Throughout the Great Recession and well into what has become an extended period of slow recovery, the tax revenue base for municipal governments has been shrinking. According to a 2012 National League of Cities year-end survey, “National League of Cities Research Brief on America’s Cities,” 2012
was expected to be the sixth consecutive year of year-over-year declining municipal revenues. Municipal revenues are not expected to rebound in real time with the economy, because assessment and collection of real property taxes — a primary revenue driver — lag anywhere from 18 months to several years behind changes in property market values. Thus, the outlook is grim for the municipal tax base for the foreseeable future.
At the same time that municipal tax bases are shrinking, local governments must continue to fund basic services, address a growing inventory of deferred infrastructure maintenance, and undertake other large-scale, high-priority projects. Notwithstanding substantial cuts to basic services and other austerity measures, existing sources of municipal revenue are projected to be insufficient to fund the growing deferred infrastructure maintenance problem. The American Society of Civil Engineers, in its “2013 Report Card for America’s Infrastructure,” estimated that through 2020, the investment necessary to maintain the current infrastructure in a “good state of repair” will be $3.6 trillion, of which $1.6 trillion is unfunded. Much of this burden is expected to be borne by municipal governments.
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