Good afternoon, everyone. Good afternoon everyone, welcome to the National League both cities, its a pleasure to have you and what we call city hall away from your city, town or village in america. The National League of cities is an organization that represents 19,000 city, towns and for being here because were releasing the 34th annual city fiscal conditions report. Each person in this room is here for a reason. Youre interested in what is happening in cities all over america. Perhaps you enjoy digging into data and understanding the fiscal nature of the data on our communities. You really want to hear about the pressures city leaders face every day in balancing their budget, dealing with issues, the various policy issues and the federal impact on those issues. Or you just want to make sure that youre in the right place at the right time dealing with and learning about what america will be dealing with as it relates to the fiscal impact of our economy. For all of these reasons at its core, the city fiscal conditions is about the connection between the needs of communities and the ability of local government leaders to address those needs in the communities. Im often asked, why is this such an important report . It really is because if you think about what is happening in the city halls, the towns, the communities in america is city officials, town leaders, village leaders that are the ones that are dealing with the issues at first. So, this years city fiscal conditions report, were going to be able to see where all cities and communities are not the same across the nation. They may be facing different issues and different challenges. We want to be able to break that out and create some realities around some of the outcomes in this report. Some cities may be forced to choose between resurfacing main street or repairing an old fire truck. Others may have to decide between reforming their health care and Retirement Systems or shrinking Public Safety budgets. These are all choices that local leaders deal with every day. And, unfortunately, the realities of dealing with these issues is part of what governance is and is about what leadership is. My hope is all of us two support cities, towns and villages across a country contribute to sharing this information that youre going to learn today, but also what is your role in making our communities better as a person, as a leader in your professional or personal life. Today were going to do a deep dive into the report findings and hear from a panel of experts, moderated by kim hart, who is the managing editor at axios, focused on cities. But before we do that, wed like to be able to get a teeup of what is actually in the report and be able to understand the approach and how the report was developed. Im pleased to introduce the report authors. Christie mcfarland, the National League of Cities Research director. Come on up. Thank you again. And mike pagano, the dean of college of urban planning and Public Affairs at the university of illinois at chicago and director of the Government Finance research center. Thank you, clarence. Without further ado, again, welcome to the National League of cities and we look forward to learning about what is going on in our nation. Thank you very much, christie and mike. Thank you so much, clarence. Well, thank you for being here. Another year, 34th annual cityfiscal conditions. Its hard to believe. Mike and i need to pinch ourselves every time we say its may again. Now here we are at exciting times. How many of you have read the city fiscal conditions report this year or over the past couple of years . Awesome. Thats pretty much all of you. Thank you. I think the key point to city fiscal conditions, although i know some of you have heard headlines around recession and whatnot, well dig into that a little bit, but really city fiscal conditions and the trends we see with city Fiscal Health is that, you know, theyre a slowmoving ship. If we see big junctures and big changes in trends relating to city finances, we know that we need to go back to the drawing board. So, what were going to talk about today is the trends weve been seeing in city fiscal conditions, you know, again over the past 34 years and even more recently since the prior recession. And well talk about how what were seeing now aligns with those realities we saw in city fiscal conditions around the time of previous recessions. Before we get into some top line results, i want to talk about how this report is developed. We work with finance officers from around the country. We survey them, ask them about fiscal policy choices their communities are making, core budget factors, both positive and negative thats facing their communities. We also ask finance officers and budget directors to provide us with tangible fiscal data and information, whether its from their coffers or budget documents. Mike and his team, as well as colleagues at National League of cities, also supplement that data, particularly for the largest 200 cities by going to online documents and collecting that data by hand. So, so we are very proud of the report this year, proud of the partnership we have with uic and with that, i think well jump right in. So, some of the topline fiscal trends, as i mentioned, are beginning to align with some of the negative Economic Trends that weve seen in past downturns. Well go into this. General Fund Revenues are not only slowing. General Fund Revenues are not only slowing but budgeted to decline. Expenditures continue to outpace revenues and property tax receipts are showing signs of weakening, notably in the midwest. So im going to turn it over to mike whos going to go into a deep dive on our yearoveryear changes on revenue and expenditures. Thank you, christie. As you can see with this graphic, i want to make a few points about this. First of all, this is the underscore should be general fund. This is not all funds of municipalities. Its only the general