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cities and the great Recession Lessons in Dynamic Change and Adaptation michael a. pagano university of illinois at chicago The Great Recession has had a powerful effect on metropolitan regions and on local governments. The real-estate bubble burst in 2007, putting many owners under water (the mortgage exceeded the market value of the home) and the stock markets plummeted in 2008, wiping out hundreds of billions of dollars in investments. Consequently, the unemployment rate in the nation soared quickly to over 9 percent and has declined ever-so-slightly over the last several years and appears stuck at around 7–8 percent, well above the pre–Great Recession levels of 4–5 percent. Job loss in 2008 and 2009 wracked cities and urbanized regions as nearly all of the loss was in the private sector, down by some 8 million jobs; since then, nearly 5 million private-sector jobs have been created, benefiting the nation’s metropolitan regions. At the same time, however, job loss in the local government sector has worsened. The U.S. Bureau of Labor Statistics indicated that local government employment at the end of 2012 shrank by 577,000 employees from the peak of 14,610,000 reached in 2008.1 Local governments, including school districts, cities, and counties—which generated 75 percent of their total tax revenue from a tax on real-estate values—in particular are hard-pressed to recoup the losses of the last five years as the real-estate market is only recently showing signs of recovery.2 Fortunately, the real-estate sector may be stabilizing—and mortgage rates remain at historically low rates, benefiting the housing market—but property tax collections by cities, counties, school districts, and townships lag the “real-time” market by two to three years and sometimes longer. Consequently , cities’ capacities to provide a level of service that citizens enjoyed in, say, 2006, may not be reached for several more years, if ever.3 4 michael a. pagano To complicate the growth challenges of metropolitan regions, estimates of basic infrastructure needs total in the trillions of dollars and pension obligations for local governments, as well as health benefits for retired municipal employees, reach unfathomable heights.4 A recent study on the unfunded liability of the municipal pension systems and the unfunded portion of “other post-employment benefits” (typically including health care costs) estimated that the unfunded liability for 61 cities reached a staggering $217 billion.5 In other words, cities labor under a creaky tax regimen today and for the foreseeable future just at the same time that pension obligations, health costs for city retirees, and the “life” of infrastructure assets are reaching critical needs. The quality of life in urban regions depends on the capacity of cities and metropolitan regions to respond to the environmental, infrastructural, organizational , and human challenges of the global era. Cities and urban regions that are resilient enough to cope with the challenges posed both by unexpected shocks and longer-term trends will be positioned to provide adequately for the health, safety, and well-being of their citizens. These challenges require the application of human and financial capital, innovation and entrepreneurship, a vibrant private sector, and the involvement of government and nonprofit institutions in governance and service delivery. When natural disasters strike (e.g., Hurricane Katrina, Super Storm Sandy, and the Blizzard of 2011, all in a series of “storms of the century”) or when the economic swings of the business cycle hit cities’ foundations (e.g., the Great Recession, the dot-com bust), the preponderance of cities are resilient enough to survive and even thrive. Cities “come back,” they “rebound” and “adapt.”6 They age and they also reinvent themselves, and a very few do indeed become ghost towns and die. Metropolitan regions and cities, the engines of the national and global economies, are straining under the confluence of these critical factors. Private -sector employment, the growth of private-firm formation, the training of an appropriately skilled work force, and the linking of the component parts of a sustainability economy require an adequate delivery of municipal services. The health and welfare of the nation depends on the strength and resilience of its cities.7 It hasn’t been thIs bad sInCe . . . “Not since the Great Depression” is the opening line to many contemporary analyses of unemployment, the fiscal position of cities and counties, the fraying of social safety nets, increased poverty levels, declining housing markets, and crushing personal and commercial bankruptcies...

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