U.S. cities bringing in more revenues, building reserves

Reuters

WASHINGTON, Oct 9 (Reuters) - The financial clouds thatsettled over U.S. cities during the 2007-09 recession arelifting, with a survey released on Thursday showing cities'revenues likely increased in 2013 for the first time in sevenyears, helping to boost their reserves.

According to the annual survey conducted by the NationalLeague of Cities, which represents civic officials across thecountry, 72 percent of city finance officers believe theirmunicipalities are better able to meet financial needs this yearthan they were last year. In 2012, only 57 percent said theywere more capable of paying for services and other demands thanin the prior year.

Meanwhile, cities' general fund revenues are expected torise, the first time since 2006, although only about 0.1percent, according to the League.

"While conditions are no longer deteriorating, the capacityof city budgets remains weakened coming out of the GreatRecession," it said in the survey.

The housing bust wreaked havoc on the major source ofrevenues for U.S. cities: property taxes.

The finance officers polled said they expect 2013 will markthe fourth year of decline in property tax revenues, with a fallof 0.2 percent. Last year, those taxes dropped 0.1 percent andin 2011 they fell 3.9 percent.

While the housing market is improving, any changes will notshow up in municipal coffers for years. In many places, propertytaxes are determined by assessments that only take place everythree years.

Still, cities expect the other major source of revenue,sales taxes, to grow 1 percent this year, compared with a riseof 6.2 percent last year, as consumers become conservative inthe face of economic uncertainty.

As their incomes increase, cities are rebuilding thereserves that they had raided during the longest and deepesteconomic downturn since the Great Depression. In 2010 theirreserves, which municipalities refer to as ending balances,equaled only 16.5 percent of expenditures, the lowest since1997.

In 2012, most cities ended their fiscal years with reservesequal to 21.5 percent of expenditures.

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