Transcripts For CSPAN2 National League Of Cities Discussion On City Fiscal Conditions Report 20240713

[inaudible conversations]. It is a pleasure to have you. The National League of cities in the city towns and villages. Of america and rethink you for beingal here. The fiscal conditions each person in this room what is happening in cities all over america perhaps you enjoy digging into data to understand the nature of the data if you really want to hear about the pressure city leaders face every day to balance the budget and deal with issues and various policy issues to make sure you are in the right place at the right time with what america will be dealing with how that relates to the fiscal impact of our economy. Those conditions are about the connection between the communities and the ability of the leaders to address those needs in the community. Why is this suchhy an important report . If you think about what is happening the town leader and village leader that is dealing with the issue at first so this conditions report to see where all cities and communities are not the same to be facing different issues and challenges and to create some reality around the outcomes of this report. Some cities may be forced between resurfacing main street with the old fire truck some may decide between their healthcare and retirement system to shrink Public Safety but these are all choices that local leaders deal with everyda day and that reality to deal with these issues are part of what governance is and what leadership is. My hope is to support the city towns and villages across the country to share this information that you will learn today but also what is your role to make our communities better with professional or personal life . And today we will do a deep dyed to hear from a panel of experts so to get a t up and how this was developed to Steve Mcfarland the nationals cities. [applause] and the dean for urban Planning Affairs and director of the Government Finance resource center. So without further ado welcome to the National League of cities we look forward to learning about what is going on in our nation. Thank you. Thank you for being here. So past year in the last couple of years so the key point to mention with that recession and whatnot but really the trends that we see they are a slowmoving ship and with city finances so what we will talk about today the trends we haveen seen again over the past 34 years. And talk about what we see now and compared to the recession but first i want to take a few minutes to talk about how the report is developed to work with finance officers around thed country we ask about the core budget factors. Documents but mike and his team as well as our colleagues here the National League of cities supplement that data for the largest 200 cities by going to online documents and collecting that data by hand. We are proud of the report this year and proud of the partnership we have with you i see and we will jump right in. Some of the topline fiscal trends are beginning to align with some of the negative Economic Trends weve seen in past downturns. We will go into these in more detail but mental revenues are not only slowing but general Fund Revenues are not only slowing but budgeted to decline for the first time in seven years. Expenditures are continuing to outpace revenue and property tax receipts are showing signs of weakening, notably in the midwest. I will turn it over to mike who will go into a deep dive on our yearoveryear changes in general Fund Revenues and expenditures. Thank you, kristi. As you can seat with this graphic underscore this is the underscore for the municipalities but only the general fund and the general fund of this composition and the purpose of the general fund of various from city municipality municipality to serve look safety, transit rotation and Everything Else. It does not tend to include although there are some exceptions but does not tend to include the Capital Improvement fund and would certainly include the [inaudible] but for the most part the general fund does account for summer in the neighborhood of 55 of all municipalities. It is the general fund and most of what the city spends most of what is in the news media. This is where city council has its biggest debates over the general fund. Second thing to note is these are yeartoyear changes and constant dollar terms. We use with the bureau of Economic Analysis refers to the state and local price inflator as a way of deflating or reducing the current into something more comparable across time and you can see on this graphic that this is showing yearoveryear changes and constant dollar revenues and you look to the right side of this which is the last few years expenditures have been robust on a constant dollar basis growing annually at 4 in 2015 to around two and 3 and revenues on the other hand has been declining since 2015 and it doesnt mean 2019 the revenues were in decline but the yearoveryear growth has been less. A point that is not in the report the point i wanted to make about the general fund as you can see in the years during the Great Recession, 2006, seven, eight, nine and ten for cities the fiscal recession hits primarily because of the lag in property tax receipts by couple of years. The revenue line comments by 2010 and its less than the prior year so i think an important point to make about the fiscal point of municipalities today is that if you add about the changes in the general fund over the last several years we have not returned or this can be the first year they return to a position where the general fund size is roughly what it was prior to the Great Recession so its taken a long time for municipalities, fiscal position, to return to what was 12, 13, 14 years ago. To contrast that the federal government fiscal position returned pre recession or doubles and the physical connection between what municipalities and the growth in the underlining economies and in this statistic that we only now have begun to proceed where we have been at the start of the Great Recession in 2006, 2007. Just to unpack that i think i mentioned and clarence mentioned that because we had such a great Response Rate we were able to break out the responses by publishing categories as well as regions. Looking specifically at how the citys very that are in the midwest, south, or northeast. In this chart you will notice the green dollar signs represent revenues and the gold reps and expenditures and you will notice that in all regions across the country revenues have increased in fy 20 however, the midwest is seen extreme decline around 4. 4. 