Decline in property taxes hurts cities

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STEVE CHIOTAKIS: Companies trimmed payrolls in September.
Employment services firm ADP said today -- 39,000 private jobs were cut for the month. Analysts were expecting a slight increase. Add that to a sour real estate market and slumping tax revenues, and you get an idea of what municipal governments are dealing with. A report from the National League of Cities out today says the latest recession did more harm to city budgets than any other downturn in the last 25 years. Christopher Hoene is director of research at the League of Cities and he's with us live from Washington D.C. Good morning, sir.

CHRISTOPHER HOENE: Good morning.

CHIOTAKIS: What's the main culprit here to cities? What's not coming in that used to be coming in?

HOENE: Right now it's that property taxes are declining for the first time in 25 years as a result of the declines in the housing market that started back in 2007. Those declines and housing values are starting to be registered in their local tax collections.

CHIOTAKIS: And why are property taxes so important to a city?

HOENE: Well they're important for a couple of reasons. One is that almost every city in the country has access to a local property tax. And second because for the majority of cities, it's one of the top two or three revenue sources that they use to fund services.

CHIOTAKIS: And this is like millage and things like that, right?

HOENE: Right. That's exactly right.

CHIOTAKIS: What are the main ways cities are coping with this loss in revenue? How are they dealing with that?

HOENE: Well, cities in almost every state have to balance their budgets under state law. And so they have to cut spending when their revenues decline. So far, the two major responses have been that they're making cuts in personnel in terms of layoffs and hiring freezes and furloughs and such, and they're also delaying or canceling major infrastructure projects.

CHIOTAKIS: And who are they going to help, Christopher? Are they going to states? Are they going to the federal government?

HOENE: Well they're not really going anywhere at this point. They're mostly going it alone. They'd like to go to the state governments for help, but the state governments in most instances are also facing shortfalls. And the federal government, which had been some help through the stimulus bill, the last couple of years is essentially in a place of not doing much as electoral cycles play out at this point.

CHIOTAKIS: Certainly is an eye-opening report. Thank you so much, Christopher Hoene, director of research at the League of Cities, from Washington. Thank you.

HOENE: Thank you.

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