Cities Make Various Policy Decisions to Meet Fiscal Needs

Nation's Cities Weekly, July 14, 1997 | Go to article overview

Cities Make Various Policy Decisions to Meet Fiscal Needs


During the course of a fiscal year, cities adjust their fiscal positions through numerous policy instruments. Changes in the city's fiscal environment require purposive and corrective action. The survey asked cities to identify which of 16 fiscal policy actions they had taken during the fiscal year. For example, cities were asked whether they had increased or decreased property tax rates, city service levels, fees and charges, interlocal agreements, etc. during FY1997 (or whether no action was taken during that period).

More cities took expenditure actions in 1997 than took revenue actions. Over half of all cities increased actual levels of capital spending and the growth rate of operating spending, and more than one in three increased the municipal workforce. On the other hand, between nine and 16 percent of cities reduced capital spending, the growth rate in operating spending, and the size of the municipal workforce. Also on the expenditure side, city service levels were increased by more than one in four cities, productivity was up in almost one-fourth of the cities, and the number of interlocal agreements

Although there was much less activity on the revenue side of city budgets, the level of user fees was raised in one-third of all cities, property tax rates were hiked in more than one in five cities, and impact fees were raised and new user fees imposed by one in six cities.

Expenditure Actions

In 1997, more than half of all cities increased actual levels of capital spending (56 percent) and/or increased the rate of growth in operating spending (55 percent), while 12 percent of all cities cut capital spending and 9 percent reduced the growth rate in operating spending. Fewer Northeastern cities (41 percent) increased capital spending than did cities elsewhere. Fewer Western (39 percent) and Northeastern cities (38 percent) increased the rate of growth in operating spending than did cities elsewhere.

The size of the municipal workforce increased in 36 percent of all cities and was reduced in 16 percent. Only 10 percent of Northeastern cities increased their municipal workforce, while more than two in five (41 percent) reduced their workforce levels.

City service levels were increased by 29 percent of all cities, but 50 percent of the nation's largest cities and 44 percent of the Southern cities increased service levels. Fewer than one in 20 cities (four percent) reduced city service levels.

More than one in four cities contracted out new services in 1997; nearly one in four increased productivity; and 18 percent increased the number of interlocal agreements. Regionally, more Western than other cities contracted out (40 percent), more Northeastern cities engaged in new interlocal agreements (38 percent) and productivity improvements (44 percent). Sixty-three percent of the nation's largest cities improved productivity.

American cities reported taking significantly fewer actions in 1997 to reduce operating growth rates and to reduce actual levels of capital spending than in 1996. In addition, fewer cities reduced employment and city service levels than at any point in the previous decade. The percentage of cities reporting increases in interlocal agreements or in productivity declined significantly in 1997, while there was a substantial increase in the percentage of cities increasing contracting out of services.

There was also a large 11 point drop in the percent of cities reducing actual capital spending in 1997. The percentage of cities reducing capital spending peaked in 1992 at 61 percent, and the trend has been downward during the past five years with only 12 percent of cities reporting a reduction in 1997. There is no significant variation among cities based on size with the smallest cities (12 percent) reducing capital spending slightly more than the largest cities (nine percent). However, there is regional variation in that the percentage of Midwestern cities (six percent) reporting a reduction in capital spending is much lower than Western cities (17 percent). …

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