D.C. Gridlock Slicing Into Services of Cities Across U.S.

Photographer: Alex Wong/Getty Images

Philadelphia Mayor Michael Nutter said the city would increase tax collection so that $28 million would flow to schools for the fiscal year beginning in July, compared with $15 million from the levies this year. Close

Philadelphia Mayor Michael Nutter said the city would increase tax collection so that... Read More

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Photographer: Alex Wong/Getty Images

Philadelphia Mayor Michael Nutter said the city would increase tax collection so that $28 million would flow to schools for the fiscal year beginning in July, compared with $15 million from the levies this year.

Philadelphia is scrounging for money to reduce child lead poisoning. Mesa, Arizona’s sales-tax revenue is softening as Boeing Co. (BA) suppliers cut back. Oklahoma City anticipates less spending from its largest employer, Tinker Air Force Base.

U.S. mayors gathering in Chicago this week for the Clinton Global Initiative America meeting say the automatic federal budget cuts known as sequestration are starting to ripple through their cities, forcing them to make difficult decisions about funding services their residents demand.

The mayors blame partisan gridlock in Washington and are calling on Congress and President Barack Obama to end the sequestration before more reductions take a deeper toll on cities that can’t deficit-spend like the federal government.

“Congress has got to figure out a way to work together for the good of Americans and should not continue to hold many of our mayors and our cities hostage to this death by a thousand cuts,” Philadelphia Mayor Michael Nutter, a Democrat and president of the U.S. Conference of Mayors, said by telephone.

Sequestration was supposed to be so intolerable to Republicans and Democrats alike that both sides would compromise on spending to avert $1.2 trillion in cuts over nine years. Instead, no accord was reached and reductions began in March. As much as $85 billion will be withheld for the fiscal year that ends Sept. 30, forcing service curtailments and payroll cuts.

NYC Cuts

In New York City, as many as 500 New York City Housing Authority workers may be dismissed because of sequestration.

“We had a $205 million grenade dropped on us,” Housing Authority Chairman John Rhea said today following a City Council hearing on the cuts, referring to a revenue shortfall caused by the federal spending reductions. The agency serves 650,000 residents who rely on it either for housing or rent assistance.

Governing in an age of such austerity requires mayors to find new funding sources to sustain and improve their cities, Chicago Mayor Rahm Emanuel told about 1,000 business, government and foundation leaders at the Clinton Initiative meeting.

“We need private-sector dollars to come alongside to help us do what we used to do from a national level,” said Emanuel, a former White House aide to Obama and President Bill Clinton.

New Orleans Mayor Mitch Landrieu said the federal cuts began just as cities were learning how to cope with new fiscal challenges in the post-recession economy.

Alternative Sources

“Washington is not responding nearly as quickly and not nearly as forcefully as it has historically,” Landrieu told reporters in Chicago. “You have a lot of mayors up here that are kind of starting to get with it, and to find new ways of solving old problems with new partners because our old partner has left us.”

While cities with limited military or other federal operations might see less damage from sequestration, funding they rely on for low-cost housing, Community Development Block Grants and other programs will be cut, said Michael Wallace, a National League of Cities program director in Washington.

“Most cities are not in a position to supplant these dollars,” Wallace said by telephone. “Cities are going to be making some tough choices about which priorities to fill.”

The success of efforts by mayors to replace money cut from federal funding will depend on how hard hit their communities were by the home-foreclosure crisis and the loss of tax revenue during the recession, Wallace said.

Youngsters, Homeless

In Philadelphia, sequestration has hit early-childhood education, services for older residents, student work-study jobs and public safety, Nutter said. The mayor and City Council reached an agreement June 12 on a proposed budget that covers a $350,000 cut in federal dollars for the lead-abatement program, as well as a $1 million reduction in homeless-program funding, Mark McDonald, a Nutter spokesman, said by e-mail.

“These are real programs with real services that get delivered to folks, and when they don’t get the service, bad things happen,” Nutter said. “Every dollar counts, and we don’t have one to waste.”

Scott Smith, the Republican mayor of Mesa, said he’s less concerned with federal funding cuts than he is with what he called their “meat-ax” nature. That includes fewer federal grants for training and equipment for his fire department, he said, even though the city remains responsible for providing disaster assistance to the U.S. Homeland Security Department.

Boeing Tailwind

Engineering firms and other contractors are starting to cut back as Chicago-based Boeing responds to sequestration, Smith said. The world’s largest aircraft manufacturer employs about 4,800 workers in Mesa, where its Apache helicopters are produced. Growth in the city’s sales-tax receipts has declined to about 1 percent a month compared with the previous year, down from a rate of about 6 percent, Smith said.

“It’s just money pulled out of the economy indiscriminately, which is a horrible way to budget,” said Smith, who is in line to be president of the U.S. Conference of Mayors. “We just don’t have a whole lot of patience with Washington because they simply cannot seem to be able to do the job they’re supposed to do.”

Oklahoma City also has seen its sales-tax collections soften since sequestration began, Republican Mayor Mick Cornett said. The city’s biggest employer is Tinker Air Force Base, and there is a large Federal Aviation Administration training facility where forced unpaid time off or job cuts may lead employees to curb their spending, Cornett said.

Unpaid Furloughs

The Pentagon will impose unpaid furloughs of 11 days starting July 8 on as many as 680,000 civilian employees, U.S. Defense Secretary Chuck Hagel said on May 14.

“The sequester might have made some people in our economy a little reluctant to spend,” Cornett said.

Sequestration puts a burden on cities when they were starting to recover from revenue declines and budget cuts they had to make to cope with the recession, said Kil Huh, director of State and Local Fiscal Health at the Pew Charitable Trusts, a research organization in Washington. The slump extended 18 months to June 2009 from December 2007.

The 30 U.S. cities studied by Pew as part of its American Cities Project had an average 4.7 percent decline in assessed property values from 2009-2011, with a 7.7 percent drop in municipal workers during that time.

“Just as things are starting to look up for many localities as well as states, the uncertainty that the sequester imposes on them could potentially harm the recovery that they’re experiencing,” Huh said.

To contact the reporter on this story: Mark Niquette in Columbus, Ohio, at mniquette@bloomberg.net.

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net.

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