the local property % of Cities
tax (23%). Increases in sales, income, or other tax rates
were far less common (See Figure 8 on the next page). Figure 7: City personnel-Related Cuts 2010

5
 Research Brief on america’s cities

Ending Balances
One way that cities prepare for future fiscal challenges is to maintain high levels of general fund ending balances. Ending balances
are similar to reserves, or what are often referred to as “rainy day funds,” in that they provide a financial cushion for cities in the
event of a downturn or the need for an unforeseen outlay. Prior to the recession, as city finances experienced sustained growth, city
ending balances as a percentage of general fund expenditures reached an historical high for the NLC survey of 25 percent, and were
a comparable 24 percent in 2009. However, as economic conditions have made balancing city budgets more difficult in 2009 and
2010, ending balances have been utilized to help fill the gap. City finance officers projected
Figure 6: Revenue ending
Actions balances for 2010 at just under
in 2009
20 percent of general fund expenditures (See Figure 9). In total, since the high point in 2007, cities have drawn down total ending
balances by about 20 percent (from the high of 25.2% to 2010’s 19.9%).
Ending balances, which are transferred for-
ward to the next fiscal year in most cases, are 45%
40%
maintained for many reasons. For example,
40% Increased
cities build up healthy balances in anticipa-
Decreased
tion of unpredictable events such as natural 35%
disasters and economic downturns. But they
are also built up deliberately, much like a per- 30%
% of Cities

sonal savings account, to set aside funds for

25% 23% 23%
planned events such as construction of water
treatment facilities or other capital projects. 20%
Bond underwriters also look at reserves as an
indicator of fiscal responsibility, which can 15% 12%
increase credit ratings and decrease the costs 9%
10%
of city debt, thereby saving the city money. 6%
5% 4%
6%
Finally, as federal and state aid to cities have 5% 3% 2%
4%
3% 3%
2% 2%
become smaller proportions of city revenues 1%
0%
cities have become more self-reliant and are 0
Fee Levels Property Tax Number of Level of Other Tax Tax Base Sales Tax Number of Income Tax
much more likely to set aside funds for emer- Rate Fees Impact Fees Rate Rate Other Taxes Rate
gency or other purposes. Figure 8: Revenue Actions in 2010

Figure 9: Ending Balances as a Percentage of Expenditures (General Fund)

30%
Actual Ending Balance
Budgeted Ending Balance 25.2
24.0 24.3
25% 23.7

21.6 24.4 21.4

22.4
% of Cities

19.6 19.1 19.1

20% 18.5 18.3
18.0 20.8
19.9
16.2 16.1 19.0
15.7
15.0 17.2
17.1 16.9 16.9
15% 13.4 13.2
16.6
16.0
12.3 12.7 15.3
11.5 11.8 12.0 14.3
11.1 14.1
10.5
12.2 12.3 12.2
10% 11.6
10.3 10.5
9.6 9.8
9.0 8.9

5%

0%
85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20

20

20

20

20

20

20

20

Figure 9: Ending Balances as a Percentage of Expenditures (General Fund)

6
 City Fiscal Conditions in 2010

Beyond 2010
2010 reveals a number of downward trends for city fiscal conditions. The impacts of the economic downturn are becoming increasingly
evident in city projections for final 2010 revenues and expenditures, and in the actions taken in response to changing conditions. The
local sector of the economy is now fully the midst of a downturn that will be several years in length. The effects of a depressed real
estate market, low levels of consumer confidence, and high levels of unemployment will likely play out in cities through 2010, 2011,
and beyond. The fiscal realities now confronting cities include a number of concerns:
n R
 ealestate markets continue to struggle and tend to be slow to recover from downturns, which is proving to be
the case this time around, meaning that cities will be confronted with declines or slow growth in future property
tax revenues;
n O
 ther
economic conditions – consumer spending, unemployment, and wages – are also struggling and will
weigh heavily on future city sales and income tax revenues;
n L
 argestate government budget shortfalls in 2010 and 2011 will likely be resolved through cuts in aid and
transfers to many local governments;
n T
 wo of the factors that city finance officers report as having the largest negative impact on their ability to meet
needs are employee-related costs for health care coverage and pensions. Underfunded pension and health care
liabilities will persist as a challenge to city budgets for years to come; and
n F
 acing
revenue and spending pressures, cities are likely to continue to make cuts in personnel and services, and
to draw down ending balances in order to balance budgets.
Confronted with these issues, 80 percent of city finance officers forecast that their cities will be less able to meet needs in 2011 than
they were in 2010.

