The Public Financing of America's Largest Cities: A Study of City Financial Records in the Wake of the Great Recession

Abstract

This paper employs Comprehensive Annual Financial Reports of the 35 largest population American cities from 2005 to 2011 to examine how these cities managed the Great Recession, which was a global macroeconomic shock particularly damaging to the housing sector. While broader surveys of local government suggest that the Great Recession has been associated with substantive revenue declines, particularly via the property tax, the Comprehensive Annual Financial Reports data indicate that large cities remained relatively stable in revenue by using higher property taxes to compensate for other revenue declines. Furthermore, these cities were able to rely on their net assets to engage in deficit spending. These findings indicate that cities are relying on traditional strengths of local governments, but are also able to engage in the deficit spending that is typically characteristic of national governments. It also seems to be the case that grants for capital projects were largely transferred into highly liquid and spendable assets.

A Comparison of Financial Indicators: The Case of Detroit

“…These include "fiscal stress" (Honadle 2003;Kloha, Weissert, and Klein 2005;Jimenez 2009), "fiscal shock" (Poterba 1994), and "financial position" when comparing one government to others within a cohort of similar governments (Brown 1993;Hendrick 2004;Sohl et al 2009). Outside the context of a cohort study, "financial condition" has become widely used term and is employed by most recent studies (Wang, Dennis, and Tu 2007;Kravchuk and Stone 2010;Johnson, Kioko, and Hildreth 2012;Ross, Yan, and Johnson 2014). This study uses an inclusive definition of financial condition to mean anything along a spectrum of governmental financial health without reference to a cohort group.…”

“…There are two general approaches to the measurement of financial condition. Many studies use a collection of indicators and present them in their disaggregated state (Honadle et al 2003;Hendrick 2004;Wang, Dennis, and Tu 2007;Chapman 2008;Sohl et al 2009;Jimenez 2009;Kravchuk and Stone 2010;Maher and Deller 2011;Johnson, Kioko, and Hildreth 2012;Ross, Yan, and Johnson 2014). Other studies construct a scale from aggregated indicators (Brown 1993(Brown , 1996Kleine, Kloha, and Weissert 2003;Kloha, Weissert, and Klein 2005).…”

“…The current literature (Honadle, Costa, and Cigler 2004;Rivenbark, Roenigk, and Allison 2010;Johnson, Kioko, and Hildreth 2012;Ross, Yan, and Johnson 2014;Wang 2014), offers an overlapping array of financial condition indicators constructed from data available in government CAFRs. GASB 34 instituted several important requirements, including a mandate that all data in government wide financial statements to be reported on an accrual basis.…”

“…There are many other excellent studies (Zimmerman 1992;Hendrick 2006;Jimenez 2009;Sohl et al 2009;Wood 2011;Ross, Yan, and Johnson 2014) those to frame our grohat provide alternative measures of financial condition. Given the overlap of measures between these studies, we cup of indicators with reference to the studies by Kloha, Weissert, and Klein (2005), Wang, Dennis, and Tu (2007), Rivenbark, Roenigk, and Allison (2010), and Johnson, Kioko, and Hildreth (2012).…”

Comparing Central City Finances Using Fiscally Standardized Cities

“…However, she makes no adjustments for variations in expenditure responsibilities, despite the fact that her measure of revenue 432 H. Chernick et al diversification, a Herfindahl index, is quite sensitive to the inclusion of revenue from overlying independent governments. 3 Two recent studies of central city finance after the "Great Recession" have used city government financial data gathered from the cities' Comprehensive Annual Financial Reports (Pew Charitable Trusts 2013; Ross et al 2015). Although both these studies are unable to address differences in governmental structure, the authors have been careful not to make inappropriate fiscal comparisons across cities.…”