* 97th Congress } JOINT COMMITTEE PRINT

Ist SessionJ

TRENDS IN THE FISCAL CONDITION

OF CITIES: 1979-81

A-STAFF STUDY

PREPARED FOR TME USE OF THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

MAY 18, 1981

. Printed for the use of the Joint Economic Committee

U.S. GOVERNMENT PRINTING OFFICE

784270 WASHINGTON: 1981

For sale by -the Superintendent of Documents, U.S. Government PrintIng Office

Washington, D.C. 20402
JOINT ECONOMIC COMMITTEE

(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)

HOUSE OF REPRESENTATIVES

HENRY S. REUSS. Wisconsin, Chairman

RICHARD BOLLING, Missouri

LEE H. HAMILTON, Indiana

GILLIS W. LONG, Louisiana

PARREN J. MITCHELL. Maryland

FREDERICK W. RICHMOND, New York

CLARENCE J. BROWN, Ohio

MARGARET M. HECKLER, Massachusetts

JOHN H. ROUSSELOT. California

CHALMERS P. WYLIE, Ohio

SENATE

ROGER W. JEPSEN. Iowa, Vice Chairman

WILLIAM V. ROTH, Ja., Delaware

JAMES ABDNOR, South Dakota

STEVEN D. SYMMS. Idaho

PAULA HAWKINS. Florida

MACK MATTINGLY, Georgia

LLOYD BENTSEN, Texas

WILLIAM PROXMIRE. Wisconsin

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JAMES K. GALBRAITH, Executive Director

Baucz R. BARTLzTT, Deputy Director

(I1)
LETTERS OF TRANSMITTAL

MAY 13, 1981.

T~o the Members of the Joint Economic Committee:

I am pleased to transmit herewith a staff study entitled "Trends in

the Fiscal Condition of Cities: 1979-81."

Although the sample differs from those of previous Joint Economic

Committee surveys on city finances, this study reflects the committee's

continued interest in and concern over the fiscal condition of our cities.

Among other things, this study analyzes city government revenues,

expenditures, assets and liabilities, and borrowing and employment

patterns.

The committee once again is deeply grateful to the city officials who

provided the necessary data as well as valuable recommendations.

Without their expertise and cooperation this study could not have

been conducted.

It should be noted that these data were collected prior to the proposal or consideration of the 1982 Federal budget.

The study was conducted by Deborah Matz of the Joint Economic

Committee staff and John Petersen of the Government Finance Research Center of the Municipal Finance Officers Association. Research

assistance was provided by Michael Nardone of the committee staff

and Joseph Kelley of MFOA. The manuscript was typed by Jane

Bennett of the committee staff.

Sincerely, IfHENRY S. REiuss,

Chairman, Joint Economic Committee.

MAY 8, 1981.

Hon. HENRY S. REuss,

Chairman, Joint Economic Committee,

Congress of the United States, Washington, D.C.

DEAR MR. CHAIRMAN: Transmitted herewith is a staff study entitled

"Trends in the Fiscal Condition of Cities: 1979-81."

The committee is grateful to Royce Crocker of the Congressional

Research Service, Library of Congress; Carl Backman, Craig Boyle,

and Cathy Gust of the Senate Computer Center; and Thomas Muller

of The Urban Institute for their valuable assistance and suggestions.

Sincerely,

y ~~~~~JxEs K. GALBRsrrH,

Executive Director, Joint Economic Committee.

(HI)
CONTENTS

Page

Letters of Transmittal ....... .................. iii

Introduction and Summary ...... ................. I

Conclusions ............ ...................... 9

Methodology . .................................... 14

General Operating Revenues and-Expenditures .... 18

Operating Surpluses and Deficits .... ......... 21

Changes in Current Revenues ..... .............. 25

Changes in Composition of Total Revenues ..... 29

General Government Balance Sheet ..... .......... 35

Capital Outlays and Financing ................... 41

Sources of Capital Expenditure Funds .... ..... 45

Enterprise Fund Finances ...... ................. 50

Long-Term Borrowing and Debt Outstanding ....... 59

Changes in Workforce ....... .................... 62

Expenditures for Police, Fire, and Sanitation .. 66

Appendices

I. Cities Responding to Survey ............ I ... 72

II. Glossary. .............. 76

(V)
INTRODUCTION AND SUMMARY

.The health.of our Nation's and our cities'

economies are inextricably related. Sharp

swings in our national economy often create

-severe dislocations at the local level. In

addition, reductions in private sector jobs

and-policies which induce urban populations

to suburbs have forced many cities, large and

small, into operating deficits.

Likewise, the fiscal condition of our

Nation's cities is a microcosm of the

Nation's economic vitality. When cities are

plagued by severe fiscal stress, often, so

too are their State governments. The

combined State and local government sector

expenditures comprise over 13 percent of our

Gross National Product .(GNP). When these.

sectors are weak, they drain our national

(1)
2

economy; enjoying less tax revenue and

requiring greater amounts of individual and

public sector transfer payments from the

Federal Government.

It is apparent that all sectors will be

forced to live with less Federal assistance

in the coming years. However, drastic and

sudden reductions in assistance to State and

local governments will exacerbate the already

serious fiscal problems revealed in this

study. Although State and local governments

may benefit from personal and corporate tax

cuts, these benefits will not be felt for

some time. Budget reductions will have an

immediate impact.

The data in this survey were reported

prior to the announcement and consideration

of the 1982 Federal budget proposals and, if

anything, are probably optimistic. The

results, however, are grim.
3

. The -Committee has- conducted similar

surveys in the past. It should be'noted that

,while' many of the same cities responded;to

each of the surveys, the samples are not

identical. Caution should, therefore, be

exercised when comparing. the survey results.

The major findings are:

* For all cities, the average

increase in both revenues and

expenditures was below the rate of

inflation.in 1979-1980. 'For 1981, all

cities are anticipating that revenue

increases will be significantly below

expenditures increases.

* More than-50 percent of the cities

reported operating deficits, as defined

in this survey, in. both 1979-and 19.80.

.Operating deficits were not confined to

the largest cities. Large proportions

of cities of all sizes reported
4

operating deficits in both 1979 and

.1980. 'However, the greatest proportion

of cities in deficit occurred in the

largest cities. In 1980, over 70

percent of the largest cities were in

deficit and for 1981 all but four of the

largest cities anticipate running

deficits.

* A majority of the population

residing in the jurisdictions surveyed

live in cities which have deficits.

* For all cities, three main trends

are apparent concerning changes in

revenue: less Federal aid, little

growth in State aid and large increases

in fees for such purposes as driving

licensels, car registration, building

permits and the like.

* In terms of the composition of city

revenues, the shares represented by
5

Federal and State aid have declined in

all cities.

* Notwithstanding the widespread

concern over tax limitation measures, in

absolute dollars, the largest increase

in local revenue for 1981 is projected

in property taxes -- a reversal of last

year's survey results. Similarly, as a

percentage of total revenues, "other

local taxes" have increased in all

cities.

* Intergovernmental assistance

comprises 32¢ out of every dollar of

total current revenue in the largest

cities. Because.these cities are more

dependent on direct Federal aid than

smaller cities, they stand to bear the

brunt of proposed reductions in the

Federal grant system.
6

* Capital outlays have increased by

an average of 19.4 percent for all the

cities surveyed in 1980. Further

increases are planned for 1981, despite

reductions in the proportion of total

capital outlays financed from Federal

sources. This probably reflects a

realization by city officials of the

vital role infrastructure plays in the

economic development process. However,

these planned capital expenditure

increases may be moderated or reversed

as Federal assistance continues to

decline.

* Debt outstanding, particularly taxsupported general obligation debt,

continues to grow very slowly. The

emphasis in borrowing continues to be in

the self-supporting enterprise

activities, reflecting the increasing

importance of nontax revenues in city
7

finances. In the face of decreasing

Federal aid for capital purposes,

capital spending plans will increasingly

rely on access to the credit markets, a

process that is difficult and costly in

view of high interest rates and city

fiscal pressures.

* All cities experienced la'rge

reductions in their CETA workforces

(averaging 34 percent) in 1980. For

1981, all cities are predicting

additional steep CETA declines.

However, even these projections are

probably understated as they preceded

the Administration's proposed budget

which would terminate the public service

jobs program under Titles II and VI of

CETA.

* The full-time permanent workforces

in the medium and largest cities

declined, while the small and large city
8

workforces increased in 1980. For 1981,

all cities projected increases in their

full-time permanent workforces. These

increases were of sufficient size to

compensate for the then-anticipated

absolute reduction in CETA workers.

* Wage and salary increases for

police, fire and sanitation workers were

frequently below the rate of inflation.

However, in the largest cities the

shortfall was dramatic. For 1981, wage

and salary increases proposed in the

largest cities are below the increases

projected by other size cities for all

services.
9

Conclusions

Last year's survey indicated that -an

increasing proportion of cities would

experience operating deficits. The number

-and proportion of cities which reported

deficits in this report surpassed even the

.most pessimistic projections. And it should

be noted that cities-with deficits are not

confined to any one region or size. Thus, in

light of the seemingly intractable high rate

of inflation facing the Nation and the

proposed reductions in Federal

intergovernmental assistance, the outlook for

cities is bleak.

