Contact: 
Gerald Miller, About this study (973) 353-5093 ext 21
Dennis Gale, About the Cornwall Center (973) 353-1750 

Release Date: October 4, 2001 

As the nation's economy slows, local governments have begun to struggle with the threat of budgetary shortfalls. How well equipped are Newark and Jersey City, for example, to weather the fiscal storms? And how well do they compare with similar cities in the northeastern and midwestern regions of the nation? According to a new study released by the Joseph C. Cornwall Center for Metropolitan Studies at Rutgers-Newark, there is cause for concern. The author, Public Administration Professor Gerald J. Miller, examined public financial data for 11 cities for the years 1998 and 1999. In addition to Newark and Jersey City, the study examined Akron, Baltimore, Buffalo, Cincinnati, Cleveland, Pittsburgh, Rochester, Toledo and Yonkers. All of these cities share several characteristics: they are among the nation's older central cities and all are located in the nation's frostbelt. They are moderate-sized with populations ranging from 196,000 (Yonkers) to 651,000 (Baltimore). And their economies were once dominated by manufacturing industries. All have double-digit poverty populations. Unemployment in these cities ran in the four-to-nine percent range. And all but two experienced population losses from 1990 to 2000. 

Using standard measures employed by public finance professionals, Miller found both good news and bad news: 

NEWARK 

The Good News: Currently, Newark has a relatively moderate overall tax burden, an indicator of relatively good financial condition. Moreover, the city's tax base has diversity, giving it the capacity to weather economic change better than any other city in the comparison group. Too, the lack of large, long-term debt commitments - such as those in Pittsburgh - yields flexibility for Newark in overcoming the immediate pressures from problems such as unemployment, poverty, and population loss. A relatively high reduction in the city's unemployment rate and a near-end to population losses offers hope for Newark's future fiscal prospects. 

The Bad News: Newark's fiscal base leaves much room for improvement. In almost every case, Newark ranked at the bottom of the eleven cities in the strength of its revenue base. The tax base is concentrated in too few tax payers and its collection rate is relatively low, both indicators of insecure financial conditions. Newark is using a greater share of its property tax values than any of the 11 cities except Yonkers. Furthermore, Newark is more dependent on intergovernmental revenues (i.e. revenue from outside its own borders, such as county, state, and federal grants and entitlements) than any of the comparison group cities except Cleveland. As Newark continues to press forward in pursuit of its renaissance, it will be critical for leaders in both the public and private sectors to find new ways to stabilize and enhance the city's fiscal base. 

JERSEY CITY 

The Good News: Among the 11 cities in our study, Jersey City is comparatively wealthy. The city's disposable income per capita is the fourth highest, and it has a high collection rate for its property tax. Jersey City has a moderate direct and overlapping tax burden and does not rely as much as most other cities on intergovernmental revenues (i.e. revenue from outside its own borders, such as. county, state, and federal grants and entitlements). Jersey City is less vulnerable than the other cities if a major revenue source should move away. The city's unemployment rate showed the third highest decline and its population increased at a higher rate than any of the comparison cities, offering optimism for its fiscal future. 

The Bad News: Jersey City's fiscal commitments are high as are its direct debts. Overlapping debt (debt held by the city, county, school districts and other levels of government) is also high. In all, the city must continue to find resources to prevent its immediate and long-term commitments from becoming overwhelming. It appears that Jersey City has achieved its turnaround at a high cost. While greater financial and debt liabilities may be a necessary cost of revitalization, the city must steer clear of substantial new financial commitments to avoid undermining its gains. 

ALL CITIES 

Toledo, Akron and Pittsburgh had the lowest revenue burdens per capita of the 11 cities, while Jersey City, Baltimore and Yonkers had the highest. 

Among the least dependent on intergovernmental revenues (i.e. revenue from outside its own borders, such as county, state, and federal grants and entitlements) were Baltimore and Akron. Yonkers was by far the most dependent, followed by Buffalo and Newark.

Newark, Jersey City and Yonkers had the most diverse revenue base while Toledo, Cleveland and Akron had among the least diverse. In other words, the Ohio cities were heavily dependent on a single revenue source (most likely the income tax). 

Cincinnati, Toledo and Newark had the lowest debt per resident (per capita). Jersey City, Rochester and Pittsburgh had the highest. Of all the cities, only Jersey City had exceeded its own legal debt limit. Pittsburgh and Yonkers, in particular, struggle with debt; the two cities far exceeded the others in terms of debt as a proportion of the value of all taxable property.

The four Ohio cities in the study (Akron, Toledo, Cincinnati, Cleveland) demonstrated the best property tax collection rates. The remaining cities ranged well below these four in the efficiency of their revenue collection procedures. 

Poverty rates in all of the cities in 1995 (the latest data available until updated figures are released by the Census Bureau) were high. But Newark, Jersey City, and Yonkers - all in the New York City region - showed the greatest decline in unemployment and the best record in reducing 'population loss. These trends offer hope that all three cities can strengthen their fiscal base. 

Graph1 (Illustrative Graph): Total Revenue
                                          Population

Graph 2 (Illustrative Graph): Intergovernmental Revenue
                                            Total Revenue

(The graphs are in Portable Data Format (PDF). If you do not have Adobe Acrobat Reader, please visit the Adobe web site to obtain the latest version.)

Excerpts from the tables and graphs in Professor Miller's study are included herein. Anyone interested in acquiring the complete study, please see our Publication Series or contact:

The Joseph C. Cornwall Center for Metropolitan Studies 
101 Warren Avenue, Smith 236 
Rutgers-Newark 
Newark, N.J. 07102 
973-353-1750 
accousti@andromeda.rutgers.edu

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