Recession-battered cities combine services

USA Today

• FILED UNDER
• Money News

In a post-recession budgetary crimp, Chelsea, Mass., City Manager Jay Ash has seen the light. Chelsea is joining with big neighbor Boston to buy greener LED lights for the city's 1,400 streetlights. Doing so may save $250,000 to buy them and $80,000 a year in electricity to power them.

Across the country, cities, counties and other local governments are combining services, from 911 call centers to basic purchasing, to capitalize on the economics of scale and offset declining revenue since the Great Recession. The recession technically ended in 2009, but pressure on cities has continued. A September National League of Cities (NLC) report predicted that this will be the sixth consecutive year of declining revenue for local governments.

"Municipalities are under tremendous pressure to find new ways to maintain and expand services to residents who want those services," says Ash, whose city's $135 million budget has grown by 1%-2% annually since 2008, compared with 4%-5% before the recession hit in 2007.

Ash says that when he came into government 30 years ago, "the last thing you would have done is call across your municipal border for help. Today, it is expected."

He discusses ways to combine community health services with leaders of two neighboring suburbs.

Americans are starting to notice the stress on city budgets. A USA TODAY/Gallup Poll, taken Oct. 13-14, found that 34% of respondents said their local governments have cut back on services since the 2008 financial crash. Fifty-one percent have noticed no difference, and 9% said they believed more services were being offered. The survey of 1,015 adults has a margin of error of +/-4 percentage points.

The NLC's survey of 324 financial officers in cities over 10,000 in population (http://www.nlc.org/cfc2012) found that more than four in 10 had seen cuts in aid from state governments over the past year. Almost half had reduced the size of their workforces. The federal Bureau of Labor Statistics reported in September that more than 14 million people work for local governments, down 476,000 since 2008.

The NLC's survey also projected that revenue from property taxes would be down by 2.1% this year and that income tax revenue would be down almost 1%. Sales tax revenue was projected to grow by 2.4%. Forty-three percent of respondents in the survey said their cities had raised fees, and 25% reported reduced spending on parks, recreation and libraries.

Ash says Chelsea has been able to maintain basic services, actually increasing police and fire ranks by 14% over the past decade, while cutting clerical and other positions in city hall by 12%. Since the recession, Chelsea has tapped rainy day funds and put off capital expenditures on roads, bridges and sewers. It's a common refrain around the country, and postponed maintenance worries officials.

Citizens "don't see the drain systems, don't see the water lines," Ash says.

Local governments got a momentary boost in 2009 through federal stimulus spending. Since then, mayors, city councils and managers have braced for what policy analysts Bruce J. Perlman and J. Edwin Benton describe as a "going it alone" future. Federal and state governments, which also face financial challenges, have cut aid to local governments.

Perlman, a University of New Mexico professor of public administration, and Benton, a University of South Florida government professor, say local governments have relied mostly on "quick-fix" strategies such as freezing hiring to cope with tight budgets.

They surveyed 580 city and county officials and found that about a third expected revenue in their jurisdictions to return to pre-recession levels.

"There are a lot of pressures (to combine services), but there has not been a notable shift to it as of yet," says Perlman, formerly chief administrative officer for Albuquerque. "That said, I am willing to go out on a limb and say that is the next step. What has happened to local governments is the fat has sort of been wrung out, and so there is nothing else left to do. So collaboration is the next step."

Michael Abels, a former city manager in DeLand, Fla., says the Great Recession has been a "primary catalyst" for much of the consolidation underway, especially in public safety. He predicts that service sharing between local governments will expand to health care and roads as cities confront backlogs in infrastructure needs.

Abels says he's worried that citizens and city officials will become complacent and believe local governments will return to pre-recession conditions, when there is ample evidence they won't. He says many jobs being created are low-wage and low-benefit, which will increase demands on public services while limiting tax revenue to local governments.

"Even though there are indications that the recession is ending, I don't think the local governments have yet hit bottom," says Abels, who teaches public administration at the University of Central Florida.

With federal and state aid likely to be scarce, he says, "local government is going to have to become innovators in some social programs."

USA Today