Many -cities have already retrenched their

service levels. For these cities, merely

maintaining existing service levels will

.. require further increases in local taxes,

user *charges, and fees. In addition to the

f-actthat increasing dependence upon several

..of, these revenue sources would
10

disproportionately burden the poor, it could

well create another round of urban

emigration. These cities have suffered as

high tax rates have combined with other

factors to drive many middle-class residents

and firms to suburban locations. In a number

of instances there was reason to believe the

worst was over and the cities had adjusted to

their new situations. This potential

stability, however, is now in grave danger of

disintegrating. Thus, the Federal Government

may have to develop a policy for dealing with

municipal default on other than an ad hoc

basis. And, while the State government

should be the first source of municipal

fiscal relief, not infrequently we will find

State governments themselves. fiscally

strained and incapable of providing the

necessary revenues.

Complicating the fiscal strain caused by

reduced Federal funds will be the pressure
11

for larger employee wage and salary

-increases; particularly in the largest

cities. While wage and salary increases in

other size cities were frequently below the

rate of inflation, in the largest cities they

did not even approach it. Given the fact

that 75.4 percent of the workforces in the

largest cities belong to collective

-bargaining units and 55.1 percent of these

employees are covered by contracts which

expire in 1981, city officials can expect

mounting pressure for cost-of-living

-increases in the coming year.

One encouraging change which has occurred

in cities is the sharp increase in capital

outlays. It appears that city government

officials have come to recognize that

maintaining and rehabilitating their capital

plant is a vital step in the economic

development process. However sanguine this

finding may be, it is tempered by the fact

78-427 0 - 81 - 3
12

that with reduced Federal assistance, many of

these activities may be slowed or halted.

Unfortunately, these are the very activities

which are necessary if cities are to

redevelop or reshape their corporate tax

bases and reduce their dependence on Federal

funds.

The results of this study strongly support

the need for reindustrialization policies,

given the severe fiscal consequences to

cities of declining middle class populations

and private sector jobs. The study also

shows the danger of too-heavy reliance on

Federal assistance. For many cities,

however, there are few alternatives. Even

reindustrialization, which will undoubtedly

help many cities, is a long-run solution. In

the near term, short of imperiling the health

and safety of its residents, cities will have

to raise taxes, user charges, and fees to

compensate for diminished Federal assistance.
13

But because of the magnitude of the proposed

Federal cuts and the abruptness with which

they will likely be implemented, many

economic development initiatives will be

reversed; the population of many cities will

be forced-to forego certain services and to

pay more for others, and an increasing number

of cities will.find.themselves on the brink

of fiscal collapse.
METHODOLOGY

Cities -- like other governments --

typically keep their books and control their

activities through a series of funds.

Because of this, it is frequently difficult

to get a comprehensive picture of their

financial activities unless special pains are

taken to recognize the accounting and

programmatic distinctions among groups of

funds. The survey attempted to simplify

some of these difficulties by asking cities

to consolidate their finances into two major

groups: first, the finances of "general

government" -- activities that are typically

supported by general revenues (primarily

taxes) -- and second, the "enterprise"

activities that are run largely on a selfsupporting basis through the "sale" of

certain goods and services by means of user

charges and fees. Within the general

government accounting structure, capital

(14)
15

outlays and debt transactions are frequently

carried on through separate funds, often with

receipts that are restricted to those

purposes.

.To develop estimates of overall financial

operations -and conditions, certain

simplifications and consolidations were

necessary. .-These were largely left to the

: respondents- to perform, -relying on a set of

careful definitions.to- guide.their judgments

as to the-.most appropriate categorization and

compilation--(see Appendix II). Therefore,

.while the individual financial items should

.. be generally.compa-rable among-cities in the

survey, -they may not be directly comparable

to figures reported elsewhere regarding city

finances, including the cities' own financial

reports.

-,This-.survey was..mai.led to 594 cities with

populations of 10.,000 or. more. Throughout,

-.the data are. reported on the basis-of city
16

size. To enhance comparability, data -are

reported on a per capita basis, where

feasible.

Survey Sample and Responses

City Size

SMALL

(10,000-49,999)

MEDIUM

(50,000-99,999

LARGE

(100,000-249,999)

LARGEST

(250,000 and over)

TOTAL

Surveyed

301

Responded

120

137 66

100 53

56 36

594 275

A list of the respondents is found in

Appendix I. All data have been compiled 'in

accordance with the fiscal year of the

reporting jurisdiction. Throughout, all

references to years refer to fiscal years.

Because the survey was mailed in the Fall,

1980, and some cities have fiscal years which
17

end with the calendar year, 1980 "actual"

data may, in some instances, represent

estimates. In all cases, 1981 data represent

budgeted and anticipated outlays. All per

capita amounts in this report are based on

1976 population data.

'Further, data for "all cities" have been

'calculated as the simple average of per

-capita amounts.
GENERAL OPERATING REVENUES AND EXPENDITURES

The survey was designed to produce a

combined statement of each city's general

government current operating receipts and

current and capital expenditures. For the

purpose of this analysis, capital

expenditures were considered separately.

Normally, most general government

expenditures and receipts will be contained

in a city's general fund. However, because

of different accounting structures and

service responsibilities, general government

activities may be accounted for in a variety

of other funds. Therefore, governments were

asked to combine all city funds except

enterprises (or special utility funds),

intergovernmental service funds, and those

trust funds for which the city acts only as a

fiduciary. The questionnaire asked for a

breakdown of current receipts by major types

of taxes and other current revenues from own

(18)
19

sources, and- those State and Federal grants

used for current operating purposes as well

as capital -Ooutlays. The desired result was

for a complete picture of those revenues used

to provide current city expenditures.

In addition to the current expenditures,

cities were asked to give their outlays for

long-term interest and principal. Although

the repayment of principal in yearly debt

service does not constitute a current

operating expenditure, as a practical matter

such payments usually are made out of current

revenues. Since these contractual

*commitments are not postponable, they

constitute an ongoing drain on current

revenues as do most current operating costs.

For all cities, the increase in both

current operating revenues and expenditures

was less than the rate of inflation in 1979-

1980 (see Table 1). The *most significant

shortfall occurred in the large cities. The

78-427 0 - 81 - 4
TABLE 1

CURRENT REVENUES AND CURRENT

EXPENDITURES PER CAPITA

BY CITY SIZE

- Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=109)

Revenues $262.17 $287.22 $299.64 9.6% 4.3%

Expenditures 273.23 292.63 331.12 7.1 13.2

MEDIUM CITIES (n=S1)

Revenues 314.43 341.80 355.01 8.7 3.9

Expenditures 312.85 339.54 378.85 8.5 11.6

LARGE CITIES (n=47)

Revenues 332.02 354.48 367.20 6.8 3.6

Expenditures 341.19 366.12 408.16 7.3 11.5

LARGEST CITIES (n=29)

Revenues 471.38 506.71 535.27 7.5 5.6

Expenditures 492.74 529.23 571.99 7.4 8.1

ALL CITIES (n=236)

Revenues 313.08 339.38 354.01 8.4 4.3

Expenditures 322.30 346.48 386.38 7.5 11.5

1981a = budgeted or anticipated amounts for Fiscal Year 1981

0

I
21

average revenue increase for these cities was

the smallest (6.8 percent) and fell short of

the expenditure increase by 0.5 percent. For

1981, in each category of cities it is

anticipated that expenditure increases will

.exceed revenue increases significantly.

.Operating Surpluses and Deficits

Table 2 indicates the average surplus or

.deficit per capita for each size category of

cities as defined above (including long-term

-debt service.requirements). In both 1979 and

1980 more than 5.0 percent of the cities -- of

all sizes-- in the sample reported actual

operating deficits (see Chart 1). The

proportion of large and largest cities in

deficit increased between 1979 and 1980. In

addition, for these cities the average per

capita deficit increased by 26.9 percent and

5.4 percent.respectively.
22

TABLE 2

ACTUAL AND ANTICIPATED

SURPLUSES AND DEFICITS

BY CITY SIZE

1979 1980 1981a

SMALL CITIES (n=109)

a. Average Surplus or Deficit

Per Capita $-11.07 $-S.41 $-31.49

b. Total Surplus or Deficit as

% of Total Expenditures - 4.1% - 1.8% - 9.5%

c. * of Cities in Surplus 47 55 27

d. % of Group Population in

Surplus 42.2% 52.4% 24.2%

e. $ of Cities in Deficit 62 54 82

f. % of Group Population in

Deficit 57.8% 47.6% 5; 7S.8%

MEDIUM CITIES (n=Sl)