4 . When we look at population, specifically general fund Revenue Growth and fy 18 through the smaller midsize cities but in the on the spending side clearly our cities saw this rise and that is to be did to the general factors putting budget pressures on other cities including pension, healthcare, wages and other sources but as well [inaudible] yes, i think its a really important chart to show for municipalities to compare themselves with other municipalities ive been associated with the fiscal Condition Survey since 1991 and we always get the question about can you compare the city to that city and primarily the answer is it depends. Some cities dont have access through the same general taxing authority as other cities. For example, very municipalities that have access to all three and considered to be the broadbased general tax on retail, sales or income and wages and on real estate. You you will hear from one of them today after we are finished and its the city of new york and a city that has such a large general fund and i think i was told it was 93 billion that and the rest of our analysis because it would overwhelm the data. That said, this demonstrates for than anything the volatility of each of the general tax sources across time and how they react to changes in the underlying National Economy. What you will see during the Great Recession is that sales, not surprising, sales tax and income taxed drop dramatically and immediately as the recession hit. By around 2014, 15 they begin to grow at a fairly robust level of around five, 6 a year for a couple of years will be found in the last two years, 2018, 2019 is even though theres a positive growth rate in all three general tax that all three have slowed rather considerably so that by 2019, which is a budgeted year, all the other data referred to what we pull from the Financial Reports so these are actual audited data from the prior years. When he 19 is what the cities have proposed and these are there in approved budgets and they might pretty close to what we think will be close to audited amounts. If you look in particular at sales and income taxes hovering around 1 growth anything about the growth in the National Economy or at least the way we measure the Gross Domestic Product which is the measure of the National Economy would expect those numbers that the growth would be pretty strong but in two of the cases sales and income meager and even in property taxes is not as large as you might have expected given the growth of the economy. Part of that is consumers what effects the fiscal condition of state, local governments is the reports on housing are fairly all around the place and there are some markets that are strong in markets that are weak and the growth hasnt been as robust in the postrecession years as it has been in the previous recession eras and part of that plays itself out in a very cautious market or at least buying and selling of real estate and probably has a much too with the Real Estate Property tax numbers have something to do with the fact that there is manufacturing, at least manufacturing increases not been as great as the losses were after the Great Recession so we are losing that land and plans to where it wouldve been tax before and real estate. That the average across the board and that varies by ninas apologies and some cities are doing quite well and others are struggling and even within the same city such as my city as chicago we are seen both areas of struggle and growth and that is what christie will pick up on. Thats an important point in terms of that variation. As mike mentioned particular changes in manufacturing while Residential Property has significant variation across country and that impacts property tax revenues particularly with a decline in property tax revenues for the midwest reported for fy 18 although they are reporting Revenue Growth in fy 19 in the midwest as well. Just to note, we dont have it here but in the report 19 talks about the differences by population and notably we will talk about later but the largest cities are the only group that anticipates lower tax receipts. And then, again, the ability to meet needs. We have seen variation over the years particularly looking at three quarters of the reporting that their community is better able to meet the financial needs and we talked about their suspects for next year as well. Yes, what is interesting about this and i appreciate it the cfo municipality are apparently optimistic about this years budget compared to the previous. We asked them about the next year and the numbers dropped a bit only 61 of cfos thought next year would be better than this year which i think, from my perspective at least, a fairly optimistic on their point parts but we will see what happens but these are really strong numbers in the eyes of the cfos. Then we question why they do anticipate the next recession and where will it occur . We are showing this information by population size because thats where it is striking. You will notice around two, three large city finance officers with budget directors with cities greater than 300,000 in population anticipate a recession in the next one, two years prayed this information is coming from folks who are day in, day out thinking particularly around large cities with access to forecasting and modeling tools and resources and potentially other cities may have. This is not necessarily that they are putting a recession into their forecast Going Forward but that the variables they use to inform their models are telling them in the next one, two years they will see revenue decline so for them thats a keen indication. Then you will see fewer Financial Officers that anticipate a recession in the next one, two years. This is an interesting question about everyones crystal ball eventually there will be a downturn whether a collapse again 2007 or more moderate than we experienced in the. Com bust of the recession of 1991 or a larger one in the late 80s but it still is interesting that we are getting that there are forecasting something that will happen soon and how they prepare for it is the important take away for this. Another is that i think we are probably getting differences based on the size of the staff you have that can take the time and look into the future to see what the future looks like or rather where we are trying to get to the end of the month to make payroll and do we have time to think through for another six months, 12 months, 24 months so part of it may be the capacity of the staffs to do that. We dont know when the next downturn will hit. We see there is variability across the cities of different sizes and regions and even different structures for that matter. In your experience, mike, what have you seen in terms of how cities perhaps compared for the recession based on what they learned from the prior recessions . What we used to publish and i dont think it is in this report but we do continue to track what [inaudible] does for the states and what the reserves are in general and how those reserves have changed over time and its a nice way of looking at how cities maintain an expenditure level to Keep Services going even when there is a decline in revenues. What weve been able to track since the early 1980s that there has been a continuous growth in the percentage of, in the reserves a percentage of expenditures that indicates the cities are not spending all they have which is smart and prudent and its in anticipation of something. In some cases we talk with the cfos and mayors and managers they are letting us know were not sure what our state will do which states do during recessions. Some cities do not want to go into the bond market which in todays, im not sure the wizened considering the borrowing rates but some only want to Purchase Capital facilities but the cash they have on hand and so the reserves are large and growth because of it. I think what we have seen this year the continued growth and reserves as a percentage of expenditures in the general fund just that cities are wellpositioned to whether a short downturn in their underlying economy and that is how they are preparing for it. It gives him an opportunity because there is still some growth in revenue to address those pressing needs. We always can take an opportunity to maintain and repair infrastructure rather than using it as a cash cow and pushing the cost off onto our grandchildren. It requires us to continue to make annual contributions to our pension funds. Im sitting here from chicago and there are a lot of cities that are challenged, no more than the city of chicago, but this is a time when you have reserves of that magnitude to begin to transfer those over to your pension