Citiwire.net

For Release Sunday, December 6, 2009
© 2009 Washington Post Writers Group

WASHINGTON — In the 1930s, America underwent its grinding, years-long Great Depression. Now, at a minimum, we have the Great Recession. It’s the severest downturn in 70 years. And without a fiscal lifeline to struggling cities, it could conceivably get even worse.

This is the alarming conclusion of last month’s joint study and conference of the Brookings Institution and the National League of Cities (NLC), including a panel of mayors from across the nation.

It’s true, many economists now say our recessionary downward spiral has stopped. But, warned the NLC’s Christopher Hoene, past recessions show that “the low point for cities,” in terms of their revenue and expenditure numbers, “typically comes 18 months to 24 months after the low point of the recession” –a particularly disturbing fact because, economists tell us, the current recession’s “low point” has just been hit.

The delayed impact occurs because property tax collections, the revenue mainstay for most cities, don’t decline until after an entire cycle of reduced assessments to reflect declining house values.

Even before that, cities and towns are finding themselves engulfed in a daunting, widespread fiscal crisis. Deep workforce cuts, sharply reduced services and cancelled infrastructure projects are reported across the country. Each cut, as it occurs, reduces economic activity and intensifies the recession.

Most attention has gone to the fisal woes of state governments. But the states at least had a chance to trim their deficits with a major infusion of cash through last winter’s $787 billion American Recovery and Reinvestment Act (ARRA).

But the act, written for “shovel ready” speeds, sent the lion’s share of its government aid to states, leaving scraps–relatively–for local governments. Cities are benefitting a bit from ARRA’s special energy conservation grants and a temporary uptick in Community Development Block Grant funds. And the act has reportedly saved 350,000 jobs in schools. But its funds scarcely helped cities’ core budgets.

The result of still-worsening city fiscal fortunes, report Hoene and Mark Muro of the Brookings Institution, could be “a deepening local government fiscal crisis that hobbles the nation’s incipient recovery with several years of layoffs, cancelled contracts with vendors, and reduced services.”

One factor darkening cities’ recovery hopes is the long-term decline of federal assistance. In the 1970s, notes National League of Cities President Don Borut, federal programs financed about 17 percent of city budgets. Today the figure’s about 5 percent. Borut sees “an unraveling of the intergovernmental system and inattention to and a disregard of the fundamental interdependence of local, state and federal government.”

Cities, of course, have their own critics. They’re faulted for adding too many workers in good economic times, and–to avoid immediate wage hikes–offering unwise pension concessions to workers. But the cities can hardly be faulted for escalating health care costs that now are gnawing away at their bottom lines. Or state laws that sometimes force them into expensive agreements with police and fire unions.

The fact–as the mayors like to note–is that city and metropolitan economies generate over 80 percent of the nation’s economic activity. “If we’re going to pump the economy, create jobs” to offset the forces of recession, suggests San Jose Mayor Chuck Reed, federal assistance should go to cities and regions. Why? Because, he asserts, that’s where economic potential–the country’s “greatest, long-term return on our investment” –is concentrated.

Philadelphia Mayor Michael Nutter, who’s been forced to go through a series of massive budget cutbacks, believes that “quietly,” many federal officials would “admit” they erred by running the bulk of ARRA money through the states.

On top of that, Nutter is critical of Washington for giving “a bunch of money to banks who now won’t lend it to anyone because they need to hold onto it.” And for promoting the idea that some banks and investment firms are “too big to fail.”

Too big to fail? How about the nation’s cities and their metro regions? Nutter asks: They have “obligations and responsibilities that are far greater, and at least as important, as anything that’s going on in terms of business and industry. We provide desperately needed services and drive the economic engines in our cities and metropolitan areas unlike any other industry in the United State.”

No question about it, this is unusually bold assertiveness from urban America. And it’s likely to become more strident as the cities’ finances worsen with the delayed property tax hit. The Obama administration is intent on coordinating urban programs in such areas as housing and transportation. But it’s lent the cities and metros a deaf ear on fiscal policy. Checking where the votes are–and our economic future lies–may oblige it to change its tune.

For reprints of Neal Peirce’s column, please contact Washington Post Permissions, c/o PARS International Corp., WPPermissions@parsintl.com, fax 212-221-9195. For newspaper syndication sales, Washington Post Writers Group, 202-334-5375, wpwgsales@washpost.com.