Are Cities Like Lehman Brothers or AIG?

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Philadelphia in early November 2008 was in the midst of celebrating two unprecedented victories: a World Series championship, just the second in franchise history, and the election of the country’s first black president, to whom locals had given 83 percent of their votes.

“In city government, we were trying to figure out which day to tell citizens we now have a $1 billion deficit,” said Philadelphia mayor Michael Nutter.

Should they interrupt the ticker-tape parade or rain on the election party?

The city’s fiscal situation would only deteriorate further over the coming months, mirroring the mess in metropolitan areas across the country as the national recession targeted big cities with already big problems. Cities in California were hit by the mortgage bust, cities in the Midwest suffered with the collapse of the auto industry, and cities in the Northeast were dragged down with the financial services sector.

Just about every revenue stream they relied on went down: Unemployment hit income taxes, the reduced consumption that went with it dried up sales taxes, and falling housing values turned into lower property taxes. As a result, the recession has been, according to the Brookings Institution, a metropolitan crisis as much as a national one. It stands to reason, then, that any real recovery must take root there, too.

Unfortunately, according to an analysis by the research arm of the National League of Cities, history suggests the fiscal reality in metropolitan areas lags 18-24 months behind changes in the national economy. And so while many economists nominally declared the recession over in August of this year, the worst is yet to come in places like Philadelphia.

“That reminds me of a sign I once saw several years ago: ‘Mission Accomplished,’” Nutter said dryly. “That is not what’s happening on the ground.”

The charismatic Democrat delivered the most applause lines at a Brookings conference Thursday on the fiscal plight of cities, speaking on a panel alongside the mayors of San Jose, Mesa, Ariz., and Bowling Green, Ky. Each was introduced as an innovator in the impossible task of delivering the same municipal services everyone expects — public safety, transportation, sanitation, libraries, parks — with less money than ever.

The federal government has clearly calculated that some companies and banks are “too big to fail.” Well, Nutter insisted, cities are too important to fail.

The National League of Cities found that 67 percent of cities have responded to the recession this year with hiring freezes or layoffs. In Philadelphia, the government no longer picks up leaves and this summer opened only 40 of its 76 public swimming pools.

Scott Smith, the Republican mayor of Mesa, has shifted the way his city responds to fire department calls, 70 percent of which have been for emergency medical services and not fires. It doesn’t make sense, he said, to send a $750,000 fire truck and four highly trained firefighters to wrap a sprained ankle (which brings up a quick health care tangent: City governments don’t make for very cost-effective primary care doctors, although that has become one of their roles.)

Smith said he would have had to eliminate every department in his government to leave public safety untouched, and even then he couldn’t have covered his deficit.

“This raises the question: What kind of cities do our citizens want?” he asked. Should the primary role be providing public safety? “Do you want,? he asked, “to have 76 pools and have your streets swept?”

Each mayor lamented the disconnect among citizens who often expect more services than they’re willing to pay taxes to cover.

“People by and large still don’t accept the reality that things have changed,” San Jose Mayor Chuck Reed said. “Mayors know that; people don’t.”

Half the solution, suggested Bowling Green mayor Elaine Walker, is for citizens to adjust their behavior and expectations, too. If the city can’t afford to build a new road, people should consider changing their driving habits. If you want to have a parade now in Philadelphia, Nutter said, you╒re more than welcome to have all the parade you can pay for — yourself.

Each mayor also said he or she had felt only minimal impact from the federal stimulus, which has targeted some funds for specific programs like hiring police officers but which offers little in the way of addressing broad budget gaps. Many city advocates have criticized the recovery act for not more proportionately benefiting large metro areas where a disproportionate percentage of the population lives. (The money is largely doled out by the feds at the state level, not directly to cities.)

Nutter directed his stimulus criticism elsewhere — at the billions spent bailing out banks that in turn have refused to lend anyone money.

“You want to put people to work? Build something in cities,” he said. “Every bridge in the city of Philadelphia actually goes somewhere.”

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