funds. Also, we were talking before this about the needs of many communities to address a growing homeless now is the time to be thinking now is the time to be thinking about what to do and how to sustain it over time. Thank you, mike. With dad that concludes the report over the portion of the event today but we do want to open it up for a few questions from the audience. These questions should be specific to the report and the data from the report and you will have an opportunity to have conversation, dialogue and questions with the panelists as well but if there are any questions please, raise your hand, state your name and who you are with removal, microphone coming around for questions. There is the microphone. Hello. Allison with a congressman from michigan. In terms of the breakout the regional, i think we all saw midwest just straight down, did the tax revenue graph, how much was influenced by that stark slow drop in the midwest . Is there any correlation or is there a thought of pulling out the midwest in particular in terms of the revenue aspect of this . It seems to have a pretty different outcome than the other three regions. We have a sizable number of respondents from the midwest so clearly that affected the results for overall which is why then we thought it was a portent to show the regional breakouts. We do not so the regional breakouts. It would make a difference mathematically. How much it would make, im not sure. If you think of where the largest cities are located they tend to be located on the coast and they are the ones that are fewer in the midwest than there are in the midwestern census region. To underscore mikes point about large cities, when we look at the municipal sector we make a special effort to make sure the larger cities are included in the data and that is because were looking at aggregate numbers across city budgets. Large cities would weigh more heavily on the result. Hello, marissa, city budget director for the city of philadelphia. Questions about asking predicting the next recession, do you have Historical Data from previous reports on how good were those finance officers at predicting and how much weight should be put into it now . This was the first year we ask that question. I think its telling that we ask about the financial needs to be met and you can see clearly around post recession but again what mike said about property tax lag you can see significant drops in the percentage that they are better able during the time when property tax receipts are declining as a result of the recession. We would anticipate this question would be weathered as well. Sir. Hello, art with the American Public transportation association. You made reference to the earlier recessions caused by the. Com and the housing bubble but this seems to be more based on general trends, nothing particular driving it. Is there anything of a fragile nature that you could equate to those megatrends the cost earlier recessions . Great question. I think this is much more is that tariffs or trade or globalization things that are making the cfos wary . Im not sure if that affects what year they picked the recession. But you are right. Theres not one singular event that has triggered it in their minds something, some event that would call for a downturn in the economy. In 2015. Again that is into new growth thats over growth starting back in 2015. So, i, it may be that sort of general economic conditions, slower moving trends are sort of underway. Natalie cohen, national research. I was a little surprised about the slowdown in elections. What happened to the Internet Sales tax surge . I think we will hear a little bit about that on the panel. My sense is that it hasnt been that cash cow that they were hoping for but also theres the reality not all cities collect sales taxes. A good chunk of them do, but not all of them do, so that is to be determined. City of gaithersburg council. One of the things that affected municipalities and State Governments, state revenue is most clearly the last couple of years are the changes in tax laws, tax cuts, deductibility is, state and local taxes had a big impact on revenue and also planning in the state and fiscal level. If you addressed this and then the second question followup is one of the traditional responses to the recession is for congress to cut the taxes yet again. Can you address both of those questions . I know in the Previous Survey we had asked about finance officers, budget directors what did you feel is a large impact as a result of the federal tax reform and advanced refunding continues to be a challenge. In terms of the second question. The cities an the cities and states have not responded as vigorously as i expected them to and maybe because it is going to take the time or twatime or two for the r income taxpayers to realize im paying more and not getting whatever but its costing me more. Im not sure thats happened yet. I think we will take one more question and then we will need to wrap it up. Okay. Excellent. Thank you so much. Really appreciate your time and attention here today. Thank you, mike. Thank you, christy. I would like to introduce kim hart will be the managing editor from taxi us, the budget director from new york city dan gillmor and executiv executive r and ceo of the michigan municipal league. Welcome and thank you. [applause] all right. Thank you very much for going through that. We will just jump right in. When i read the report last week the biggest take away for me was the question that this was the first time asking which is when do you expect to see the recession on the horizon. But also on the flipside you see that counterintuitive finding which is the cities still seem fairly optimistic that they will be able to meet the needs of their cities and in some ways even though they are more pessimistic than the smaller ones they are in theory better prepared to weather the downturn at least a short one like that. So i wanted to open the panel and get us talking about that delete. We have a great set of panelists that come from different circumstances and the cities they work in the regions they work and seek economic realities differently on the ground. Starting with you, lucky you get to sit right next to me and you are from new york city so therefore a very different budgetary situation than our peers over here. Tell us a little bit about what you are seeing being the biggest city in the country that you have also weathered several you were in the recession last time and youve been there for a couple of different administrations. Can you tell us what you are seeing on the ground in new york . Was the first clarify my General Fund Budget was 93 billion. Total fund budge funds budgeteds 93 billion id be in a very good place. [laughter] it is 63 million. Looking at my colleagues here the magnitude is very different. But i think generally speaking what we are seeing, and the budget director from philadelphia pointed out whoever the forecaster is what hired them right away we are not predicting a recession in our Economic Forecast as we look to update the budget for this the next quarterly update in november, but we are seeing an actual quota on the revenue. So the growth yearoveryear was here forecasting is starting to slow. We are also coming off of a very unique era with personal income tax where we had a significant onetime increase so its starting to overall normalized to get a Bigger Picture we are seeing a slowdown. I think unlike many others, we do have the ability to call on a number of different tax revenues. We have the sales tax that isnt slowing down. We are seeing an increase in night and we have property taxes that makes it about 45 of the total. We have transaction tax, mortgage tax, we could go on and on but its very diverse which is very unique to many that you dont have the Revenue Sources available to you. But the other thing we have been doing just as we have been planning for a slowdown and as mike says at some point it has to come and we have been doing this since the beginning of the administration which is constantly asking the agencies, so even in times we have the revenue coming in even when he had the personal income tax jump we still asked the agencies to look at their budget to see so over the course of this last fiscal year was up 2. 