a. Average Surplus or Deficit

Per Capita $ 1.59 $ 2.26 $-23.84

b. Total Surplus or Deficit as

% of Total Expenditures O.5% . 0.7% - 6.3%

c. i of Cities in Surplus 25 32 9

d. % of Group Population in

Surplus 47.9% 61.0% 17.0%

e. * of Cities in Deficit 26 19 42

f. % of Group Population in

Deficit 52.1% 39.0% 83.0%

LARGE CITIES (n=47j

a. Average Surplus or Deficit

Per Capita $-9.17 $-11.64 . -40.96

b. Total Surplus or Deficit as

% of Total Expenditures -2.7% - 3.2% -10.0%

c. * of Cities in Surplus 24 22 10

d. % of Group Population in

Surplus . 50.1% 1 4S.3% 24.1%

e. $ of Cities in Deficit i 23 25 37

f. % of Group Population in

Deficit 1 49.9% * 54.7% 7S.9%

i I

LARGEST CITIES (n=29)

a. Average Surplus or Deficit j ,

Per Capita $-21.36 $-22.52 $-36.72

b. Total Surplus or Deficit as

% of Total Expenditures - 4.3% - 4.3% - 6.4%

c. i of Cities in Surplus 10 8 4

d. % of Group Population in

Surplus 25.2% 17.7%. 8.6%

e. i of Cities in Deficit i 19 21 25

f. % of Group Population in

Deficit ! 74.8% 1 82.3% 91.4%

ALL CITIES (n=2 3 6 )

a. Average Surplus or Deficit

Per Capita $- 9.22 $- 7.09 $-32.36

b. Total Surplus or Deficit as

% of Total Expenditures - 2.9% - 2.0% - 8.4%

c. i of Cities in Surplus 106 117 s0

d. % of Group Population in

Surplus 33.6% 30.1% 13.7%

e. of Cities in Deficit 130 119 186

|f. %of Group Population in

Deficit 66.4% 69.9% 86.3%

1981a = budgeted or anticipated amounts for Fiscal Year 1981
CHART 1

PERCENT OF RESPONDENT CITIES WITH

OPERATING FUND DEFICITS

BY CITY POPULATION SIZE

P

E

R

C

E

N

T

0

F

C

I

T

I

E

S

tCO

M FY 1979

HFY 1980

D FY 1981

(ANTICIPATED)

CITY POPULATION

I I

.z %%'b ll-blb izllll
24

Only medium size cities experienced an

average operating surplus in 1979 or 1980.

However, in both years the per capita surplus

was small -- a negligible percentage of total

operating expenditures. For the large

cities, the average ratio of the deficits to

total expenditures increased, while for small

cities it decreased and for the largest it

remained constant.

The populations of the small and large

cities in deficit encompassed approximately

half of the total population of the small and

large cities in the sample. In 1979, threequarters of the population of the largest

cities resided in those cities experiencing

deficits. This increased to 82.3 percent in

1980 during which time over 70 percent of the

largest cities were in deficit.

For 1981, all but four of the largest

cities are anticipating deficits and in each

of the other categories the number of cities
25

-projecting deficits in 1981 is up sharply

from those in deficit in 1980.

Changes in Current Revenues

According to Table 3, three common threads

connect cities in all categories with regard

to the changes in current revenues.. First,

cities. in all size..catego.ries received less

Federal aid in 1980 than in 1979. .The

decrease for all categories averaged 5.5

*percent. - Second, State aid was-the slowest

growing component of r.evenues for cities in

all categories. For the largest cities,

State aid remained virtually. unchanged from

the previous year- -- increasing by 0.7

-,percent. 'Finally, the growth in -fees and

miscellaneous revenues in 1980 has been

dramatic,.more than offsetting the absolute

reduction in .Federal aid -for all size

'categories. While the largest increase in

-fees -. and misce.llaneous. revenues occurred in
26

TABLE 3

CURRENT GENERAL REVENUES

IN PER CAPITA AMOUNTS AND

ANNUAL PERCENT CHANGE

BY CITY SIZE

% Change % Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=109)

Total Current Revenue $262.17 $287.22 $299.64 9.6% 4.3%

1. Property Tax 88.74 96.08 1 105.02 8.3 9.3 2. Other Local Taxes 52.14 58.49 57.47 12.2 - 1.8 3. User Charges 17.83 1 19.86 20.27 11.4 2.1 4. Fees and Misc. 35.65 | 41.78 38.96 17.2 - 6.8 5. State Aid* 42.70 j 45.14 49.08 5.7 8.7 6. Federal Aid* 15.34 | 13.98 15.94 - 8.8 14.0 7. Transfers from I

Enterprise Funds 9.78 11.88 i 12.91 21.5 8.7

MEDIUM CITIES (n=Sl)

Total Current Revenue $314.43 $341.80 $35S.01 8.7% 3.9% 1. Property Tax 116.41 127.66 139.21 9.7 9.0 2. Other Local Taxes 52.02 60.02 64.21 15.4 7.0 3. User Charges 16.29 17.51 21.31 7.S 21.7 4. Fees and Misc. 41.66 48.17 43.51 15.6 - 9.7 S. State Aid* 49.94 51.88 55.14 3.9 6.3 6. Federal Aid 30.90 29.39 23.S4 - 4.9 -19.9

7. Transfers from

Enterprise Funds 7.22 7.18 8.08 - 0.5 12.6

LARGE CITIES (n=47)

Total Current Revenue $332.02 $354.48 I $367.20 6.8% 3.6% 1. Property Tax 108.49 117.15 125.98 8.0 7.5 2. Other Local Taxes 66.00 1 71.55 77.94 8.4 8.9 3. User Charges 14.73 15.33 17.12 4.0 11.6 4. Fees and Misc. 43.92 51.91 46.96 18.2 - 9.6 S. State Aid 49.99 S1.02 53.19 2.1 4.2 6. Federal Aid 41.18 j 39.19 37.50 - 4.8 - 4.3 7. Transfers from

Enterprise Funds 7.71 8.33 8.52 | 8.1 2.3

LARGEST CITIES (n=29)

Total Current Revenue $471.38 $506.71 $535.27 7.5% 5.6% 1. Property Tax 105.01 112.56 122.28 7.2 8.6 2. Other Local Taxes 116.07 130.05 135.64 j 12.0 4.3 3. User Charges 25.00 25:61 27.71 j 2.4 8.2 4. Fees and Misc. S3 77 68.09 70.21 26.6 3.1 5. State Aid* 88.34 88.99 96.34 0.7 8.3 6. Federal Aid- 76.09 73.50 76.28 - 3.4 3.8 7. Transfers from .

Enterprise Funds 7.10 7.93 6.82 11.7 -14.0

1981a = budgeted or anticipated amounts for Fiscal Year 1981

'Includes only that aid used for operating purposes.
27

the largest cities (26.6 percent) the

increase- in each size category of cities far

outpaced the percent increase in all other

revenue sources. Fees and miscellaneous

revenues include new and increased fees for

driver's licenses, automobile registration,

liquor licenses, building permits, and the

like. Interestingly, for 1981, all but the

largest cities are projecting reductions in

fees and miscellaneous revenues from the

large increases in 1980.

In a reversal of last year's survey

results, all cities are projecting that

property taxes will be the source of the

largest dollar amount of increase in revenue

in 1981. This may be due to the impact of

inflation on property values and/or to the

diminished impact of certain one-time

property tax reductions or roll-backs.

In percentage terms, the largest relative

increase in revenue in 1981 in the smallest

78-427 0 - 81 - 5
28

cities is projected to be Federal aid (14

percent); in medium cities, user charges

(21.7 percent); in large cities, user charges

(11.6 percent). In the largest cities, the

greatest relative revenue increases are

projected to be balanced among property taxes

(8.6 percent), State aid (8.3 percent), and

user charges (8.2 percent).

It should be noted that these projections

were made prior to the submission and

consideration of the 1982 Federal budget

proposals. If these or similar proposals

which greatly reduce Federal aid to State and

local governments are adopted, it is likely

that not only Federal, but State revenues as

well will have been overestimated even in

those instances where reductions are

anticipated. Unless local expenditures are

reduced accordingly, local taxes, user

charges and fees are likely to be increased

significantly in the coming years. Because
29

these -increased revenues, particularly those

derived from sales taxes, user charges, and

.fees, are collected from individuals based on

consumption and not on income, in all

likelihood the relative burden will fall most

heavily on the cities' poorest residents.

