America's distressed cities will have to depend less on the federal government and more on their own resources over the next two years, a Treasury official told business executives yesterday.
Speaking at a seminar on urban business sponsored by the Conference Board, Donald Haider, deputy assistant secretary for state and local finance, warned that the last Congress' decision to cut economic stimulus programs is "indicative of the shifting national mood" and probably that of the next Congress.
With the slowing of federal aid and the economy plus the evaporation of state operating surpluses, cities face the need for "innovation amidst scarcity," he said.
Haider urged the business leaders to push the idea of a national development bank as a way of rebuilding private sector economies of distressed areas. President Carter supported the bank in his National Urban Policy, but no legislative action was taken on the proposal in the last session.
An as yet unreleased study of financial conditions in 66 U.S. cities by the First National Bank of Boston and the accounting firm Touche Ross shows that the vast majority are in better economic balance than is widely believed. The trouble is with their managment.
James M. Howell, the bank's senior vice president and chief economist, told the conclave that seven of the cities are extended to the limits of prudence. They are Buffalo, Boston, Hartford, Stamford, Fresno, Baltimore and Richmond. Whereas Stamford can be expected to get help from the many businesses moving there, the others have, in his words, "used up all their options" as far as high taxes, debt and intergovernmental transfers are concerned.
He characterized these cities as industrially mature. The ratio of public employes to private sector workers in these cities is double that of young and growing cities. The study also found that taxes dont necessarily rise as population increases in young and growing cities the way they do in older cities.
Spending by the municipality continues to rise in old cities even when private spending declines. For example, in young cities per capita spending by the city is $312, compared with $68 by privat enterprise. In fast growing cities, the ratio is $338 public to $242 private. But in "terminal" cities, public spending outstrips private spending $722 to $133 per person.
Howell said the study concluded that intergovernmental transfer payments were more responsive to deteriorating social conditions than to deteriorating economic conditions.