84% of cities in money trouble

Some 84% of cities say they are facing financial difficulty, according to new survey. Things won't improve this year.

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By Tami Luhby, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- More than eight in ten cities are in financial trouble, up from 64% six months ago, according to a survey released Wednesday.

The recession is straining cities' ability to meet their financial needs, according to the National League of Cities. Some 84% of cities reported facing fiscal difficulties, the highest percentage since the group starting doing surveys in 1985.

The nation's cities are counting on billions of dollars from the economic stimulus package now being debated in the Senate. Mayors gathered in Washington, D.C., to meet with White House advisers and House Speaker Nancy Pelosi, D-Calif., on Wednesday to urge Congress to pass the recovery bill.

The mayors are eager to get funding for transportation and infrastructure projects that will put their residents to work. While most of those meeting Wednesday have budget deficits, they are not looking for federal money to close those gaps.

"If we're going to invest to stimulate our economy, we need to invest in our cities," said Miami Mayor Manny Diaz. "Cities are ready to go. This money comes in and goes right back out to create jobs."

The mayors have put together a "Ready to Go" report that details 18,750 local infrastructure projects in 779 cities that can be started as soon as funding is received. The projects, which represent an investment of $150 billion, would create 1.6 million jobs in 2009 and 2010 and range from creating bridge guardrails in Bessemer, Ala., to renovating elementary schools in Norfolk, Va.

The economic stimulus package sets aside billions of dollars for highway construction, transit improvements, school modernization and community development block grants.

2009 not looking better

Things will remain tough in 2009. Some 92% of the cities surveyed expected to have trouble meeting their city needs during this year. To cope, they are implementing hiring freezes and layoffs, delaying capital expenditures and instituting service cuts.

Some 69% have instituted hiring freezes or layoffs, while 42% are delaying or canceling infrastructure projects. Another 22% have instituted across the board cuts.

Cities are seeing their tax revenues decline as property values drop, shopping slows and unemployment rises. On top of that, nearly one in two city finance officers report difficulties in access to credit and/or bond financing.

To bring in more revenue, they are adding to raising fees. Nearly half are increasing charges for services, while 28% are increasing the number of fees. Fewer are raising taxes. Some 14% have increased property taxes, while 6% have hiked sales taxes.

"Cities are responding as best they can," said Donald Borut, the league's executive director. "Their citizens have increasing needs for services just at the same time that revenues are declining."

City finances tend to lag the overall economy by 12 to 24 months, the league said. The weakening economic conditions will be felt by cities through 2009 and likely through most of 2010, the league said.  To top of page

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