Changes in Composition of Total Revenues

Notwithstanding the fact that tax

limitations have been adopted in a number of

States, according to Table 4 property taxes

as a percent of total revenue increased in

two of the four categories (medium and large

cities). Reflecting the pressure to find

alternative revenue sources, reliance on

"other local taxes" has increased in all of

the size categories. Nonetheless, for all

city categories except the largest cities,

the property tax is still the single greatest

revenue source accounting for over one-third

of total current revenues.
30

TABLE 4

PERCENT COMPOSITION OF CURRENT REVENUES

BY CITY SIZE

1979 1980 1981a

(% of Total) (t of Total) (% of Total)

SMALL CITIES (n=109)

Total Current Revenue 100% 100 100 l

1. Property Tax 33-9 33.5 35.1

2. Other Local Taxes | 19.9 20.4 19.2

3. User Charges 6.8 6.9 6.8

4. Fees and Misc. 13.6 14.6 13.0

5. State Aid 16.3 15.7 16.4

6. Federal Aid 5.9 4.9 5.3

7. Transfers from i

Enterprise Funds 3.7 4.1 4.3

MEDIUM CITIES (n=5l)

Total Current Revenues 100 % i 100 % 100 %

1. Property Tax 37.0 37.4 39.2

2. Other Local Taxes 16.5 17.6 18.1

3. User Charges 5.2 5.1 6.0

4. Fees and Misc. 13.3 14.1 12.3

5. State Aid 15.9 15.2 15.5

6. Federal Aid 9.8 8.6 6.6

7. Transfers from

Enterprise Funds 2.3 2.1 2.3

LARGE CITIES (n=47) i

Total Current Revenues 100% 100% 1 100%

1. Property Tax 32.7 33.1 34.3 2. Other Local Taxes 19.9 20.2 21.2

3. User Charges 4.4 4.3 4.7

4. Fees and Misc. 13.2 14.6 i 12.8

S. State Aid j 15.1 14.4 | 14.S

6. Federal Aid 12.4 11.1 10.2

7. Transfers from

Enterprise Funds 2.3 2.4 2.3

LARGEST CITIES (n=29) 100%

Total Current Revenues 100 % 100 l 1. Property Tax 22.3 22.2 22.8

2. Other Local Taxes 24.6 25.7 25.3

3. User Charges 5.3 5.1 5.2

4. Fees and Misc. 11.4 ; 13.4 13.1

6. State Aid 18.7 17.6 18.0

6. Federal Aid 1 16.1 14.5 14.3

7. Transfers from

Enterprise Funds 1.5 1.6 1.3

1981a = budgeted or anticipated amounts for Fiscal Year 1981
31 '

These increases in local own-source

revenues as a proportion of total revenues

result from the reduced importance of

intergovernmental aid in all categories of

cities. This trend is projected to continue

in 1981.

All categories are projecting increases in

the proportion of total current revenue

comprised of property taxes, with the largest

jumps anticipated in smal.l and medium size

cities(l.6 percent and 1.8 percent

respectively). Although all but the small

cities are -anticipating reductions in the

proportion of total revenues comprised of

Federal aid in 1981, cities in all categories

are anticipating that the proportion of State

aid. to total revenues will increase slightly

in 1981.

According to Chart 2, intergovernmental

assistance in the largest cities accounts for

32¢ of each dollar of total current revenue
32

CHART 2

CITY REVENUE SOURCES -- FY 1980

PERCENT COMPOSI T ION

CITIES GROUPED BY POPULATION SIZE

PORLATION -- 1i,wON TO 49,999 PWIIATION - 5SB.00 TO 99.999

POPULATION -- 120280 TO 249.999 PORULATION -OVER 250.200

V VX-

\~ uw L A 

=D M.=
33

while: the small cities receive 21¢ in

intergovernmental assistance for each dollar

of revenue raised. Because Federal and State

aid -- individually and combined -- comprise

a larger proportion of the largest cities

revenues than any other size cities, the

largest cities stand to bear the brunt of

reductions in the Federal grant-in-aid

system.

In many of the largest cities retrenchment

has already occurred, and to maintain

existing service levels will require further

increases in local taxes, user charges, and

fees. It is these cities, moreover, which in

the past have suffered as high tax rates have

combined with other factors to encourage the

flight of population and business to suburban

locations. A sharp and sudden reduction in

intergovernmental assistance can mean a

further deterioration of services and/or a

new round of tax increases. Either can
34

generate a new wave of out-migration and a

further decline in the fiscal viability of

many cities. And while cities stand to

benefit from personal and corporate tax cuts,

in all likelihood the effects of these

changes will not be felt for some time.
GENERAL GOVERNMENT BALANCE SHEET

Primary interest in the balance sheet data

for the general government funds relates to

the quantity and quality of assets with

respect to current liabilities (those due

within one year) and the ongoing transaction

needs of the city in carrying out its daily

operations.

Cities were asked to supply balance sheet

information pertaining to current assets and

liabilities available to support general

government activities. Accordingly, they

were asked to exclude those funds held for

trust accounts and enterprise activities,

since these are typically restricted and are

not available for other general purposes.

The assets reported, therefore, should serve

as a reasonably good proxy for funds

(35)
36

generally available for supporting the

current spending activities of cities.

(Because of the questionnaire design, the

assets contain amounts in bond funds that are

intended for capital outlays -- in many

cases, these are not available for current

expenditures.)

There are various possible measures of

liquidity. Two of the more important are the

"current" ratio, which is the ratio of

current assets to current liabilities, and

the "quick" ratio, which is the ratio of cash

and investments to current liabilities.

Generally, if a government is supporting its

spending by increasing short-term liabilities

(or by liquidating its assets) these ratios

will be decreasing. The "quick" ratio is a

useful measure of the liquidity of the assets

themselves and how quickly they can be

converted to cash. This may be important if

the other assets (taxes collected and
37

accounts receivable) prove to be illiquid. A

third measure of liquidity is the ratio of

net current assets (working capital) to total

expenditures. Governments that have low

ratios (few net assets to expenditures) may

find themselves having cash-flow problems and

forced to borrow in the case of short-falls

in revenues or other receipts.

As shown in Table 5, the ratio of current

assets to liabilities displays no particular

trend during the period for all the city

categories. However, there appears to be

some deterioration of the ratio of cash and

investments to (quick ratio) liabilities in

the largest cities, although the other cities

expect to improve or maintain their quick

ratios in fiscal year 1981. On average,

however, the city balance sheets do not

reflect any noticeable deterioration over the

period in either of the ratios.
38

TABLE 5

GENERAL GOVERNMENT BALANCE SHEET

1979 1980 1981a

SMALL CITIES (n=89)

1. Current Ratio* 2.69 2.65 2.73

2. Quick Ratio** 1.78 1.83 1.89

MEDIUM CITIES (n=45)

1. Current Ratio* 3.08 3.10 3.08

2. Quick Ratio** 2.28 2.25 2.27

LARGE CITIES (n=33)

1. Current Ratio* 3.89 3.88 3.93

2. Quick Ratio** 2.79 2.91 2.89

LARGEST CITIES (n=24)

1. Current Ratio* 1.83 1.74 1.80

2. Quick Ratio** 1.21 1.13 1.13

* Current ratio is the ratio of current assets to current

liabilities.

** Quick ratio is the ratio of cash and investments to

liabilities.

Assets consist of demand deposits, cash, investments, taxes

receivable, receivables from other funds, and other current

receivables.

1981a = budgeted or anticipated amounts for Fiscal Year 1981.
39

Another interesting statistic is the ratio

of net current assets to current operating

expenditures. This reflects the working

capital available to meet the recurring

financing needs of the cities. The results

shown in Table 6 indicate that the ratio of

net assets to operating expenditures

decreased from 1979 to 1980 and is

anticipated to decline in 1981 for all sizes

of cities. Normally, the working capital

ratio of governments declines with city size.

In other words, the largest cities tend to

experience a lower coverage of expenditures

by net assets than do smaller units. This

does not seem to be the case with the large

size cities in the sample, however. This

should not be seen as a sign of weakness, but

rather a demonstration of the economies of

scale in liquid asset management by larger

units.
TABLE 6

NET CURRENT ASSETS

AT END OF YEAR AS A PERCENTAGE OF

CURRENT OPERATING EXPENDITURES

BY CITY SIZE

1981a = budgeted or anticipated amounts for fiscal year 1981

1979 1980 1981a

SMALL CITIES 38.6% 38.9% 31.7%

MEDIUM CITIES 34.6 33.2 26.9

LARGE CITIES 39.9 37.7 34.9

LARGEST CITIES 21.2 17.3 15.6

I
CAPITAL OUTLAYS AND FINANCING

The survey contained questions designed to

determine recent trends in city capital

outlays and how they are being financed. As

in the case of operating expenditures, the

distinction was made between general

government capital expenditures and those on

behalf of city utility enterprise activities.

This section discusses only those capital

expenditures associated with activities of a

general purpose nature.

Capital expenditures by cities showed

significant growth from 1979 to 1980, and

more growth in 1981 is anticipated. For all

cities, the average increase in 1980 capital

outlays totaled 19.4 percent. A major source

of the financing, although a reduced

proportion in most cases, is Federal funds.

Perhaps the most notable feature of the

capital outlay pattern shown in Table 7 is

(41)
TABLE 7

GENERAL GOVERNMENT CAPITAL

PER CAPITA BY CITY

EXPENDITURES

SIZE

1981a = budgeted or anticipated amounts for Fiscal Year 1981

Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=108) $51.31 $61.95 $74.67 20.7 % 20.5 %

MEDIUM CITIES (n=50) 53.59 54.56 86.17 1.8 57.9

LARGE CITIES (n=48) 54.55 71.22 83.56 30.6 17.3

LARGEST CITIES (n=29) 67.10 83.67 109.09 24.7 30.4

ALL CITIES (n=235) 54.41 64.95 83.18 19.4 28.1
43

the large percentage increases planned for

1981 by cities of all sizes. But, meeting

these expectations will require the existence

of sufficient funds for capital purposes, and

this may prove to be a problem.

