City governments, reporting they already are feeling pinched by the Persian Gulf crisis, are saying the cost of energy is the single area that has worsened most dramatically during the last year.

In a survey released yesterday by the National League of Cities, 269 municipal officials placed economic problems -- including housing affordability and the general cost of living -- at the top of their lists of concerns. A significant number of officials also said drug-related problems were continuing to worsen.

"The statistical indicators may say we are heading into a recession, but in a large number of places, that's not news," said Donald J. Borut, the executive director of the National League of Cities. "It's current events."

Officials, who had seemed more optimistic in last year's survey about local concerns such as homelessness, unemployment and mortgage conditions, changed their minds this year, with a larger number saying that all three problems are getting worse.

When asked which conditions had deteriorated the most during the past five years, however, drugs topped the list, followed by crime and infrastructure problems. Forty percent of the respondents said they will be forced to reduce service levels next year if they do not increase taxes.