fund. The composition of the general fund varies from city to city but for the most part its the discretionary of a municipality to support all sorts of things, police service, Public Safety, transportation and everything else. What it does not tend to include, although there are some exceptions, it does not tend to include in what would be part of the Capital Improvement fund and it wouldnt certain include the Enterprise Funds of municipalities. For the most part, the general fund does account for somewhere in the neighborhood of 55 of all municipalities. It is the general fund. Its most of what the cities spend and most of what is in the news media. This is where we have this is where city council has its biggest debates over the general fund. Second thing to note, these are yeartoyear changes in constant dollar terms. We use what the bureau of Economic Analysis refers to as their state and local implicit price deflator as a way of deflating or reducing the current dollars into something thats more comparable over time. You can see then on this graphic that this is showing yearoveryear changes in constant dollars, revenues, expenditures of the general fund. I think if you look to the right side of this, which is the last few years weve collected data in the general fund is that expenditures have been fairly robust on a constant dollar basis growing annually from 4 in 2015 to around 2 and 3 in the last several years. Revenues, on the other hand, have been declining since 2015 on a yearoveryear basis. It doesnt mean until 2019 the revenues were in decline but the yearoveryear growth has been less. A point that is not in the report but a point i wanted to make about the general fund is you can see in the years during the Great Recession, 2006,07,08,09 and10, for the cities the fiscal recession hits by a couple of years. So, the revenue line really plummets by 2010 to be somewhere around 5 less than the prior year. So, the i think an important point to make about the fiscal position of municipalities today is that if i add up the changes in the general fund over the last several years, we have not returned or maybe this could be the first year that we have returned to a position where the general funds size is roughly what it was prior to the Great Recession. So its taken a long time for municipalitiesfiscal position to return to what it was 12, 13, 14 years ago. This is to contrast that, the federal governments fiscal returned to previous levels of 2011. The fiscal connection between what municipalities have access to, their revenuegenerating mechanisms and the growth in those underlying economies is rather attenuated for municipalities in this statistic that weve only now begun to see that we are about where we were at the start of the Great Recession in 2006 and07. And just to unpack that a little bit, i think i had mentioned, clarence had mentioned, that because we had such a great Response Rate to the survey this year, we were able to break out the responses by population categories as well as regions. Looking more specifically, how are cities faring that are either in midwest, west, south and east, for example. In this chart youll notice the green dollar signs represent revenues and the goals represent expenditures. Similar to the previous chart. Youll notice that in all regions across the country, revenues have increased in fy20. However, the midwest is seeing some extreme decline at around 4. 4 . And when we look at population, specifically general fund Revenue Growth in fy18 grew most in smaller cities. On the spending side, clearly large cities saw the steepest rise. A lot of that is attributed to the general factors putting budget pressures on other cities including pensions, health care, wages, and other sources, but as well for large cities thinking about human services, which i think well hear a little bit about in just a moment. Mike . Yeah. So, this is, i think, a really important chart to show for municipalities compare themselves with other municipalities. We have, and ive been associated with the fiscal Condition Survey for nlc since 1991. We always get the question about, well, can you compare this city to that city . And primarily the answer is, well, it really depends. Some cities dont have access to the same kinds of general taxing authority as other cities to do. For example, there are very few municipalities in the entire country who have access to all three, what we consider to be the broadbase general taxes on retail sales on income or wages and on real estate. Very few youll hear from one of those today when after we are finished. Its also the city of new york. It also is a city that has such a large general fund of, i think melanie told me, ddz 93 billion now, that we do not include it in the rest of in our analysis because it would just overwhelm all the other data for the municipalities. That said, i think what this demonstrates more than anything is the volatility of each of the general tax sources across time and how they react to changes in the underlying in the National Economy in this particular case. What you will see during the Great Recession is that sales, not surprisingly, sales tax and income tax drop pretty dramatically and pretty immediately as soon as the Great Recession hits. Property taxes lag for a few years. Around 201415 they begin to grow at a fairly robust level of around 5 and 6 per year for a couple of years. What we found in the last two years, 2018 and19, even though there is a positive growth rate, constant dollar positive growth rate in all three general tax sources, that all three of them have slowed rather considerably, so that by 2019, all the other data referred to what we pull from the annual comprehensive report, 2019 is what the cities have proposed. These are their approved budgets. They may not reflect what happens at the very end but theyre pretty close to what we think will be pretty close to audited amounts. I think the