In gauging anticipated 1981 capital

expenditures, it should be noted that cities

on average have in the past fallen far below

their budgeted amounts. From Table 8, it can

be seen that actual capital expenditures in

1979 and 1980 averaged only about 75 percent

of those that were planned. Such

"undershooting" of the budgeted amounts may

stem from several factors, including delays

in receipts of grant or borrowed funds,

construction delays, tendencies to

overestimate the rate of takedown of funds,

and perhaps a conscious budget policy of

using the capital expenditure accounts as a

cushion for additional liquidity. Capital

expenditures have typically been used as a
TABLE 8

ACTUAL EXPENDITURES AND RECEIPTS AS A RATIO OF

THOSE BUDGETED FOR GENERAL GOVERNMENT CAPITAL PURPOSES

BY CITY SIZE

Actual/Budget Actual/Budget

I Capital Expzenditures Capital Receipts _

__________________________ 1979 1980 1979 _ 1980 i _ _t

SMALL CITIES (n=108)

MEDIUM CITIES (n=50)

LARGE CITIES (n=48)

LARGEST CITIES (n=29)

ALL CITIES (n=235

0.630

0. 754

0.728

0.717 i

0.682

0.666

0.862

0.800

0.761

0.863

0.746 !

0.739 ,

0.793

0.764

0,841

0.853
45

buffer whereby shortfalls in revenues or

unforeseen current expenditures can be

financed by deferring capital outlays. If

the cities achieve only 75 percent of their

planned capital outlays in 1981, capital

outlays per capita would be, on average, $62

per capita, virtually no change from the 1980

level. If Federal assistance is

substantially reduced, there is a good chance

that even this estimate is optimistic.

Sources of Capital Expenditure Funds

There are three major ways to finance

capital expenditures: current revenues,

intergovernmental grants, and borrowing.

Beyond this generalization, tracing the

mechanics of financing long-term expenditures

can become complex. Payments on major

capital projects often extend over a long

period of time. Their financing presents

special opportunities for temporary or

interim financing arrangements to take place
46

before the final or definitive method of

paying for them is employed.

On the other hand, many capital outlays

for equipment and minor facilities are

relatively small and recurring, and are

typically financed out of current receipts or

accumulated reserves. The variety of sources

of funds creates special problems for

determining how long-lived improvements are

financed in any one time period.

Through the years, major capital outlays

of city governments, usually involving

substantial construction costs, have been

financed by long-term borrowing. A

traditional rule of thumb has been that 50

percent of the dollar value of major capital

outlays is financed by the sale of bonds.

During the 1970's, intergovernmental grants

-- especially those from the Federal

Government -- came to occupy a major role.

Analysis in last year's survey indicated,
47

however, that long-term borrowing as a source

of funds for capital outlays had fallen

behind intergovernmental grants in

importance, and represented only about 20 to

30 percent of total funds raised.

Table 9 provides the composition of

financing sources of capital outlays for the

cities surveyed for 1979, 1980, and 1981

anticipated. As Table 9 shows, the sources

of financing were divided between borrowing

(long- and short-term), intergovernmental

payments (State and Federal), and current

revenues and carry-over balances. During the

period, for all cities long-term borrowing

has become more important, while Federal aid

has become less so except for the largest

cities. The sources do not vary radically

among the sizes of cities, except that the

smaller jurisdictions appear somewhat more

dependent on financing capital improvements

from current revenues, while the larger
48

TABLE 9

GENERAL GOVERNMENT

CAPITAL OUTLAY FINANCING

PERCENTAGE COMPOSITION

BY CITY SIZE

1979 1980 1981a

SMALL CITIES (n=108)

1. Short-term Debt 5.5% 5.7% 3.2%

2. Long-term Debt 13.5 17.6 17.5 3. State Aid 5.2 3.3 5.0 4. Federal Aid 24.4 20.8 19.1 5. Current Revenues 33.4 35.2 38.6 6. Carry-over Balance 15.8 16.1 15.3 7. Transfer from Enterprise 2.1 1.3 1.3

TOTAL 100.0% 100.0% 100.0%

MEDIUM CITIES (n=S0)

1. Short-term Debt 5.7% 9.9% 6.3% 2. Long-term Debt 11.9 15.1 22.1 3. State Aid 6.5 8.6 3.5 4. Federal Aid 24.4 20.3 19.6 5. Current Revenues 32.2 27.6 25.8 6. Carry-over Balance 19.1 17.6 22.0 7. Transfer from Enterprise 0.3 0.9 0.8

TOTAL 100.0% 100.0% 100.0% ;

LARGE CITIES (n=48)

1. Short-term Debt 3.6% 3.1% 0.0% 2. Long-term Debt 23.9 22.3 31.6 3. State Aid 5.2 16.0 18.6 4. Federal Aid 36.5 26.2 23.1 5. Current Revenues 19.7 21.1 16.7 6. Carry-over Balance 10.4 10.3 9.8 7. Transfer from Enterprise 0.7 1.0 0.3 2 TOTAL 100.0% 100.0% 100.0%

LARGEST CITIES (n=29)5 l

1. Short-term Debt 6.1% 8.0% 4.3% 2. Long-term Debt 31.9 32.1 32.4 3. State Aid 7.2 5.9 5.4 4. Federal Aid 27.8 29.4 31.8 5. Current Revenues 22.0 18.6 18.3 6. Carry-over Balance 1 4.3 5.6 7 7 7. Transfer from Enterprise 0.7 0.6 j 0.3

TOTAL T100.0% 100.0% 100.0%

ALL CITIES (n=235) l

1. Short-term Debt I 5.3% 6.3% 3.4% 2. Long-term Debt : 17.5 20.2 23.5 3. State Aid S.7 5 7.2 7.4 4. Federal Aid 1 27.0 23.0 i 21.9 5. Current Revenues 29.2 28.5 28.5 6. Carry-over Balance 14.0 13.7 14.5 7. Transfer from Enterprise 1.3 1.0 0.9

TOTAL 100.0% 100.0% 100.0%

1981a = budgeted or anticipated amounts for Fiscal Year 1981
49

cities have greater dependence on long-term

borrowing and State and Federal

intergovernmental assistance.

Review of the sources of funds by their

percentage composition also shows that all

but the largest cities have budgeted for

declines in the relative importance of

Federal assistance in 1981 and for an

increase in long-term borrowing. With the

largest cities expecting an increase of 30

percent in 1981 in their capital spending,

yet relying for 32 percent of the financing

from Federal aid, it is unlikely that these

expectations will be achieved.
ENTERPRISE FUND FINANCES

The survey contained questions designed to

determine recent trends in city enterprise

fund activities. Enterprise activities, as

defined in the survey, are those government

functions that are generally self-supporting

through user charges (as opposed to general

government revenues), that are operated by

the city, and accounted for in separate

enterprise or special utility funds. Common

city enterprise functions are water and sewer

(when funded by user charges), electric, gas,

airports, and local transit. This section

discusses enterprise revenue and expenditures

for both operating and capital activities.

Table 10 gives the average per capita

total revenues and expenditures for

enterprise activities as reported by the 227

respondents reporting such activities. Total

revenues are growing in excess of 13 percent

(50)
TABLE 10

ENTERPRISE FUND

TOTAL EXPENDITURES AND REVENUES PER CAPITA

ALL CITIES (n=227)

Percent Change|

1979 1980 1981a 1979-1980 1980-1981a

REVENUES

1. Operating Revenues $131.25 $148.41 $167.74 13.1% 13.0%

2. State Aid 1.09 1.50 2.03 37.6 35.3

3. Federal Aid 10.76 12.23 14.39 13.7 17.6

4. Other Revenues 10.94 12.46 14.36 13.9 15.2

TOTAL $154.04 $174.60 $198.52 13.3% 13.7% I~~~~~~~~~~~~~

EXPENDITURES

1. Operating

Expenditures $103.31 $1i20.83 $141.47 17.0% 17.1%

2. Capital |

Expendituresl38.98 42.30 53.26 8.5 25.9

3. Interest

Expenditures 9.59 9.82 10.78 2.4 9.8

TOTAL $151.88 $172.95 $205.51 13.9% 18.8%

1981a = budgeted or anticipated amounts for fiscal year 1981

Qn
52

a year, well above the growth rate seen in

general government revenues. State and

Federal aid make up minor shares of total

-receipts (almost all of it for capital

grants) but has shown strong growth. The

growth in expenses outpaced that of revenues

in 1980, and are anticipated to outdistance

them greatly in 1981.

Focusing on total revenues and

expenditures of enterprise funds can be

misleading, however. Enterprises receive

revenues from a variety of sources,. including

user charges, grants from -States .a.nd the

-Federal-Government, and '-other -miscellaneous

receipts.. .Furthermore, mo-st capital spending

by enterprises .is. financed by - long-term

borrowing.. Because.these-g.ov.ernment entities

-conduct activities. on a - self-supporting

basis, - particular. attention is given to

zoperating -.revenues .--dderiv-ed -. from -the

%performan-ce -of_-.serv'ic-es3--In xrelati~onship to
53

those recurring expenses needed to pay for

day-to-day operations. Thus, the

questionnaire was designed to derive a net

operating revenue figure for the enterprise

fund. Changes in net operating revenue give

a good indication of how well charges for

services are keeping pace with the current

expenditures incurred in providing them.

