Tuesday, February 01, 2005

Yinz Are Not Alone

In all the major yinzer media, this article from CFO Magazine on the looming crisis in major metropolitan areas has been making headlines. Pittsburgh is used as an example of the fiscal problems that other cities across the country are facing.

From the article:

Pittsburgh is not alone. Communities ranging from Atlanta and Buffalo to Chicago and San Diego are in dire shape. Compared with the fiscal troubles of the federal government, those of municipalities have received little attention from corporate executives. But sooner rather than later, businesses will feel the effects of local budget shortfalls, through higher taxes and fees, crumbling roads and bridges, and smaller police departments. Simply relocating may not be the answer — many suburbs now face the same fiscal pressures as inner cities...

The NLC (National League of Cities) study, which included a survey of 288 municipal CFOs, found that 61 percent of municipalities will be less able to meet their financial obligations in 2005 than they were in 2004. And last year was not a good one for cities: it was the third year in a row that general fund revenues, adjusted for inflation, declined. At the same time, costs — especially for public safety and health care — have soared. The result is predictable: with reserves dwindling, many cities are resorting to severe budget cuts and hikes in taxes and fees.

The trouble isn't limited to the old industrial cities of the Northeast. In fact, the study showed that communities in the West and Midwest — including some suburbs — are even worse off. Seventy-five percent of CFOs in Western cities reported deteriorating conditions, as did 74 percent of those in Midwestern cities, compared with 59 percent in the Northeast and 43 percent in the South.

Couple reasons given for this crisis:
(1) Change of income source from goods (taxed) to services (untaxed);
(2) Overeliance on property tax revenue, which is vulnerable to swings in the economy;
(3) The Political goals of Politicians do no equal the Governmental goals of the City;
(4) Cities are burdened with unfunded mandates from the Federal Government and the States;
(5) Rising personnel and pension costs;

Pittsburgh's case also included the problems of binding arbitration, untaxed non-profits, and an inability to contain costs sooner.

So if it comes as any small consolation to you yinzers "aht" there, Pittsburgh, Lakewood CO, THE CITY, and 61% of all the other cities are pretty much up the same creek.

For those of you that love the big picture: if the economy tanks again, cities are screwed... but not just "sort of" or "kinda" screwed... I mean "late night scrambled cable station" screwed. I mean "back room of the video store" screwed. I mean "Fox primetime" screwed. I mean "Bob Villa and Norm Abrams got together to build a home entertainment center so that they could go and rent movies from the back room of the video store to watch with Jenna Jameson AND Paris Hilton" kinda screwed.

But, of course, who doesn't love a man covered in sawdust?

Anyway, I suppose that the rhetorical question in the upcoming Pittsburgh mayoral election is this: how many of these problems will the new mayor (or even the Act 47 or Oversight Board) be able to address and how many of these problems are out of his (her, their) control?

1 comment:

Greg Lagana said...

Curious - what's the binding arbitration angle - arbitrators compromised?

Here's another one: http://www.nytimes.com/2005/02/02/national/02detroit.html?oref=login