The effects of the recession will continue to drag down city budgets beyond 2010, according to a survey by the Washington-based National League of Cities (NLC). The situation reflects the typical 18-month time lag seen in the effects that economic shifts have on city budgets that results from the collection of tax revenues only at certain times of the year, according to NLC.

The report, "City Fiscal Conditions in 2009," found that cities face significant budget gaps this year because of a 1.3 percent decline of income tax and a 3.8 percent decrease in sales tax collections. Those taxes are typically the earliest source of city revenue to decline as job losses increase and consumer purchases decrease, according to NLC. Property taxes, which make up the bulk of city revenue nationwide, are beginning to slow, growing only 1.6 percent as real property assessments are adjusted to reflect declining housing values.

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