Table 11 gives the operating revenues,

expenditures and net revenues per capita for

the cities in the survey reporting such

activities. Small cities have enjoyed some

improvement in net revenues. However, all

other city categories have experienced a drop

in net revenues as operating expenditures

increased at a faster rate than operating

revenues.

The decline in the overall current

position of the enterprise fund is also

illustrated by the upward trend of the

enterprise fund operating ratio (enterprise
TABLE 11

ENTERPRISE FUND

OPERATING REVENUES, OPERATING EXPENSES,

AND NET OPERATING REVENUES PER CAPITA

BY CITY SIZE

Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=96)

1. Operating Revenues $144.01 $166.43 $184.32 15.6% 10.7%

2. Operating Expenditures 124.30 145.65 171.43 17.2 17.7

NET REVENUES $ 19.71 $ 20.78 $12.89 5.4% -38.0%

MEDIUM CITIES (n=56)

1. Operating Revenues $125.23 $134.93 $153.79 7.7% 14.0%

2. Operating Expenditures 106.73 117.77 129.36 10.3 9.8

NET REVENUES $ 18.50 17.16 24.43 -725 42.4%

LARGE CITIES (n=46)

1. Operating Revenues $119.33 $135.23 $159.84 13.3% 18.2%

2. Operating Expenditures 101.48 117.50 140.87 15.8 19.9

NET REVENUES $ $ 17.73 $ 18.97 0.7% 7.0%

LARGEST CITIES (n=29)

1. Operating Revenues i $119.52 $135.70 $152.35 13.5% 12.3%

2. Operating Expenditures 105.12 126.74 151.02 20.6 19.2

NET REVENUES $ 14.40 -8.96 1.33 -37.8% -85.0%

ALL CITIES (n=227)

1. Operating Revenues $131.25 j $148.41 $167.74 13.1% 13.0%

2. Operating Expenditures 112.89 130.65 152.25 15.7 16.S

NET REVENUES : 18.36 $ 17.76 $ 5.49 - 3.3% -12.8%

1981a = budgeted or anticipated amounts for fiscal year 1981
55

expenditures divided by enterprise revenues

-- see Table 12). The operating ratio for

the enterprise fund increases because the

operating expenditures are increasing at a

faster rate than the operating revenues. The

largest cities are expecting the ratio to

increase to 0.99 in 1981, which means that

they will barely be able to cover operating

expenses with operating revenues. If the

increase in expenses is greater than expected

in 1981 (or if the trend continues in future

years), the largest city enterprise funds, on

average, will be operating at a deficit. A

remedy in such situations is to raise charges

or defer capital and maintenance outlays.

City enterprises are typically heavy users

of capital funds and make-substantial capital

outlays. As may be seen in Table 13, there

are major increases planned for 1981, by

small cities. Given the adverse trend in
TABLE 12

ENTERPRISE FUND OPERATING RATIO

(enterprise expenditures divided by enterprise revenues)

BY CITY SIZE

1981a = budgeted or anticipated amounts for fiscal year 1981

1979 1980 1981a

SMALL CITIES (n=96) .86 .88 .93

MEDIUM CITIES (n=56) .85 .87 .84

LARGE CITIES (n=46) .85 .87 .88

LARGEST CITIES (n=29) .88 .93 .99

CA

as
TABLE 13

ENTERPRISE FUND CAPITAL OUTLAYS

PER CAPITA BY CITY SIZE

1981a = budgeted or anticipated amounts for Fiscal Year 1981

Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=96) $34.45 $34.50 $55.87 0.1% 61.9%

MEDIUM CITIES (n=56) 40.13 46.92 54.45 16.9 16.0

LARGE CITIES (n=46) 45.47 47.41 47.23 4.3 - 0.4

LARGEST CITIES (n=29) 41.50 51.08 51.89 23.1 1.6

ALL CITIES (n=227) 38.98 42.30 53.26 8.5 25.9

0n

I
LONG-TERM BORROWING AND DEBT OUTSTANDING

Cities in the survey were asked to

identify the amount of long-term debt

outstanding by type of security and by

whether it was for general government or city

enterprise purposes. Although most general

government long-term debt was tax-supported

general obligations, some limited-obligation

"revenue bond" borrowing was done for general

government purposes. Likewise, some general

obligation debt was reported as sold for

enterprise purposes.

Since 1979, the capital markets have been

under severe pressure, and many borrowing

plans have been sidetracked. As Table 14

indicates, average per capita indebtedness

generally increases with the size of the

jurisdiction. The trends in debt are mixed,

but generally show debt per capita growing

slowly in the larger units.

(59)
TABLE 14

PER CAPITA LONG-TERM DEBT

FOR GENERAL GOVERNMENT AND ENTERPRISE PURPOSES

BY CITY SIZE

Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES

General (n=104) $216.96 $245.19 $246.92 13.0% 0.7%

Enterprise (n=82) 174.71 190.87 191.33 9.3 0.2

MEDIUM CITIES

General (n=53) 202.05 200.91 199.79 - 0.6 - 0.6

Enterprise (n=44) 211.66 236.74 242.70 11.8 2.5

LARGE CITIES

General (n=48) 223.28 234.96 253.93 5.2 8.1

Enterprise (n=44) 315.26 337.13 353.81 6.9 4.9

LARGEST CITIES

General (n=35) 339.84 345.87 352.17 1.8 1.8

Enterprise (n=30) 245.58 258.09 278.41 4.8 7.9

1981a = budgeted or anticipated amounts for Fiscal Year 1981

NOTE: Because of differing sample sizes, per capita debt numbers for General

Government and Enterprise are not additive.
61

The relatively higher levels of enterprise

borrowing is also reflected in the growth

trends in debt outstanding as shown in Table

14. Enterprise debt continues to grow. This

reflects a national trend at all levels of

government to reduce reliance on tax

supported debt and to enlarge the use of

limited obligations secured on nontax revenue

sources. Table 14 shows no large planned

increases in long-term debt outstanding. The

current, extremely high interest rates in the

tax-exempt bond market will probably severely

curb even these relatively modest borrowing

plans and sidetrack capital spending, as

noted, in the process.
CHANGES IN WORKFORCE

Respondents were asked to report the

average number of employees on their payroll

in 1979, 1980, and 1981 anticipated broken

down on the basis of full-time permanent,

CETA and part-time and seasonal employees.

In all but the small cities, total

employment declined between 1979-1980 (see

Table 15). This followed little or no growth

in employment in the previous year as

reported in last year's survey. The largest

decline occurred in the medium size cities

which averaged an 8.2 percent workforce

reduction. These cities also experienced the

largest average reduction in their full-time

-permanent workforce (-7.3 percent). In

particular, t-he sharp reductions in the

Compr-ehensi-ve - Employment and Training

8(2)
TABLE 15

CHANGES IN WORKFORCE

BY CITY SIZE

Percent Change

1979 1980 1981a 1979-1980 1980-1981a

SMALL CITIES (n=116)

1. Full-Time Permanent 260 267 273 2.8% 2.2%

2. CETA 14 8 7 -39.8 -14.9

3. Part-Time & Seasonal 40 42 41 4.4 - 2.4

TOTAL 314 318 321 1.2% 1.1%

MEDIUM CITIES (n=64)

1. Full-Time Permanent 947 878 892 - 7.3 1.5

2. CETA 82 60 51 -27.0 -15.2

3. Part-Time & Seasonal 102 100 101 - 2.2 0.7

TOTAL 1,131 1,038 1,043 - 8.2% 0.5%

LARGE CITIES (n=50)

1. Full-Time Permanent 1,727 1,762 1,800 2.0 2.2

2. CETA 156 94 73 -39.7 -22.0

3. Part-Time & Seasonal 219 228 207 4.3 - 9.4

TOTAL 2,101 2,084 2,080 - 0.8% - 0.2%

LARGEST CITIES (n=36)

1. Full-Time Permanent 12,512 12,459 12,522 - 0.4 0.5

2. CETA 1,214 843 700 -30.5 -17.0

3. Part-Time 6 Seasonal 379 395 385 4.2 - 2.7

TOTAL 14,106 13,698 13,607 - 2.9% - 0.7%

1981a = budgeted or anticipated amounts for Fiscal Year 1981
64

Administration (CETA) workforces in all size

categories (averaging 34 percent) contributed

mightily to the overall decline.

For 1981, cities of all sizes are once

again projecting steep, albeit reduced,

declines in CETA workforces. In all but the

largest cities, increases projected in the

full-time permanent workforces for 1981 would

offset absolute CETA reductions. However, it

should be noted once again that -these

projections were made late last year. This

was prior to the submission of the 1982

Feder.al budget proposals which would

eliminate the public service jobs program

under Titles II and VI of CETA. If these are

enacted, the projections will have greatly

understated the extent of the decline in CETA

employees. The result will be reduced

service levels or substantial increases in

the non-CETA workforce to compensate for the

CETA cuts.
65

The cities which are likely to be most

severely affected if the CETA reductions are

adopted are the largest cities, where CETA

employees represented over 6 percent of the

total workforce in 1980. These cities have

already retrenched service levels

significantly and further employment

reductions may not be possible without

affecting vital city sevices. Yet fiscal

pressure will preclude their increasing their

full-time permanent or part-time workforces

to compensate for CETA reductions.
EXPENDITURES FOR POLICE, FIRE, AND SANITATION

In an attempt to determine the status of

primary services, this report analyzes

expenditures for police, fire, and sanitation

wages and..salari.es as well as the number of

full-time employees in each service.

