Cities Prepare for Cutbacks With Some Creative Ideas

THE city of Phoenix listened to their employees' suggestions on streamlining government and saved $7.9 million last year.

Little Rock, Ark., and Emporia, Kan., combined fire and police dispatching operations to cut costs. The city of Lauderhill, Fla., saved about $500,000 this year by forming its own police department.

From coast to coast, American cities are trying to make post-recession ends meet with creative solutions to old problems.

The good news for many is that tax revenues have gone up as the country has pulled out of recession. The bad news is that possible cuts in federal aid loom on the horizon, promising to once again squeeze bottom lines.

Thus many cities are now trying to build on the lessons learned over the past few years to prepare for what will likely be a lean future.

"We are in the third year of good economic times and revenues are responding to help city budgets improve," says George Peterson, senior fiscal analyst for the Urban Institute in Washington. "The question for cities now is how to ready themselves for the certainty of congressional cutbacks coming soon without irreversibly crippling themselves for the long run."

In figures released today, 72 percent of 417 cities responding to a National League of Cities survey say their general fund revenues exceeded expenditures for 1994 - compared with less than 50 percent of cities in 1991 and 1992. Sixty percent of city finance officers say their communities are better able to meet fiscal needs today than a year ago. Just two years ago, 66 percent answered the opposite: that they had become less able to meet their fiscal needs.

"The clear message in this year's NLC survey is that city leaders are running on performance not promises," says Carolyn Banks, NLC President and a councilwoman-at-large of Atlanta. She notes that half of cities surveyed (51 percent) said they reduced the growth of operating spending during 1994, and nearly a third (31 percent) reduced actual levels of capital spending.

The survey found that the annual per-capita growth rate of city expenditures during 1993 and 1994 was less than 1 percent.

"They are holding down costs by streamlining their operations, forming interlocal agreements, improving productivity, and using measures such as automation," adds Dr. Michael Pagano, professor of political science at Miami University in Oxford, Ohio, who conducts the survey.

Eric Tucker, finance director for Detroit, came up with an innovative funding of the city's self-insurance plan, leaving the $2.3 billion city budget with a surplus in the $17 million to $20 million range, after years of red ink. And he found that buying his phones and switching area codes for city phones could save $1,770,000.

Nancy Roncevich, budget coordinator for the city of Columbus, Ohio, says her city's fiscal health has come from sheer, aggressive management - automating personnel files and purchasing agreements, focusing on cutting overtime, and being careful to avoid redundancy in hiring.

"We are finding that our extreme caution and conservatism over a wide range of activities is producing significant savings," she says.

THE 417 cities in the NLC survey included 32 of the 51 largest US cities, 51 percent of the cities with populations over 100,000, and 35 percent of cities between 50,000 and 100,000. Other findings:

*Among the biggest cities, those with populations over 300,000, crime and federal-state mandates were most often listed as top adversities. The cost of health benefits was identified most often by small cities, and infrastructure needs led concerns of mid-sized cities.

*Productivity gains were cited by 38 percent of cities overall and by 85 percent of the largest cities. Cost-sharing initiatives and other interlocal agreements among municipalities were reported by 26 percent of all cities, and half of big cities.

*Nearly half of all cities predict that, barring further corrective actions, revenues will fall short of expenditures in 1995.

The NLC survey did find that nearly 70 percent of cities raised or imposed new taxes or fees during the past 12 months, generating an estimated $721 million in additional revenues. But national observers say that trend will be reversed by the same antitax fervor seen in Orange County, Calif., where voters rejected a half-cent sales tax increase to bail them out of bankruptcy.

"It's good news that most American cities are saying they have recorded improved financial conditions over last year," says Bill Barnes, director of research for NLC. "But balancing the checkbook doesn't necessarily mean the family is fed ...."

The other question is what's ahead? Steven Schier, a political scientist at Carleton College in Northfield, Minn., believes the federal cutbacks to cities in coming years will be substantial.