Bloomberg News

States, Congress Hampering Recovery in Cities, U.S. Mayors Say

June 14, 2012

U.S. cities recovering from the worst recession since the 1930s are hampered by partisan bickering in Washington, D.C., and pressure from state lawmakers to fill budget shortfalls, U.S. mayors say.

“It’s keeping capital on the sidelines,” Philadelphia Mayor Michael Nutter said of the factionalism in Congress. “Business people are not sure what direction we’re going in.”

U.S. mayors gathered in Orlando, Florida, for their annual meeting say cities are slowly rebounding, citing examples of declining unemployment in Columbus, Ohio, an increase in construction fee collections in West Palm Beach, Florida, and a new outlet mall in Livermore, California.

“We are really beginning to feel a recovery that is real and substantial,” said Mayor Michael B. Coleman of Columbus, where unemployment is 6.5 percent, down from 9.3 percent in January 2010. “It’s not as fast as we want, but it’s clearly steady and purposeful.”

For the first time since 1980, cities are simultaneously collecting less in property taxes and in state aid, according to a June 1 report by the Philadelphia-based Pew Charitable Trusts. The two revenue sources typically account for about half of municipal income.

States “have been coming to cities to pick their pockets to make their budget,” said John Marchand, mayor of Livermore, a city of about 81,000 people, some 40 miles east of San Francisco.

Closing Gaps

Thirty states have projected or filled budget gaps totaling $54 billion for fiscal year 2013, the Washington-based Center on Budget and Policy Priorities said in a May 24 report. State revenue remains 7 percent below 2007 levels, according to the report.

In Livermore, sales tax and property tax collections are down from last year and the budget of $77 million is at the same level as in 2005, Marchand said.

The city is seeing home construction, while $1 million in local tax incentives helped land a new outlet mall, he said.

In West Palm Beach, Mayor Jeri Muoio said fees for construction projects may reach the highest in six years, and home sales have increased slightly.

Muoio and other mayors said economic issues would decide the presidential election this year.

“We’re moving in the right direction, but I don’t think that’s trickled down to the average person,” Muoio said. “I’m not really sure that the average person, the average voter, is seeing an impact on their personal economic well-being.”

Output Increases

All but 23 of the U.S.’s 363 metropolitan areas will increase their gross output, James Diffley, chief regional economist for forecasting firm IHS Global Insight, said at the conference.

The gains will add to a national economy projected to grow by about 150,000 jobs a month for the rest of the year, he said.

“We are more confident than a year ago that our economic recovery is self-sustaining,” Diffley told mayors. “We will continue to see significant growth in jobs and income this year and the next.”

Diffley said 57 cities will increase output by more than 3 percent this year, including New Orleans, Salt Lake City and three Texas municipalities: Austin, Dallas and Houston. The U.S. gross domestic product is expected to grow 2.1 percent, he said.

High-tech expansion in Denver and San Francisco will spur growth near 3 percent, he said. Riverside, California, and Phoenix will “at last strongly rebound from the depths of the housing crunch,” Diffley said.

Nutter and other mayors said Congress can help cities with a new transportation bill to increase spending on road projects and by avoiding defense cuts scheduled to reach about $500 billion by 2021. The automatic cuts in Pentagon spending were required after a congressional committee failed to agree on how to reduce the national debt.

“We need them to do their jobs,” Nutter said.

To contact the reporter on this story: Michael C. Bender in Tallahassee at mbender10@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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