The Lag Between Economic & City Fiscal Conditions

We often refer to the lag between changes in the economic
cycle and the impact on city fiscal conditions. What does
this mean? The lag refers to the gap between when eco-
nomic conditions change and when those conditions have
an impact on reported city revenue collections.
How long is the lag? The lag is typically anywhere from
eighteen months to several years, and it is related in large
part to the lag in property tax collections. Property tax
bills represent the value of the property in some previous
year, when the last assessment of the value of the prop-
erty was conducted. A downturn in real estate prices may
not be noticed for one to several years after the downturn
began, because property tax assessment cycles vary across
jurisdictions: some reassess property annually, while others
reassess every few years. Consequently, property tax col-
lections, as reflected in property tax assessments, lag eco-
nomic changes (both positive and negative) by some period
of time. Sales and income tax collections also exhibit lags
due to collection and administration issues.
Figure 2 (pg. 3), which shows year-to-year change in city
general fund revenues and expenditures, also includes
markers for the official U.S. recessions that occurred in
1991 and 2001, with low points, or “troughs” in March
1991 and November 2001 according to the National Bu-
reau of Economic Research (NBER). Comparing the dates
of the recessions to the low point of city revenue and ex-
penditures as reported in NLC’s annual survey (typically
conducted between April and June of every year), we see
that the low point for city revenues and expenditures af-
ter the 1991 recession occurred in 1993, approximately
two years after the trough of the U.S. economic recession
(March 1991 to March 1993). After the 2001 recession,
the low point for city revenues and expenditures occurred
in 2003, approximately eighteen months after the trough of
the U.S. economic recession (November 2001-April 2003).
Our reporting on this lag is dependent upon when the an-
nual NLC survey is conducted, meaning that there is some
degree of error in the length of the lag – for instance, had
the survey been conducted in November of 1992, rather
than April of 1993, we might have picked the effects of
changing economic conditions earlier. Nevertheless, our
point, that the evidence of the effects of changing econom-
ic conditions tend to take 18-24 months to become evident,
is borne out by the available data.

7
Research Brief on america’s cities © National League of Cities 2010

About the Survey

The City Fiscal Conditions Survey is a national mail survey of finance officers in U.S. cities. Surveys were mailed to a sample of 1,055
cities, including all cities with populations greater than 50,000 and, using established sampling techniques, to a randomly generated
sample of cities with populations between 10,000 and 50,000. The survey was conducted from April to June 2010. The 2010 survey
data are drawn from 338 responding cities, for a response rate of 32.0%. The responses received allow us to generalize about all cities
with populations of 10,000 or more.
Throughout the report, the data are compared for cities of different population sizes, regions of the country, and with different tax
structures. The response rates for these categories are provided in the table below.

Categories Number of Surveys Sent Number Returned Response Rate

Population
>300,000 59 31 52.5%
100,000-299,999 179 63 35.2%
50,000-99,999 315 97 30.8%
10,000-49,999 502 147 29.3%

Region
Northeast 222 21 9.5%
Midwest 302 77 25.5%
South 277 118 42.6%
West 254 122 48.0%

Tax Authority
Property 384 81 21.1%
Sales & Property 534 236 44.2%
Income & Property 110 21 19.1%

It should be remembered that the number and scope of governmental functions influence both revenues and expenditures. For example,
many Northeastern cities are responsible not only for general government functions but also for public education. Some cities are
required by their states to assume more social welfare responsibilities than other cities. Some assume traditional county functions.
Cities also vary according to their revenue-generating authority. Some states, notably Kentucky, Michigan, Ohio and Pennsylvania,
allow their cities to tax earnings and income. Other cities, notably those in Colorado, Louisiana, New Mexico, and Oklahoma,
depend heavily on sales tax revenues. Moreover, state laws may require cities to account for funds in a manner that varies from state
to state. Therefore, much of the statistical data presented here must also be understood within the context of cross-state variation in
tax authority, functional responsibility, and state laws. City taxing authority, functional responsibility, and accounting systems vary
across the states. For more information on differences in state-local fiscal structure, see Cities and State Fiscal Structure (NLC 2009)
at www.nlc.org.
When we report on fiscal data such as general fund revenues and expenditures we are referring to all responding cities’ aggregated fiscal
data included in the survey. As a consequence, it should be noted that those aggregate data are influenced by the relatively larger cities
that have larger budgets and that deliver services to a preponderance of the nation’s cities’ residents. When asking for fiscal data, we ask
city finance officers to provide information about the fiscal year for which they have most recently closed the books (and therefore have
verified the final numbers), which we generally refer to as FY 2009, the year prior (FY 2008), and the budgeted (estimated) amounts
for the current fiscal year (FY 2010).
When we report on non-fiscal data (such as finance officers’ assessment of their ability to meet fiscal needs, fiscal actions taken, or
factors affecting their budgets), we are referring to percentages of responses to a particular question on a one-response-per-city basis.
Thus, the contribution of each city’s response to these questions is weighted equally.

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