Table 16 presents the number of employees

by type of employment per 10,000 city

-residents. As may be seen, the average

number of sanitation employees per 10,000

population was reduced in all categories of

cities. The largest cities faced net

reductions in police and fire workforces per

10,000 population, as well.

According to Table 17, in all categories

of cities expenditures for police, fire, and

sanitation generally increased.by a greater

rate-than total current-expenditures between

-(66)
67

TABLE 16

POLICE, FIRE, AND SANITATION

NUMBER OF FULL TIME EMPLOYEES

PER 10,000 POPULATION

BY CITY SIZE

% Change % Change 1979 1980 1981a 1979-1980 1980-19 8 1a

SMALL CITIES

1. Police (n=108) 21.9 22.4 22.9 2.0 2.5

2. Fire (n=93) 15.3 1S.6 15.7 2.1 0.7

3. Sanitation (n=78) 10.4 10.2 10.3 -1.8 0.8

MEDIUM CITIES

1. Police (n=55) 21.4 22.1 22.9 3.2 3.6

2. Fire (n=53) 16.0 16.2 16.5 1.7

3 . Sanitat ion (n=39) 7.5 7. 2 7 .1 -3. 5 -

LARGE CITIES

1. Police (n=46) 21.8 22.4 23.0 2.9 2.6

2. Fire (n=46) 17.0 17.4 17.5 1.9 1.0

3. Sanitation (n=41) 9.0 8.9 9.0 -1.0 1.1

LARGEST CITIES

1. Police (n=31) 29.5 29.3 30.1 -0.8 2.8

2. Fire (n=31) 18.3 18.3 18.2 -0.4 -0.2

3. Sanitation (n=29) 10.9 10.4 10.5 -4.2 1.0

ALL CITIES

1. Police (n=240) 22.8 23.2 23.9 19 2.8

2. Fire (n=223) 16.2 16.5 16.6 1.6 0.9

3. Sanitation (n=187) 9.6 9.3 9.4 2.3 0.6

1981a = budgeted or anticipated amounts for Fiscal Year 1981

79-427 0 - 81 - 2
68

TABLE 17

POLICE, FIRE, AND SANITATION

PER CAPITA WAGES AND SALARIES

BY CITY SIZE

Perce t Change 1979 1980 1981a I 70-luszn ioRn-l R1

SMALL CITIES

1. Police (n=108) $38.05 $42.61 $48.05 12.0% 12.8%

2. Fire (n=93) 26.87 30.16 33.15 12.2 9.9

3. Sanitation (n=78) 11.56 12.62 13.85 9.2 9.8

MEDIUM CITIES

1. Police (n=55) 42.46 47.86 53.32 12.7 11.4

2. Fire (n=53) 33.58 36.90 40.11 9.9 R.7

3. Sanitation (n=39) 10.16 10.43 11.61 2.7 11.3

LARGE CITIES

1. Police (n=46) 41.4S 45.88 S1.06 10.7 11.3

2. Fire (n=46) 33.S1 37.17 1 41.25 10.9 11.0

3. Sanitation (n=41) 12.19 12.96 14.79 6.3 14.1

LARGEST CITIES

1. Police (n=31) 66.92 70.94 77.50 6.0 9.3

2. Fire (n=31) 44.30 , 47.69 j 50.69 7.7 6.3

3. Sanitation (n=29) 16.24 16.63 17.22 2.4 3.6

ALL CITIES

1. Police (n=240) 43.44 48.10 53.64 10.7 11.5 2. Fire (n=223) 32.26 35.65 38.91 10.5 9.2

3. Sanitation (n=187) 12.13 12.86 14.11 6.0 9.7

1981a = budgeted or anticipated amounts for Fiscal Year 1981
69

1979 and 1980 (see Table 1 for comparison).

Exceptions include sanitation workers in

large cities and both police and sanitation

workers in the largest cities. While total

wages and salaries increased for each of the

services in the largest cities, employees in

these cities realized the smallest average

gains. Although increases in other size

categories frequently lagged the inflation

rate, in the largest cities the increases did

not even approach it.

Table 17. indicates that, in projecting

1981 .wage and salary increases, again, the

increase projected in the largest cities is

less than the increases projected by other

size cities for all services.

Although the samples are not identical,

the results of this survey, for two

consecutive years, have shown that police,

fire, and sanitation employees in the largest

cities are realizing the smallest wage and
70

salary gains. More importantly, these gains

have been significantly below the rate of

inflation.

