Newly Released Data Show Long-Lasting Impact of the Great Recession on Cities

Wednesday, May 14, 2014

For Immediate Release
Contact: Anthony Flint 617-503-2116

CAMBRIDGE, Mass. (May 14, 2014) – The Great Recession continues to wreak havoc on city budgets long after it officially ended, depriving many of the nation’s largest central cites of tax revenue even as the economy recovers, according to a new data analysis by researchers at the Lincoln Institute of Land Policy.

America’s cities saw tax revenue decline significantly beginning at the start of this decade, according to an analysis of 2011 data that has been added to the Fiscally Standardized Cities database on the Lincoln Institute’s website. The FiSC database provides detailed annual fiscal information on 112 of the nation’s largest central cities, from 1977 to 2011.

Although the Great Recession officially ended in June 2009, the fiscal impacts of the recession and the collapse of the housing market have lingered.

For the two years of the Great Recession, 2007 through 2009, the average real per capita revenue of the cities in the database remained largely unchanged, in part because increases in property taxes and user fees offset declines in revenue from state aid and other local taxes. In 2010 however, average real per capita general revenues fell by three percent from their 2007 level. This decline continued in 2011, with per capita real revenues nearly five percent below where they were in 2007.

The FiSC database provides a full picture of revenues raised from city residents and businesses and spending on their behalf, whether done by the city government or by a separate overlying school district, county, or special district. The database was constructed using data collected by the Governments Division of the U.S. Census Bureau.

The decline in real per capita revenues between 2009 and 2011, and especially between 2010 and 2011, is attributable to a decline during those years of the two most important sources of revenue for cities — the property tax and state aid. On average, the property tax accounts for one-quarter of general revenues for the 112 cities in the database. Other taxes, such as general and selective sales taxes, account for 13 percent, and charges and fees levied on residents, tourists, commuters, and businesses, represent on average 17 percent. Intergovernmental revenues from states and the federal government average nearly 40 percent of total revenue.

Reflecting the decline in property values in most parts of the country, real per capita property tax revenues declined on average by 1.6 percent between 2009 and 2010, and by 4.8 percent between 2010 and 2011.While large, these revenue reductions were much smaller than the decline in housing prices in most cities.

Following the passage of the federal stimulus legislation, the American Recovery and Reinvestment Act, federal aid increased by 6.1 percent between 2009 and 2011. But during this same period, state aid, a much more important source of intergovernmental revenue for most cities, declined by nearly four percent. Revenues from local sales and income taxes also declined steadily during the course of the recession. By 2010, these revenues were 12 percent below 2007 levels. In 2011, they increased slightly reflecting the slowly improving economy.

Overall, there was wide variation in revenue declines across the country compared to pre-recession 2007 levels. The largest revenue reductions occurred in Florida and in the West, with particularly large reductions between 2007 and 2011 in Las Vegas (20.2 percent), Sacramento (17.8 percent), Miami (13.9 percent), Fort Lauderdale (13.2 percent), and Phoenix (13.0 percent). Revenue increases between 2007 and 2011 occurred in a handful of cities including Baltimore, Buffalo, Ft. Worth, Minneapolis, and San Francisco.

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