3 billion we got in savings and we took a headcount if we ask them to do more with less. The other thing we have been doing is increasing our general reserves so we are now at a total close to 6 billion. 4. 5 billion of that is for the retiring trust benefits. The balances in our general funds and then we increase that as we adopted the budget for this coming fiscal year by 250 million. So, its a combination of us being very conservative about where we are going with our revenue and also on the expense side increasing general revenue. Are you seeing expenditures increased . Anyone will tell you youve got your pension costs increasing, retiree, healthcare costs, you are seeing lieber. When the administration came in because of the prior administrations and the challenges around the recession they were not able to settle the labor contracts so many of them were still outstanding. We are now at the plaintiff settlepoint wesettled about 65 r labor contracts and we are still going through that those are just the general Cost Increases. The general debt service is another big factor in the Great Recession with a lot of cutbacks on capital spending. The capital plan over ten years is pretty significant. 110. So thats another area where you will see the service is catching up. So, i think that they there are so Cost Increases but its important to continually ask for savings to help offset that and set aside reserves. Turning it over to you, on the opposite side of the country and opposite end of the spectrum in terms of the cities via southwell and in california tell us what you are seeing in terms of i think for us, first of all thank you for the opportunity. Its great to be here. I think what we are seeing in california for those of you that dont know we are around 8,000 people come in the los angeles region. I represent and my board represents over 11 million people. We have over 600 elected officials that are members of our organizations including los angeles, so we have a really, really large economic base that i represent and we present so for a city of my scale, kind of like it was said before we are not predicting a recession yet that wbut we are absolutely trag those indicators that show that there is something on the horizon. We expect that to happen within the next one to three years. So were bracing ourselves for that and learning to take measures to prepare for that and mitigate that. What we are doing in order to be able to address those issues is being a little more entrepreneurial at the local level and whatever side of the spectrum you call on theyve decided to tax cannabis. We are a city that has embraced that and we feel that weve placed enough control measures to make sure this isnt something that affects the general population. We havent seen it yet, which is great. In terms of the revenue side, thats something we as a city has embraced to be able to mitigate those negative Economic Indicators that we are seeking. At the same time when you have that curve that happened early this yeaearlierthis year and thf that you have the state Fiscal Health index that weve been tracking in california and we started seeing that negative downward trend early this summer and its been trending downward for the last five months so to be experiencing that but also as a country so we are very aware and concerned and on top of that we have Cost Increases. Every city we will say will have Public Safety costs increasing. Our city is suffering from that as well as the local level we are addressing that with some innovative action and at the same time costs even a year ago it wasnt something we expected so we are not shying away from that. We are confronting at the same time we realize we need to pay for it somehow so that is where we try to balance not only with cannabis but other Revenue Opportunities we have in the city as well. And for the region and the state they are trying to be more entrepreneurial and tap into the Revenue Streams that are not the traditional Revenue Streams with whats happened to so at some point in time we have to start reimagining what the local city economics are and address it that way. One thing the young lady mentioned before regarding the online sales taxes. In california what we have is a Revenue Source is on tap. Online sales taxes need to modernize in terms of the collection mechanism. We agreed that they are out there. We havent given up on them yet. The department is actually modernizing their software and in the meantime we are waiting for those revenues to come in and we expect that as matures we will start to see an increase in revenue from the stream as well. We think that as the online spectrum starts realizing more of those in the traditional mom and pop brick and Mortar Stores going away its incumbent upon us as policymakers to initiate and implement policies to tap into that as soon as possible. And our midwestern representative since we solve a pretty stark decline happening in the midwest even though theres Slower Growth in the other region especially in the larger cities in the midwest, whats going on in michigan and the states surrounding you . Its not the first time i have had a role but i enjoy when i go outside the state i get the chance to listen to other folks. I feel like ive been living that my entire adult life because you talk about all the changes from the deindustrialization and globalization of our economy and we sorweve sort of been in the midwest ground zero for that coming off of all of our industrial use. So, i think those difficult times are things we have some luck often used to in a good way and a bad way. On the other side of that is yes, there is an economic issue when we talk about declining revenue, some of the things that were pointed out in the actual survey had to do with contracting economies and people worrying about when the recession is coming but a lot of it is Decision Making decision, federal decisionmaking particularly when it comes to sharing revenues, providing revenues for local dollars. So, yes weve had Economic Issues in the midwest but without exception, perhaps illinois im not sure but everywhere else the way in which theyve decided to deal with this than by using austerity as a budget goal and quite frankly as an Economic Development it isnt an Economic Development tool so when you have decades of god, you wind up with Transportation Systems that are outdated and potholes as big as midwestern towels and we can keep going with the theme here. [laughter] and water issues and housing issues all around. And this time when we entered this economic change several decades ago, economies and industries were still local and regional and now we see people going to places that are providing things in the way of amenities for people. So the State Governments in some degree the federal government if they are not going to join the local units and actually invest in these places, its not going to be a great outcome and weve got to figure out a better way to do that. When you talk about