‘Fiscal cliff’ threatens local governments

Local governments have a direct stake in the wrangling in Washington over the so-called “fiscal cliff,” according to the National League of Cities (NLC). The $600 billion worth of spending reductions and tax hikes set for next year could affect cities’ ability to hire police, build sewers or repair roads.

One of the biggest impacts would come from cuts in federal Community Development Block Grants, which local governments use to make neighborhood improvements. Lexington County, S.C., for example, recently used the funds to build a medical clinic and provide food storage equipment for local food banks, according to The State newspaper.

South Carolina alone could lose $3.7 million in Community Development grants next year, according to NLC. In a letter to the state’s Congressional delegation, nearly 100 South Carolina mayors urged no cuts in the grants.

Local governments could also suffer from a proposal to remove the tax-exempt status on municipal bonds that help cities pay for infrastructure improvements, such as building roads and water or sewer facilities. If the tax exemption is removed, the cost of making those improvements “will rise thereby forcing cities to either raise local property taxes or fees to pay for them or forego those projects altogether,” Manuel Marono, mayor of Sweetwater, Fla., and president of the Florida League of Cities, wrote in The Daytona Beach News-Journal.

Cuts in Department of Justice grants to state and local law enforcement agencies could affect their ability to hire and retain police officers. The NLC identifies at least 11 federal agencies where proposed cuts would directly impact local governments.