The last person to leave Highland Park, Mich., will soon have fewer lights to turn out.
Officials with the private electric utility there are repossessing 1,400 street lights and poles. The city — facing a severe budget crunch — owed the company $4 million, a debt the company canceled in exchange for taking its lights back.
At least Highland Park is still solvent.
Last week, city officials in Harrisburg, Pa. — the state’s capital — decided to seek bankruptcy protection, in part because the city is on the hook for millions of dollars used to rebuild a power-generating trash incinerator.
Municipal bankruptcy and repossession are extreme cases, but no longer unheard of in America.
From Rhode Island to California, hundreds of city governments — after staggering through three years of national economic doldrums — are ending this year facing even more layoffs, unpaid furloughs and service cuts to balance their out-of-whack budgets.
“The effects of depressed real estate markets, low levels of consumer confidence and high levels of unemployment will continue to play out in cities through 2011, 2012 and beyond,” concluded a September report by the National League of Cities, calling depressed city budgets and worker layoffs a “new normal.”
Nancy McCarthy Snyder, an urban affairs professor at Wichita State University, said cities are now hitting the bottom of the recessionary slump in part because lower property values have finally worked their way into the system.
And lower property values mean lower property tax collections.
“Cities are facing a whole mix of issues that are coming to roost all at once,” Snyder said, including the end of federal stimulus spending.
In Kansas City, City Manager Troy Schulte instituted a hiring freeze last week, citing softer-than-expected tax receipts.
“We are holding our own at this point, but we do have challenges,” said Councilwoman Jan Marcason, chairman of the finance and governance committee. “And next year’s budget is going to be very difficult.”
The City Council this year approved raises for firefighters, and other municipal employees are now clamoring for more money. If the city met all those demands, it could cost taxpayers an additional $10 million at a time when revenues are flat, although Schulte said he’s working hard to avoid the shortfall.
Rising pension costs for city workers also are a big worry for Kansas City.
To be sure, Kansas City’s financial picture remains strong compared with many other municipalities. City Hall has cut hundreds of jobs over the past 36 months, and revenues haven’t dropped as much as in other cities.
Other area communities are relatively healthy financially, too, and not just because they’ve cut expenses. Some Kansas cities have decided to raise taxes as well.
Overland Park increased its property tax levy by more than 40 percent this year, after cutting some jobs and programs. Nearby Lenexa increased its levy by more than 11 percent.
“We’re going to hold the line on expenses,” Lenexa Mayor Mike Boehm said, adding: “To be honest with you, I have more people, even this year, saying to me, ‘If you need to raise taxes a little bit, don’t give up what we have.’ ”
In general, experts said that Kansas communities face more restrictions on spending than in many other states, helping to limit budget problems. Missouri’s Hancock amendment also helps keep public spending lower than in other states.
Still, that hasn’t completely exempted area cities from budget squabbles. Topeka officials, for example, fought last week over decriminalizing domestic violence as a way to address a budget dispute in that community.
But in many other cities facing shortfalls, the common reaction has been to slash public payrolls, pensions and capital spending to bring expenses in line with revenues.
Since September 2008, local governments — including boards of education — have cut 535,000 jobs, the Labor Department said earlier this month, including 35,000 local government jobs just last month.
In Chicago last week, Mayor Rahm Emanuel proposed closing a $636 million budget gap by shuttering police stations, raising water rates, laying off 517 workers and eliminating 2,000 vacant positions.
Emanuel, once President Barack Obama’s chief of staff, also proposed higher taxes: On hotel guests, parking, even higher fines for some criminal behavior.
“Smoke and mirrors and one-time fixes simply won’t get the job done,” Emanuel said in a news release. “It’s time to provide Chicagoans with an honest city budget.”
Many of the cities facing the biggest budget headaches are on the coasts, where plunging home values have decimated property tax revenues. Vallejo, Calif., declared bankruptcy three years ago; Central Falls, R.I., declared bankruptcy in August, after retirees there refused cuts to their pensions.
Other cities are turning to more creative solutions to cover shortfalls. In Scranton, Pa., officials are considering selling their parking meters to get upfront money. But the moves to balance city budgets by further cutting jobs, pensions, and health benefits worries union officials. In the National League of Cities report, three out of four city budget managers said they would reduce expenses in the coming budget year by reducing personnel costs.
“Public workers everywhere understand budgets are tight,” said Jeff Mazur of the American Federation of State, County, and Municipal Employees union. He added, however, that they want to make sure contracts are fully honored.
AFSCME and other labor unions, along with Democrats supporters, have pressed lawmakers to pass Obama’s proposed jobs bill. It includes $5 billion in grants for cities to hire or retain police officers.
Senate Republicans, however, recently rejected the plan, and GOP Sen. Roy Blunt of Missouri said Thursday that cities shouldn’t expect Washington to bail them out.
“That’s going to come back on local taxpayers as to what kind of schools they’re going to have and what kind of police protection they’re going to have,” Blunt said in a conference call with Missouri reporters, adding: “The federal government can’t take responsibility for … the Kansas City police.”
Highland Park’s mayor, however, is hoping that sentiment doesn’t extend to street lights. To turn the lights back on in that Detroit suburb, he’s looking for help from Uncle Sam.
Source: MCT Information Services