investment, what are the areas that are the priority is for where you are . Very simply, i know the report talked about the three things as being many drivers in a negative way. Infrastructure, Public Safety and legacy costs and they are basically for those individuals that used to do the infrastructure in the Public Safety said its the infrastructure of Public Safety, and again, part of that is economic downturn there isnt enough money out there necessarily, but much of this has been the states role quite frankly turning its back in many cases over the local units of government is not providing those funds. Michigan we got about 9 billion across the midwest in terms of the amount of money that was shared for these type of services before. People dont know they are drivindriving when a state or fl highway and they are looking for those services. So, again, having that state partner and federal partner to work on this type of thing and provide the resources and opportunities to take themselves out of these economic old is something that we havent done a very good job with. I dont think weve done a good job around the country but the midwest has been particularly difficult, and in the midwest our State Governments treat the cities were spent majorleague Baseball Players treat the nationals. [laughter] too soon . Had to get that one in. Sorry. A very similar circumstance. What are you guys in terms of investment and where you see the biggest headwind insta terms of success. In terms of our capital plan, the ten year plan is 110 billion. 75 of that goes towards infrastructure improvement, and there are many that needs to be done. And i think we actually see that as a way to drive Economic Development and create the incentive to come and do business in the city and in fact overall in our economy we have seen that we are less than line of wall street. Weve diversified more taxes coming in and in fact we just got an upgrade so now we are at the highest level and weve also seen education as another area of the economy has diversified and where we are going so i think it is a different situation. This has been seen by that they not only on a panel i was on last week but this week in what we are able to do its hard to make comparisons and i was on a panel with someone from michigan last week as well. For us on the investment side, our city and most in california are on the sales taxes so the income we have an opportunity to be able to invest as a city and in the location and effort that is going to create and increase the sales taxes and focus that doesnt mean that we neglected the residential component. We are keeping up with our services but by and large because of the nature of the beast we are focusing a lot on creating that Sales Tax Base to increase the revenue base. In my city we are lucky enough that we are about to receive a light rail line thats going to be coming through the city. So we have learned from other localities and metro regions with a gu it on right and wrongn our case we are betting big and we are embracing it. We are putting all the blocks around where the stations are going to be going so that when this thing comes online we are able to tap into that so we are doing a lot of mixed use at this point where we satisfy the need for increased residential space and at the same time having to ensure it creates the sales tax as well and we dont realize that when its just housing. Also because of the investment we are doing and the fact we are out there clothing business to come into our city, we are seeing a lot of interest right now from developers more so than i would say the city is around us and its pretty unique and exciting for us. Something we havent experienced for a while but the stability in government that we have in our staff, the training weve done with our staff and the Economic Development ensure that they go out there and have the right message for the right audience to be able to track into the city where we invest so at this point, we, the trend is showing its starting to pay off so we are expecting that again to insulate ourselves from many recessions have come forward. Picking up on what you are talking about, so much of the city is about housing and housing prices. The unaffordable and many more cities or in some places Property Values are not showing the same amount in there for property taxes are not able to help the city is in the way they are on the coast for a large part. So, property tax revenue increased everywhere except in the midwest according to the report. That the Housing Affordability challenges also create new headaches for you so in terms of then you have the homelessness after that goes along with it and a lot of other obligations with regards to that. So i was interested in hearing a little bit about how you are on the outskirts of la a lot of these challenges combine at the same time and the president has taken notice and the governor has taken notice. How do you try to sort out those headwinds . At this point, since 2012, the State Government in california has invested less and less of Affordable Housing as a we are starting to see that dichotomy having some really high scale very expensive real estate and at the same time youre not really having the best middle class. So starting to see the displacement of the lower income people in the region because of that and the quality of jobs happening at the higher end especially in the region so for us it is a concern from the perspective its not right to displace somebody that for our cities its the fabric of the community when you have people that have been there for years and decades and then all of a sudden they are displaced for pressures because they cant afford to live in the localiti localities. So the fabric of our community, to keep that intact it is a challenge for us because we live in a free country and theres only so much we can do in terms of being able to affect the social change into the negative changes. We are very aware of the Market Forces and the effect. At the same time on the local level, we try to address them as much as possible to ensure we do not lose that into the same time capture that increased value to hire properties are bringing in as well so we are trying to come up with a balance into the same time trying to work with the federal and State Government for them to do their part as well and that they will invest in Affordable Housing so we can maintain a nice balance in the community. So it is an issue and in california the governor just vetoed a bill that would have gotten it a long way into investing in Affordable Housing. That was disappointing. We are looking forward to working with him in the next session to ensure Affordable Housing gets a nice amount of investment from the state but at the same time, we cant wait for him or them in the legislature to do what they do. At the local level we have to fix the problems and fix them now. Cant wait. We are trying. What do you see in new york . At the beginning of the administration we announced our Affordable Housing plan and then we doubled down the effort into 13. 