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

36 Pages Posted: 6 Mar 2013 Last revised: 19 Nov 2013

See all articles by Justin M. Ross

Justin M. Ross

Indiana University - School of Public & Environmental Affairs

Wenli Yan

University of Kentucky - James W. Martin School of Public Policy and Administration; Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Craig L. Johnson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA)

Date Written: March 4, 2013

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 CAFR data indicates 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.

Keywords: city public finance, fiscal stress, Great Recession, property taxes, Comprehensive Annual Financial Reports

JEL Classification: H1, H7

Suggested Citation

Ross, Justin M. and Yan, Wenli and Johnson, Craig L., The Public Financing of America's Largest Cities: An Autopsy of City Financial Records in the Wake of the Great Recession (March 4, 2013). Indiana University, Bloomington School of Public & Environmental Affairs Research Paper No. 2013-03-01. Available at SSRN: https://ssrn.com/abstract=2228863 or http://dx.doi.org/10.2139/ssrn.2228863

Justin M. Ross (Contact Author)

Indiana University - School of Public & Environmental Affairs ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Wenli Yan

University of Kentucky - James W. Martin School of Public Policy and Administration ( email )

Lexington, KY 40506
United States

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

Craig L. Johnson

Indiana University Bloomington - School of Public & Environmental Affairs (SPEA) ( email )

1315 East Tenth Street
Bloomington, IN 47405
United States

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