2017 State of the Cities Report

Survey results reveal financial stability overall, but suggest that challenges remain for cities.

The 2017 State of the Cities Report presents findings from the League’s 14th annual Fiscal Conditions Survey. The survey was sent to the chief administrative official in each member city, and the results overall suggest that cities are financially stable right now.

State of the cities overview
While the data suggests that challenges for cities remain, especially in the areas of infrastructure funding and employee costs, most city officials who responded said that their city was better able to meet needs in 2016 than in the previous year. This echoes the nationwide trend. The National League of Cities reported that 81 percent of city finance officers were optimistic about meeting their city’s fiscal needs in 2016.

Large cities (those over 10,000 in population) were more likely to say they were better able to meet needs in 2016 (89 percent) than cities overall. Small cities (those under 2,500) were less likely to say they were better able to meet needs (59 percent) than cities overall.

Revenue shortfalls
City officials most frequently cited slight revenue shortfalls (defined as less than 10 percent of expected revenues) in the areas of property tax (32 percent), fees/charges (25 percent), and state revenues (20 percent). A small share of cities reported significant shortfalls (greater than 10 percent of expected revenues). Eight percent of cities experienced significant fee shortfalls, and 6 percent of cities reported significant state revenue shortfalls.

There was a sharp uptick in the share of cities reporting shortfalls in state revenues, from 11 percent to 21 percent. It is likely that many cities were anticipating an increase in local government aid (LGA), but the Legislature failed to pass the tax bill containing that increase.

From the comments offered by some respondents, it seems that the absence of LGA increases or inflation adjustments are categorized by members as shortfalls. For example, one city official noted that the city saw a shortfall in state revenues “due to LGA not being restored.” Another wrote, “LGA, our major funding source, remained about the same again for this year and next. This is very problematic for us.”

In addition, small cities did not receive state transportation aid in 2016. The Small Cities Assistance Account was created by the 2014 Legislature to provide aid for street maintenance, construction, and reconstruction for cities with populations under 5,000. That aid was distributed to small cities in 2015, but was not available in 2016.

If you have questions about the 2017 State of the Cities Report, contact Rachel Walker at (651) 281-1236 or rwalker@lmc.org.

Read the current issue of the Cities Bulletin