5 billion in Capital Funding to either construct new or preserve and to stabilize Affordable Housing for 300,000 units. Its been a lot more new construction i think the challenge is how much can you actually do in the city having this conversation right before lunch of how much you can do but then weve also done a lot of investments into the subsidy programs to help individuals particularly those that are homeless to see a Significant Impact in terms of being able to get people housing. But the challenge is always going to be coming im sure the major cities are like this also how much Housing Stock you actually have. I think housing is more a symptom of a bigger problem rather than the cause of it and in most cases people sometimes go out looking for a specific type looking at locations and then figuring out where the housing opportunities are. On one end you have homelessness and dealing with getting people into the appropriate facilities and then looking at Home Ownership is often affordability on this and end in the middle there is a lot of workers where theres just not opportunity for them and a lot of it gets back to what weve ar we purchased tg about on the fact we are not at Different Levels of investing in other places to make them livable, to make people want to be there. We are pretty huge burdens on those places and driving up the cost if we start leaving everybody else behind. Until we figure out the larger scale economics to try to support these places you have a love of order aging communities and legacy costs and Water Infrastructure that was largely turning their backs of the state and federal level and again that austerity idea just cut your way into this and out of this problem doesnt work. Weve got to create places people want to be and that is the larger problem i think housing as much as it seems like the problem i think it is the cause of somethinbecause of somh larger. Shifting gears slightly and then im going to open up to your question. As it was mentioned several times in the report and at the tail end of the presentation is the impact of trade at the federal level. How much is that becoming a challenge or has that already become the challenge in your cities and is it something youre concerned about Going Forward . Its definitely a concern we have and why it needs to be very cautious in our Economic Forecast. In the scheme of how much does it actually affect the Revenue Sources, not significantly thatt it is something we are concerned about. For us its the Los Angeles County region, the state of california itself relies a lot on trade but only for the agricultural aspect that the export of that and also in terms of the jobs that are created supporting the whole International Trading industry. You have truckers and people that work in the ports. Not only for our region but for the country so any type you have a type of pressure that causes instability into trade you dont know if you will have have a jw especially when it comes down to that level. So for us its trying to work at the federal government to show the effect this has put its something we are absolutely monitoring. I would echo instability is probably the Biggest Issue right now. There are trade policies themselves, but i think that longterm the manufactor manufas vitally important. And not knowing sort of what is right around the corner is just as bad as doing something bad around the corner. The volatility in the stock market and as the lates latest happened today and how the stock market response and that volatility for us is one of the reasons they are so conservative about the forecast especially with what is happening in wall street because it is just so volatile and responsive to what is happening in the trade talk into the conversations that are being had, s added, so that is e answer. With that i want to open up to your questions. Raise your hand and we will get a microphone over to you. Right over here when i was listening to the investment question, one of the issues i was wondering about is what do you see in the challenge for the people that you need to work in your city, whether it is perhaps less generous benefits in the past or just general impression of what its like to work in the local government. Talking about in our cities in terms of businesses in the cities or the Government Agency . The government agencies, people who work for the City Government. That is an issue, no question. We need the best and brightest. We need to be able to have attractive places. Some government leaders look at the same type of names anybody else would be looking for when it comes to differentiation in housing and cultural opportunities, good infrastructure, transportation options. The things that are driving the economies of the world right now are basically areas that we are all competing in. The three areas we are representing here. So that is an issue. We are trying to do some things to get more people involved in the local governmenlocal governg the program to get more women involved in the city management. I know that you guys know about 60 nationwide are females we have programs going out to get more people engaged and involved in the profession as well. So there are different ways to attack it. But where you see the benefits going down and pay going down, government itself getting a little less stable than it was, weve got to look longerterm how to get the best and brightest in this profession. I think because of the market and population, i would say we dont have as much of a problem attracting the talent and maintaining it. I think with some of the emerging issues like i mentioned before, the level of expertise at the local level it isnt really there yet so starting to have the pool of talent growing organically. But i think overall we still live in the age where its very stable and reliable and because of that i cant say that we have had a problem attracting and maintaining. Theres just certain professions where its challenging. It is one of them and getting the right people. We have in the past administrations than outsourcing and there was fear we really needed to have cost savings, recruit in the jobs. Weve been doing a lot of work which im sure you go on and on about to be able to use the Different Levels of the civil status and recruit. But that is an area where it is winwin and we are building that infrastructure that the City Government and to actually save because it is costing us more to outsource. A little further down the run when you talk about the larger legacy cities, they have trouble recruiting Police Officers and they are out there getting training and hiring men at relatively low levels two or three years later when the officer gets experience, they are gone to the suburbs for the 15 grand a year more. Those individuals that are going to mak make those economic posis becausdecisionsbecause they wert decision to make, but the job of being a Police Officer in detroit as opposed is a completely different animal that we are not paying them the way we should as again the austerity and the investment from the state level in terms of whats going on so we see that happening all the tim time in ps that we cannot afford that to happen. The direct result of this program we find ourselves in. I will keep going. [laughter] marissa from philadelphia. Im very nervous about the next session and wondering what folks are doing me differently than they have in the past or what they are sort of anticipating even if they are not already taking down growth projection. What do you anticipate having just even in terms of stress testing your budget to make sure that you are ready . I would be more concerned if we were suddenly just thinking about it right at this moment of saying what are we doing. I think the fact that we have been doing it since the beginning of the administration which is constantly asking the agency is building up the reserves, being very committed to the longterm liabilities into the Retiree Health benefits and continued investing is. Those are not part of the general fund so in terms of legacy for this administration which is having a down payment on the benefit is a significant achievement. But i think moving forward, and again this is