State of the Cities Report 2015

Share of cities reporting an improved ability to meet financial needs in 2014 holds steady at 71 percent

The 2015 State of the Cities Report presents findings from the 12th annual Fiscal Conditions Survey. The survey was sent to the chief administrative official in each member city. City officials responded to the 2015 survey from Nov. 24, 2014, through Jan. 13, 2015. A total of 405 cities returned the survey for a response rate of 49 percent. A big “thank you” to all responding cities! Our results are richer when cities of all sizes from all across the state are represented.

State of the Cities overview
The share of cities reporting being better able to meet financial needs during the last fiscal year held steady in 2014 at 71 percent. This share was first reported last year and is the largest ever reported. Of course, the ability to meet needs is a relative measure and does not indicate how well a city is able to meet needs. In other words, conditions may be better than last year but still not “good.” Cities may have adjusted expectations for meeting needs. The strategies cities used in recent years have influenced their ability to meet needs today. After several years of a down, and then recovering, economy, cities have adapted to operating with financial constraints. For some cities, though, conditions may actually be improving.

The share of cities reporting a shortfall in each of the main budget categories fell for the fourth year in a row. The share of cities reporting a shortfall in property taxes continues to decline. Just over one-third reported a shortfall in property tax revenue in 2014, the smallest since 2004.

Budget factors
A city’s ability to meet fiscal needs is influenced by changes in a wide variety of budget factors. Little change was observed in many budget factors when compared to 2013. The share reporting an increase in the value of the tax base rose from 30 percent in 2013 to 46 percent in 2014.

One of the influences on a city’s ability to meet fiscal needs is the level of impact that changes in budget factors have on the city. The top factors identified by cities as having at least a moderate budget impact in 2014 were employee wages and salaries; prices, inflation, and cost of living; infrastructure needs; cost of employee health benefits; and value of the tax base.

Strategies to prepare for 2015
Cities were asked to report on the strategies used in 2014 in preparation for 2015. The vast majority of cities reported undertaking at least one strategy. The portion of cities taking action in many categories changed very little from last year. The average number of strategies undertaken by an individual city increased slightly.

How a city responds to fiscal challenges is dependent on several factors so that not every strategy is available or appropriate for every city. Cities may need to change their strategy or mix of strategies as conditions change in order to meet needs most effectively.

If you have questions about the 2015 State of the Cities Report, contact Rachel Walker or Lena Gould (see information at right).