Bloomberg News

Mayors Lobby Congress to Avoid Budget Effect on Cities

November 15, 2012

Big-city mayors warned that allowing automatic U.S. spending cuts to take effect next year would jeopardize municipal finances and job-producing water and sewer projects.

Across-the-board spending cuts of about $110 billion, equally affecting defense and non-defense programs, would begin in January if Congress and President Barack Obama can’t agree on a plan late this year to avert them.

The U.S. Conference of Mayors estimates the reductions would take $242 million from this fiscal year’s $3.3 billion in community development block grants that mayors said are an important part of their budgets. Thirteen conference members visited Washington today to urge lawmakers to reach a deal to spare such cuts.

“There are so many devastating effects that Baltimore would face” because “we receive a lot of federal funding,” Stephanie Rawlings-Blake, the city’s mayor, told reporters. “The hit on the block grants would have an extremely negative impact.”

With a jobless rate of more than 10 percent, Baltimore received almost $18 million for community development in the fiscal year ending Oct. 1, plus $3 million in a separate affordable-housing grant, according to the U.S. Department of Housing and Urban Development.

Also, Baltimore received almost $11 million in grants to help shelter the homeless and provide rental aid for low-income people infected with the AIDS virus.

Denver Mayor

Denver Mayor Michael Hancock said that under federal budget cuts, his city would lose almost $800,000 a year in community development block grant money plus more than $500,000 for job development programs.

Denver received almost $7 million in block grants, which can be used for water and sewer projects, other public improvements and affordable housing.

“We are talking about roads, bridges; we are talking about people actually going to work” to build them, said Mayor Alvin Brown of Jacksonville, Florida.

The mayors said they opposed curbs to the tax exemption for municipal bond interest. President Barack Obama has proposed raising more revenue by capping the muni-bond tax break for high earners.

Municipal Bonds

Such bonds are a tool to “build our infrastructure,” said Hancock, a Democrat. Reducing the tax break is “an instant job killer.”

Hancock cited the $856 million bond sale last month to finance expansion of the Denver International Airport. “We could not have sold those bonds had we not had the tool,” he said.

While Congress argues over how to curb the government’s $16 trillion debt, mayors said they must operate with balanced budgets.

In Jacksonville, Brown said he overcame an $80 million shortfall this year and balanced the budget without raising taxes, and achieved a similar result last year after a $58 million shortfall. A Democrat, Brown is pushing a plan to save $2.6 billion in pension expenses for retired city employees.

‘Working to Survive’

Denver has cut $500 million from its budget over the past five years and, like other cities, has “just been working to survive” financially, Hancock said. If the federal budget cuts take effect, “cities across the nation are going to be in some devastating conditions,” he said.

Automatic defense cuts, which would account for half of the reductions, are a concern for Brown and Steve Benjamin, the mayor of Columbia, South Carolina, where Fort Jackson is located.

Fort Jackson, the Army’s largest training base, nearby Shaw Air Force Base and an Air National Guard base are “a primary driver in our local economic engine,” Benjamin said.

Navy bases in northeast Florida contribute $14 billion to the region’s economy including $12 billion to Jacksonville’s, Brown said.

Federal officials’ inability “to articulate exactly where the cuts will come from” is a great source of anxiety to local officials, Benjamin said.

Across-the-board reductions would be “a meat-cleaver approach, which is not thoughtful and not strategic,” Benjamin said. “Old-school discussion is ‘everyone takes a haircut.’ This is a head cut.”

To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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