U.S. cities face deepening fiscal problems

WASHINGTON (Reuters) - Most U.S. cities face worsening economies, and local governments will have to cut personnel or stop construction over the next few years, according to a survey released by the National League of Cities on Monday.

Three in four city officials reported that overall economic and fiscal conditions have worsened over the past year, the league reported, and more than six in 10 said poverty has intensified.

Almost all -- 90 percent -- said unemployment was a problem for their communities and that joblessness has mounted over the last year.

"City budget shortfalls will become more severe over the next two years as tax collections catch up with economic conditions," the report said. "These will inevitably result in new rounds of layoffs, service cuts, and canceled projects and contracts."

Already, 71 percent of cities have cut personnel and 68 percent have delayed or canceled infrastructure projects, it found.

The worsening picture at the local level is the mirror opposite of what has been happening nationally, where gross domestic product, the broadest measure of the country's economy, was up 3.2 percent in the first quarter of the year and thousands of jobs have been added in the last three months.

Local and state economies take more time to recover from a recession than the national economy because demands for public assistance rise just as tax revenue falls.

The survey was conducted from February through April. But just last week there were new signs of the toll taken on urban areas by the longest and deepest economic downturn since World War Two.

The city of Central Falls, Rhode Island, was placed in temporary receivership on Wednesday, after the city petitioned for help in a debt restructuring after being buffeted by state budget cuts, weak revenues and the ballooning cost of pension benefits for its workers.

Also last week, Philadelphia passed a budget that will require laying off 300 people, while the mayor of Washington, D.C., took on the city council over proposed budget cuts that he said "will devastate an already under-resourced city."

The National League of Cities, which advocates for 19,000 cities, towns and villages, said, "Many cities have also taken more unprecedented measures such as cuts to public safety, reductions in health-care benefits and revisions to union contracts."

"Unfortunately for cities, the fiscal difficulties they are facing appear likely to continue beyond the current year," the report found.

(Reporting by Lisa Lambert; Additional reporting by Ciara Linnane in New York and Jon Hurdle in Trenton, New Jersey; Editing by Leslie Adler)