Further, three-quarters of the workforce

in these cities belong to collective

bargaining units, and over half the employees

are covered by contracts which expire in 1981

(see Table 18). Employees in many fiscally

stressed cities have agreed to wage increase

deferrals. With continuing inflation and

erosion of real income, the possibility of

public employee work stoppages and

disruptions, given the high proportion of

contracts coming due for renegotiation,

appears to be especially serious in the

largest cities.
TABLE 18

PERCENT OF EMPLOYEES IN COLLECTIVE

BARGAINING UNITS AND EMPLOYEES

WHOSE CONTRACTS EXPIRE IN 1981

BY CITY SIZE

% in Collective % Covered by ConBargaining Units tract Expiring 1981

SMALL CITIES 41.8% 25.7%

MEDIUM CITIES 59.1 35.7

LARGE CITIES 42.3 24.5

LARGEST CITIES 75.4 55.1

ZI-
CITIES RESPONDING TO THE JOINT ECONOMIC COMMITTEE QUESTIONNAIRE

LISTED ALPHABETICALLY BY STATE WITHIN POPULATION SIZE GROUPS POPULATION GROUP 10,000 THRU 49,999

ALABAMA

ANNISTON

OPELIKA

PRICHARO

ARIZONA

DOUGLAS

FLAGSTAFF

SIERRA VISTA CALIFORNIA

CORONA

COVINA

GLENDORA

LA MESA

PACIFICA

PIEDMONT

PITTSBURG

PLACENTIA

REDDING

ROSEVILLE

SAN CLEMENTE SANTA MARIA

SOUTH SAN FRANCISCO

YUBA COLORADO

COMMERCE

DURANGO

LITTLETON

LONGMONT

CONNECTICUT

EAST HAVEN

WINDSOR FLORIDA

BELLE GLADE COCOA

LAKELAND

OCALA

PLANTATION

GEORGIA

ROSWELL

TIFTON

VALDOSTA

ILLINOIS BLOOMINGTON

ELMWOOD PARK

LAKE FOREST PALATINE

PARK FOREST

RIVERSIDE

SCHAUMBURG

ST CHARLES

WHEATON

WINNETKA

KANSAS

OLATHE

PRAIRIE VILLAGE

KENTUCKY

COVINGTON

RICHMOND

LOUISIANA

BOSSIER CITY MORGAN

MARYLAND

HYATTSVILLE

ROCKVILLE

MASSACHUSETTS

FITCHBURG

FOXBOROUGH

LEXINGTON

MARLBOROUGH

SOUTHBRIDGE MICHIGAN

ALBION

BATTLE CREEK

GROSSE POINTE PARK

INKSTER

JACKSON

MADISON HEIGHTS

MONROE

MOUNT CLEMENS

RIVERVIEW

TRENTON

MINNESOTA

BROOKLYN PARK BURNSVILLE

HASTINGS

SHOREVIEW

WORTHINGTON

MISSISSIPPI

GREENVILLE

MISSOURI

CLAYTON

CRESTWOOD NEBRASKA

BELLEVUE NEVADA

NORTH IAS VEGAS

NEW JERSEY

HACKENSACK

LOWER NEW MEXICO

ALAMOGOROD

NEW YORK

LACKAWANNA

PORT CHESTER

NORTH CAROLINA

ALBEMARLE

MORGANTON

WILSON NORTH DAKOTA

JAMESTOWN

OHIO

BEDFORD

BRUNSWICK

CENTERVILLE

ROCKY RIVER

OKLAHOMA

ARDMORE

EDMOND

EL REND OREGON

BEAVERTON

GRESHAM

HILLSBORO

SPRINGFIELD

RHODE ISLAND

COVENTRY

SOUTH CAROLINA

ROCK HILL

SOUTH DAKOTA

BROOKINGS TENNESSEE

GALLATIN

KINGSPORT TEXAS

BIG SPRING DEER PARK

HURST

SWEETWATER

TEMPLE

VERNON

WHITE SETTLEMENT

UTAH

BOUNTIFUL

VIRGINIA

CHARLOTTESVILLE

SALEM

VIENNA

WASHINGTON

KIRKLAND

PUYALLUP

WISCONSIN

BELOIT

GLENDALE

WYOMING

CASPER

GILLETTE

GREEN RIVER

*0

z

0

'-4

-q

'-4

cn

'0

z

z

.-I

0

cn

a1
CITIES RESPONDING TO THE JOINT ECONOMIC COMMITTEE QUESTIONNAIRE

LISTED ALPHABETICALLY BY STATE WITHIN POPULATION SIZE GROUPS

POPULATION GROUP 50,000 THRU 99.999

ALABAMATUSCALOOSA

ARIZONA

TEMPE

CALIFORNIA

CHULA VISTA

COMPTON

DOWNEY

*EL MONTE

FOUNTAIN VALLEY

HAWTHORNE

INGLEWOOD

NEWPORT BEACH

ORANGE

OXNARD

REDONDO BEACH

REDWOOD

RICHMOND

SALINAS

SANTA CLARA

SANTA ROSA WEST COVINA

WESTMINSTER

COLORADO FORT COLLINS

CONNECTICUT

BRISTOL

EAST HARTFORD

GREENWICH

NORWALK

FLORIDA

MIAMI BEACH

ILLINOIS

EVANSTON

SPRINGFIELD

INDIANIA BLOOMINGTON

IOWA

DUBUQUE

SIOUX CITY

KANSAS

OVERLAND PARK

LOUISIANA LAFAYETTE

MONROE

MAINE

PORTLAND MASSACHUSETTS

CAMBRIDGE

PITTSFIELD

WEYMOUTH

MICHIGAN

REDFORD

ROYAL OAK

ST CLAIR SHORES MINNESOTA

ROCHESTER

MISSOURI

COLUMBIA

NEVADA

RENO

NEW JERSEY

HAMILTON

TRENTON

WOODBRIDGE NEW YORK

MOUNT VERNON

NORTH CAROLINA

FAYETTEVILLE

HIGH POINT

WILMINGTON

NORTH DAKOTA

FARGO

OHIO MANSFIELD

PARMA

OKLAHOMA ENID

LAWTON

PENNSYLVANIA

LOWER MERION

SOUTH CAROLINA

GREENVILLE

TEXAS MIDLAND

SAN ANGELO UTAH PROVO VIRGINIA ROANOKE WASHINGTON BELLEVUE

EVERETT WEST VIRGINIA e CHARLESTON WISCONSIN

WAUWATOSA
CITIES RESPONDING TO THE JOINT ECONOMIC COMMITTEE OUESTIONNAIRE LISTED ALPHABETICALLY BY STATE WITHIN POPULATION SIZE GROUPS POPULATION GROUP i00.000 THRU 249.999

ALABAMA

HUNTSVILLE ALASKA

ANCHORAGE ARIZONA

MESA ARKANSAS

LITTLE ROCK

CALIFORNIA

BERKELEY

FREMONT

GARDEN GROVE GLENDALE

HUNTINGTON BEACH

PASADENA

SUNNYVALE COLORADO

COLORADO SPRINGS

LAKEWOOD

PUEBLO CONNECTICUT

STAMFORD FLORIDA

HOLLYWOOD GEORGIA

COLUMBUS

MACON

SAVANNAH

IDAHO

BOISE ILLINOIS

RDCKFORD

IOWA

CEDAR RAPIDS

DAVENPORT

DES MOINES LOUISIANA

SHREVEPORT MASSACHUSETTS

WORCESTER MICHIGAN

WARREN

MISSISSIPPI

JACKSON MISSOURI

INDEPENDENCE NEBRASKA

LINCOLN

NEVADA

LAS VEGAS NEW JERSEY

JERSEY CITY NORTH CAROLINA

GREENSBORO

RALEIGH

WINSTON SALEM PENNSYLVANIA

ALENTOWN

SOUTH CAROLINA

COLUMBIA TENNESSEE

CHATTANOOGA

KNOXVILLE TEXAS

BEAUMONT

CORPUS CHRISTI GARLAND

LUBBOCK

WACO

UTAH

SALT LAKE CITY VIRGINIA

CHESAPEAKE

HAMPTON

PORTSMOUTH

RICHMOND

VIRGINIA BEACH WASHINGTON

SPOKANE

TACOMA

WISCONSIN MADISON
CITIES RESPONDING TO THE JOINT ECONOMIC COMMITTEE QUESTIONNAIRE

LISTED ALPHABETICALLY BY STATE WITHIN POPULATION SIZE GROUPS POPULATION GROUP 250,000 & OVER

ALABAMABIRMINGHAM

ARIZONA

PHOENIX

TUCSON

CALIFORNIA

LONG BEACH

OAKLAND

SACRAMENTO

SAN DIEGO SAN FRANCISCO

FLORIDA

JACKSONVILLE

MIAMI

TAMPA

GEORGIA

ATLANTA

HAWAII

HONOLULU

INDIANIA

INDIANAPOLIS KANSAS

WICHITA

LOUISIANA

BATON ROUGE MARYLAND

BALTIMORE MINNESOTA

MINNEAPOLIS

ST PAUL

MISSOURI

KANSAS

ST LOUIS NEBRASKA

OMAHA NEW JERSEY

NEWARK NEW MEXICO

ALBUQUERQUE NEW YORK .

NEW YORK

ROCHESTER

OHIO

COLUMBUS OKLAHOMA

OKLAHOMA OREGON

PORTLAND PENNSYLVANIA

PHILADELPHIA

TENNESSEE

MEMPHIS

NASHVILLE TEXAS

DALLAS

SAN ANTONIO

VIRGINIA

NORFOLK

WISCONSIN

MILWAUKEE

-n
APPENDIX II

GLOSSARY

Accounts Payable -- Liabilities on open

account owed *to private persons or

businesses for goods and.services received

by..a government unit (but not including

amounts due other funds of the same

government unit).

Capital -Expenditures (outlays) -- Direct

expenditures. for construction of

buildings, roads and ot-her-improvements,

and for purchases of equipment, land,. and

existing structures. Includes amounts for

.additions, replacement, and major alterations to fixed works and structures.

'However, expenditures for-repairs-of such

works and -- structures are classified as

current operating expenditures.

*Current *Assets --. Those assets that are

available or can be made readily available

to meet the cost of operations or to pay

current liabilities.

Debt Service -- The amount of.money necessary

to pay the- interest on the outstanding

debt -and the principal of maturing.bonded

debt (not payable from a Sinking Fund) or

to provide a Sinking Fund for -the

redemption of. bonds payable from this

fund.

(76)
77

Enterprise Activities -- As defined here,

these are government functions that are

generally, self-supporting through user

charges (as opposed to general government revenues) and that are operated by the

city, and accounted for in enterprise, or

special utility funds. Common city enterprise functions are water and sewer

(when funded by user charges), electric,

gas, airports, and local transit.

Enterprise Fund -- To account for operations

(a) that are financed and operated in a

manner similar to private business

enterprises where the intent of the

governing body is that the costs .. (expenses, including depreciation) of

providing goods or services to the general

public on a continuing basis be financed

or recovered primarily through user

charges; or (b) where the governing body has decided that periodic determination of

revenues earned, expenses incurred, and/or

net income is appropriate for capital maintenance, public policy, management control, accountability, or other

purposes.

General Fund -- The fund that is available

for any legally authorized purpose and

that is,. therefore, used to account for

all revenues and all activities not

provided for in other funds. The General

Fund is used to finance the ordinary operations of a governmental unit.

General Government Activities -- -Basic

services that are primarily financed. by general revenues, e.g., police and fire,

health and hospitals, sewerage, sanitation, education, streets, parks and

recreation, courts, and general

administration.
78

General Obligation Debt -- Debt for whose

payment the full faith and credit of the

issuing body is pledged. General

obligation debts are considered to be

those payable from taxes and other general

revenues.

Internal Service Funds -- To account for the

financing of goods and services provided

by one department or agency to other

departments or agencies of the

governmental unit, or to other

governmental units on a cost-reimbursement

basis.

Limited Liability Debt -- Debt, the principal

ot and interest on which are to be paid

solely from a specific source (such as the

sevice enterprise). Such debt does not

represent an obligation against a city's

general revenue.

Long-Term Debt -- Debt payable more than one

year after date of issue.

Operating Expenditures -- Expenditures for

compensation, supplies, materials, and

contract services that are used in current

operations. Not included in this is the

expenditure for capital or fixed assets.

Operating Revenues -- Revenues derived from

the current operation of a government,

i.e., property taxes, personal property

taxes, user charges and all licenses and

fees. In the case of enterprise

activities, operating revenues would

include revenue from the sale of goods and

services.

Original Budget._- -.Thebamount budgeted-at the

beginning of.-the fiscal year and prior to
79

any amendments that have occurred during

that year.

Permanent Employee -- Those employees who are

employed by the municipality on a

continuous full-time basis, not those

funded by CETA, nor those who are

considered part-time or seasonal

employees.

Sanitation (other than sewage)' -- Street

cleaning, and collection and disposal of

garbage and other waste.

Short-Term Debt Outstanding -- Interestbearing debt payable within one year from

date of issue, such as bond anticipation

notes, revenue anticipation notes, and tax

anticipation notes and warrants. Includes

obligations having no fixed maturity date

if payable from a tax levied for

collection in the year in their issuance.

Sinking Fund -- A fund established for

periodical contribution (and earnings

thereon) to provide for the retirement of

outstanding debt specified to be retired

from such funds.

Transfers (interfund transfers) -- Amounts

transferred from one fund to another.

0