my worst criticism is to budget director i will take it as we continue to be extremely cautious about the revenue forecast to just trust that the constant criticism that i get. Could i tell you that over the course of the fiscal year we have additional revenues coming in for collections, yes. Should i anticipate that at the beginning, absolutely not. We have to see that revenue come in. Thats one more area we continue to be extremely cautious and the other is unlike many cities we are on the gap accounting and because of the crisis in the 70s and written into state law we update the project Quarterly Survey gives us the opportunity to see where we are and course correct. We experienced that last year with the personal income tax and wenfind out and then it went don because of the market and so i found myself the timing was good as we were gettinbut as we wereo release our update to the budgeted february saying we had to be very cautious about the setting. We didnt know where it was going to go. And i think for any budget director who can say that revenue forecast and this time with the tax cuts are predictable its really challenging to do so and so we round up being very cautious about the forecast waiting for the next budget in april. The other dynamic that we set out for is for the city council and leadership going into the adopted budget process in june given how volatile the personal income taxes were over the course of that year. Its time for us to start thinking about looking at as we adopt the budget and we are going to increase spending based on the account priority is and we actually look at savings joined with the council it was unique so the adopt a budget that had the savings included and i think next year moving and we are going to do the same strategies which is we will have increased reserves i anticipate the revenues will continue to be where they are and we will have savings that we jointly adopt. Any opportunity that we receiv received. Its looking at data saving some costs and we have not really let go of anybody because of that reason. Its just been trying to say cost from that perspective that the team did the same time we have increased cost coming up so we are trying to come up with Revenue Streams that are not as reliant but the Revenue Streams we can be in control of ourselves and also investing in what weve done because of the pension obligations our city happens to be around 76 funding pension and we want to go but even more because we have a surplus in the city right now we are investing in continue to invest additional payments onto as older people to insulate ourselves as much as possible. So there are some things weve done proactively to be as safe as possible, but its something we would have to keep an eye on. I think when the number of Police Officers at the local level we drove three or 4,000, i stopped counting. I think it is much higher than that now. Firefighters in a similar way. I believe that the roads are ranked 49th or 50th in the country right now. If yobut c. And michigan is a ly place to come and visit. And again, the cutting happens it happens and until it gets to a point where our State Government particularly coming up this post throughout the midwest and a lot of places its able to make practical decisions around budgeting for the good of the community isnt because of the state we are going to be in trouble. We started a campaign that is really focusing on getting a truth partnership between the state level to help with some of these things. Its not simply raising a tax issue and it may not even be a raising taxes issue but there are so many things happening in the government around the taxes to how you were able to expend dollars to how you can work with communities around your region, you name it, which really do a lot of things to go a long way when it comes to budgeting otherwise we are going to continue to run into these problems with the transportation issues and housing have the rest of it. So theyve got to figure out a way to get beyond the politics that allow us to make practical decisions because when you see the state and federal governments they usually figured out in the 11th hour how to take care of their own budgets for the money they have to share with all of us that doesnt make its way to their and we are a decade or two or three into some of those things when it comes to transportation funding and Public Safety funding and the rest and thats where you start seeing things fall on the table. Weve got to do a better job on that. Its got to be a multitier approach. Are you also concern as people get more and more nervous about the possible recession after seeing indicators that states will constrict even further . It certainly seems that way. Its been the go to for a while now. And again, cutting your way to Economic Development might work in a place like alicia. It might be the cheapest you can possibly be to attract industrial or something along those lines but in our economy and certainly the larger economies is about attracting talent and providing a lifestyle in schools, universities, everything we look for when we think about the places we want to be, those are the type of places we have to offer people and if we dont offer them, the economic tax church and Everything Else we talked about creating jobs or improving the economy can go by the wayside because it is no longer good for business or good for the people. Its the same thing. A i think in california we saw in the legislative session the Affordable Housing bill. We saw governor in that case vetoed it because he wanted to insulate the state from the possible recession coming up and right now the state happens to have a 22 million surplus on its budget and depending on where youre at you can invest it on housing or not, but that is a very demonstrable way from any type of a future spends. We are seeing that and we saw it last year on the transportation bill that happened in the state. Its creating enough jobs right now and Economic Opportunity which is great for the same time considering the state had held the reserves attacks was placed upon the voters and we committed to that and we are doing that. They could have stepped up and invested in that, but it didnt. I would also just say in the context of moving forward with the economy and these things we can create and think about how efficient we are in our own operations around government that gives you the context to do that differently so that in times when the revenues are coming in its hard to get them to move and think differently about how they actually operate that i think as you start to think about ive beegetting oue message. Its not about scaring anyone with layoffs because that isnt where we are at it how can you think about what your you are g differently and how can we do more with less features easier said than done but i think often times when things are moving along we dont often think about the efficiency side of the. I started to walk out to get back to a meeting but on my way out i thought infrastructure. There has been talk about a federal infrastructure so it seems from the discussion today that it would be particularly timely. I raised up and say we are looking at something that could help stabilize the turnaround, there we go. What do you think . Every time we invest in our infrastructure, the positive effect that it has on the economy and jobs and just all around, its always a great investment. It makes it more attractive for the investment and has a nice trickledown effect on everybody. We are ready for that. Its almost we are talking about something new here. Its not necessarily stepping up to the