if you look at sales and income taxes hovering around a 1 growth and you think about the growth in the National Economy right now, or at least the way we measure gross domestic product, which is the measure of our National Economy, you would expect those numbers, i think most of us would expect the growth would be pretty strong, but in two of the cases, especially sales and income, its pretty meager. Even in property tax its not as large as we might have expected given the growth of the economy. Part of that is, i think, if youre and you all are because youre all here, consumers of what affects the fiscal condition of state and local governments is that the reports on housing are fairly all around the place. There are some markets that are really strong and some markets that are really weak. The growth hasnt been as robust in the postrecession years as it has in the prerecession years. And i think part of that is playing itself out in a very cautious market, or at least buying and selling of real estate. It also probably has much to do with the real estate or the property tax numbers have something to do with the fact there is manufacturing, at least manufacturing increases have not been as great as the losses were after the Great Recession so were losing a lot of that land and that plant to where it would have been taxed before maybe 15 years ago. And were just not seeing the growth in purchasing of new real estate. Again, thats sort of the average across the board. That varies by municipalities. Some cities are doing quite well and other cities are struggling. Even within be the same city, such as my city of chicago, were seeing both. Both areas of struggle and areas of growth. Thats what christie is going to pick up on. Yeah. And i think thats a really important point in terms of that variation. As mike had mentioned, particularly changes in manufacturing. Were also seeing Residential Property have some significant variation across the country. Thats obviously impacting property tax revenues. Particularly with a decline in property tax revenues for the midwest reported for fy18, although they are reporting Revenue Growth in fy19 in the midwest as well. And just a note, we dont have it here, but in your report figure 19 talks about the differences by population. Notably there and something well talk about a little later, the largest cities are the only group that anticipate Slower Growth going into 2019 in terms of property tax receipts. I think thats contributing to negative outlook by large cities for the for finances Going Forward. And then ability to meet needs. Mike, weve seen a lot of variation over the years, particularly looking at about threequarters of finance officers are reporting their communities are better able this year than last to meet the financial needs of their community. We talked a little bit about their prospects for next year as well. There were some interesting results there. Yes. Whats interesting about this, i appreciate it, is that the cfos of the municipalities are fairly optimistic about this years budget compared to the previous year. We asked them about the next year. What do you think of the next year . The numbers drop a bit. Only 61 of cfos thought that next year would be better than this year, which is, i think, from my perspective at least, fairly optimistic on their part. Well see what happens during the fiscal year. But these are fairly strong numbers, at least in the eyes of the cfos. We also asked a question around, when do you anticipate the next recession will occur . And were showing this information particularly by population size because i think thats really where its striking. Youll notice that around two and three large city finance officers, thats finance officers, budget directors from cities greater than 300,000 in population anticipate a recession in the next one to two years. And, again, i think the source of this information is really important. Again, its coming from folks who are day in and day out in their city budgets, thinking particularly around large cities who have access to forecasting and modeling tools, more resources potentially than other cities may have. But also this is not necessarily that theyre putting a recession into their forecast Going Forward. Its that the variables they use to inform their models are telling them that in the next one to two years theyll start to see revenue declines. For them thats a keen indication. And then youll see sort of fewer finance officers from cities of different offices reported, they anticipate a recession in the next one to two years. Yeah. This is an interesting this is an interesting question about what this is everybodys crystal ball, what does it look like . Eventually there will be a downturn, whether its a collapse as in 2007 or much more moderate than weve experienced in the dotcom bust and the recession of 1991 199091 or larger one in the late80s andearly90s during stagflation period. Its interesting that were getting this theyre at least forecasting something is going to be happening soon and how they prepare for it, of course, is the important takeaway for this. I think another is that i think we probably are getting some differences in city size in that last graphic. Just based on the size of the staff that you have that can actually take the time and look through into the future to see, what does the future look like or rather than in a lot of cases where were just trying to get through the end of the month to make sure we make payroll. Do we have time to think through for another six months or 12 months or 24 months . Part of it may be just the capacity of the staffs to do that. Yeah. You know, so we dont know when the next downturn will hit. We see that there is variability across cities of different sizes, across different regions and even different taxing structures for that matter. In your experience, mike, what have you seen in terms of how cities, perhaps, pre