Local government fiscal realities

Editor’s note: The following is the third of a six-part series on government budgets and government spending that comprise the Keating Report mid-year 2012 forecast. The topics we are covering include: federal fiscal trends, state finances, local government fiscal realities, public works and transportation construction, public-private partnerships and economy and government purchases.

The Washington-based National League of Cities (NLC) responded to the May jobs news by urging Congress to stop its gridlock and to pass a long-term transportation bill that would put large numbers of construction workers back on payrolls. In a statement, NLC said: “We also need Congress to support a job training bill that is responsive to the current workplace and economic realities — a bill that addresses the mismatch between workers’ skills and employer needs, and gives workers the training they need to compete for jobs in high growth, high demand industries.” NLC is a resource and advocate for 19,000 cities, towns and villages in the U.S.

These are challenging times for local governments, says Paul Posner, director of the public administration program at Fairfax, Va.-based George Mason University. “Both property values and property tax revenues are declining, and the two in combination, on the revenue side, have really hit cities hard, and I don’t think it’s going to turn around this year. On the cost side, governments, particularly local governments, are facing much higher pension costs. New pressures from the accounting and auditing communities are forcing cities and counties to more fully disclose the costs of their retirees’ pensions, and future pension liabilities for their current employees in retirement, as well. Governments have to more realistically estimate the costs that they are facing for those benefit programs, and for retiree health care, as well.”

Cities and counties are bumping up revenues or streamlining to cope with the fiscal difficulties that Posner mentions. In the Atlanta area, DeKalb County and cities including Atlanta, Alpharetta and Roswell are relying on private debt collectors to boost tax revenues. In Thurston County, Wash., several fire departments are sharing fleet maintenance services to cut costs and speed vehicle repairs. The Washington-based Tax Foundation reports that dozens of local governments in the U.S. have attempted to expand their taxing authority by levying hotel taxes on travel booking websites.

Carmel, Ind., is slashing traffic management costs by installing roundabouts, which are circular intersections with no traffic signals or stop signs where drivers travel counterclockwise around a center island. Drivers yield at entry to traffic in the roundabout, then enter the intersection and exit at their desired street. “The signalization equipment [at a typical intersection] costs $150,000. We save anywhere from $150,000 to $400,000, probably on average, over a stoplight configuration, with a roundabout,” says Carmel Mayor Jim Brainard.

Studies by the Federal Highway Administration have found that roundabouts can increase traffic capacity by 30 to 50 percent compared to traditional intersections. But, according to Brainard, safety is the main reason the city has invested in roundabouts. Carmel has experienced a 40 percent reduction in all accidents and an 80 percent reduction in injury accidents with roundabouts. “It eliminates left-hand turns and slows everybody down,” Brainard told GPN.

Brainard is optimistic about his community’s future budgets, based on his administration’s 10- and 20-year fiscal projections. “Looking ahead at 2013, we are in a lot better financial shape. The economy is a lot better here than it was a year ago. Revenues are up, building permits are up and the unemployment rate is down. We just have a lot more confidence.

“I am actually telling a few department heads that have had ongoing needs to submit their budgets to me first before I submit them to city council. I say, ‘If [your department] has pressing needs, I want to see them.’ Last year I said, ‘I don’t even want to see anything new,’ but this year we actually are going to take a look at some of those needs. I’m a lot more optimistic, and I’m sleeping better,” Brainard says.

View additional installments of our second-half 2012 forecast as well as the January 2012 forecast.

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