plate staying at the plate and moving forward on some of this stuff. In line with this question on infrastructure, what about the cities even though it does affect infrastructure, these jobs, technology, connected economy etc. A lot of the cities are working on becoming more intelligent and how they move traffic and how to pay for different things. Is this something that could help diminish or be put aside or how do you see that . Considering the trend in terms of the economy, i think that it should be expected for us to invest in not only in the Economic Perspective the ones that do have it held brazilians to adopt and be successful so i think it is crucial to invest in the Technology Infrastructure not only for the cities but every segment of the population. For the perspective of having a stable peaceful societies it is absolutely crucial. In trying to create Economic Development, many cities and states offer economic incentives. How does that affect your budgetary position . Thanks for coming everyone. [laughter] we as a city dont offer economic advice directly. It comes from the state and theres been [laughter] everybody knew where i was going with that. We do. For us i think it is because our city is somewhat aged and in terms of renovation we do assist our Business Owners with grants to make the aesthetics not only for the communities but for other developers and investors so there isnt an age. But we have seen it have paid dividends already so we are continuing to invest in that. But again, i think that if things economically start taking a downturn and fast, that would be one of the things we start reducing the investment on that at this point in time we feel confident enough and we are continuing that. I think everybody ha has gotn into that game in the last several decades and its not a productive game in the end. Its certainly a oneoff situation can help you land a company that most cases you are not able to bring in enough revenue to pay for some of the stuff that comes behind it and again i go back to the fact the number one thing people are looking for is a Great Community so that should be at the top of everybodys list and to take away from that whether it is a state condition or federal condition is something you do locally. To take away from that its putting you at a net disadvantage and i think, i fear in place of a longerterm infrastructure system, in place of a system that thoughtfully invests in communities around the country, we find that sort of trying to be the cheapest and. 5 million a year, 20 million there. And not to bring up source objects about our friends at the recent largescale, countrywide visit for the second headquarters, after 18 months they wound up with two of the most healthiest in the entire planet and asked for hundreds of millions of dollars of tax exceptions. It could have saved all of us a lot of work to have gone there in the first place but they were coming to those regions because they want workers that are going to be there and attracted to those places. If you are not adding to that bottom line it is a net loss over time. Is there a bit of a chicken and egg issue where there are not a lot of big headquarters and thofthe companies is it worn the beginning to offer something to get the flywheel to attract more people and more companies in the Virtuous Cycle . That has been the site for years the chicken and egg issue and im not smart enough to figure out the answer to that question. Over time it just wont pay for itself or work itself out. Theres nothing you can do right now as a city or a region or a state to be better equipped economically and have a great place to live and work. So, that should be the ultimate bottom line. Thats the place those companies are choosing. Amazon didnt look at the cheapest places in the country to do business. Dc or new york, i keep walking into that one. [laughter] they would have gone to the places that have next to no taxes. They were never in competition. They were never going to those places because again they were looking for amenities, everything that goes along with it and that is unfortunately not free. It costs money. Time for one more question. Earlier i asked about the tax policy and the tax law, recessions and austerity etc. If you look at the membership most cities are under 100,000. Most are less than 50,000. Mine is similar in terms of population. We cant do anything in terms of incentives without a partnership with the state and county level. And as austerity rears its head which often happens in a recession, our ability to do that and amount to something to attract and use incentives to attract business eventually theres a rebound in the companies that decide now its time for us. Weve been there for years. So i think theres limitations. The point of my question earlier was the transferring of the burden of responding to economic changes is a burden that is felt most directly and perhaps communities of our size. It falls to us and we have less ability to respond quickly to it. We have cut our staff to the the bare bones and increased efficiency and at some point the services your taxpayers and businesses have come to expect has become limited, so add some point you cant continue to do that so that is where it becomes a local and political decision. We cant forget that part of the equation here. I know that mr. Gilmartin understands representing michigan. I havent really heard any of that discussion in this report, and thats okay. That happens all the time but its something all of the member cities need to consider as we talk about the top 200 cities that drive the economy and the states but we still have a lot of cities theyre not in the same position. I dont know if you want to comment on that or just to say i agree. Its interesting we are having a discussion before we were eating lunch [inaudible] that was a decision that was made and i shared. As policymakers it is on us to continue implementing. But you have a limitation of revenues that can be realized in the same time the electorate expects them to continue and so i think that at some point in time they have to come to grips on whether they are willing to accept the services that they expect from us because it will be the point in time that we can continue to create a revenue stream. Its going to be for us to either figure out or if we dont figure it out to impose something and for us to implement it in whatever way we can but i would like to call the tip of the spear. I know it is almost 2 00 so people end here thank you everyone for coming and we will see you next time. [applause] thank you all for being here today to mike for making the trip and being a great partner and thanks to the staff and also to the budget officers and finance directors from across the country that participated in this years survey. Be sure to pick up a copy. I was surprised to see most of you reading the report independently when i came down here today so that was awesome but if you havent gotten your copy or you know someone else that would like a copy please be sure to pick one up on the layout. Continue the conversation we had a lot going out already. If you really love city finances and your passionate or want to mingle with the best and brightest please come see us in san antonio this year. We will be a publicly san antonio and we would love to see you at our conference. With that, have a great day, thank you for being here and we will see you soon. [applause]. Th washington journal continues. Host we are back with our political roundtable. , democraticn here pollster, working for the Booker Campaign and worked for the Obama Campaign 2008 feet, mcguire 2008