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Tuesday, December 28, 2010

Broke-ville, U.S.A. (The deferred impact of recession on city governments)

Today’s New York Times features an important story about Hamtramck, Michigan: A city that has fallen on very tough economic times, and is considering all options. The reason I believe the story to be relevant is that Hamtramck, Michigan could be just one example of an issue that we could surface again and again over the next two to four years… as short-term budget cuts fail to solve long-term financial issues. Cities are facing the perfect storm of reduced revenue from three years of flat retail sales, falling property tax assessments, and shrinking state and federal aid.

Because most consumers live in a municipality of some sort, this story is relevant to consumer trends. Click here to read the full article.

Implications: Whether or not cities begin to claim bankruptcy, they have begun to cut services and will likely need to raise taxes in order to return to functionality, if not solvency.

How will your business be impacted by this chain of events (reduction in services, increase in expenses)? How will your consumers be impacted? Will new business opportunities arise that replace services formerly delivered by a town or municipality?

Mike Anderson

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