Business research methods and applications

Business Research - "Financial Hardship for most Cities to Grow in '09"

After decades of tremendous successes, the American economy now finds itself at a crossroads. Tormented by an increasing price for crude oil, a weakening dollar in the background of a strengthening euro, its involvement in international wars and the record high federal debt, the harsh effects of the real estate crisis or the insufficient labor force (in both numbers and training, against the aging of the baby boomers which imply increased health care costs), the American entrepreneur finds himself in difficult times. And all these forces generate one more negative implication for the players in the business communities: they increase the costs of cities, while also decreasing their revenues.

An article focused on analyzing the financial difficulties of the American cities was featured on the 15th of September 2008 in Business Week. Andrew Welsh-Huggins, the author of "Financial Hardship for most Cities to Grow in '09" is focused on revealing the challenges faced by the American cities in the current background. His study sample is composed of various cities, including Columbus in Ohio, Palm Bay in Florida or Indianapolis. The cities have been selected based on common features, and have also been analyzed from the lens of common forces which influence them, such as the real estate crisis or the revenues registered by the local offices.

The most relevant similarity between these cities, but also between most American cities, is that only until recently, they used to be registering increasing revenues. Today however, their revenues are decreasing and becoming insufficient to support a sustainable growth and development of the urban structures. In the words of the author, "Cities for a long while now have been on the upside of the curve, generally experiencing pretty good growth in revenues," said Chris Hoene, director of policy and research for the National League of Cities, which collected data from 319 municipalities in its annual survey. "Now we're coming over the top of the curve and heading down the wrong side of it" (Welsh-Huggins, 2008).

Among the numerous features, common to the cities in the analyzed sample, one could point out the following:

Throughout the past year, the city budgets have reduced the spendings in recreational programs and facilities; they reduced the working hours for the public libraries and laid off municipal workers; the agenda is likely to continue throughout 2009

The revenues generated from property taxes have decreased drastically throughout 2008 as a direct result of the devaluing of the houses; 2009 is likely to follow a similar trend

Sales and income taxes are also decreasing, posing even more difficulties in the background of increasing health care, employee, safety and fuel costs

For all cities analyzed, the general economic stability is being threatened and in this context, raising the taxes is not a recommendable course of action. "If you take the premise this is the worst economy in the inland area since World War II, it's not good time to raise fees," said Mayor Ron Loveridge" (Welsh-Huggins, 2008).