CULVERHOUSE COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Summer 2000 / Volume 69, Number 3
In this issue:
Economic Outlook: July 2000
3
The Existing Home Market in Alabama
Just Keeps Rolling Along
5
Alabama Retail Sales, 1998-1999
8
Census of Retail Trade: Comparative
1992 and 1997 Alabama Retail Trade
9
A Look at Medium-Size Alabama City Budgets
10
THE UNIVERSITY OF
ALABAMA
B U S I N E S S
This report is also available in PDF format on the
Internet at
http://cber.cba.ua.edu
The Center for Business and Economic Research has
available at this site downloadable data on various
topics including population, retail trade, and
employment. Research briefs are also available.
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Alabama Business
Associate Dean for Research
and Technology
Carl Ferguson
Associate Director
Samuel Addy
Assistant Directors
Deborah Hamilton
Annette Watters
Authors
Ahmad Ijaz
Leonard Zumpano
Carolyn Trent
Samuel Addy
Graphic Design
Sherry O’Brien
Addtional Contributors
Holly Clark
Kathryn Rivers
Sunja Park
Alabama Business is a quarterly publication of the
Center for Business and Economic Research,
Culverhouse College of Commerce and Business
Administration, The University of Alabama.
Articles reflect the opinions of the authors, but not
necessarily those of the staff of the Center, the
faculty of the Culverhouse College of Commerce, or
the administrative officials of The University of
Alabama.
All correspondence should be addressed to: Editor,
Alabama Business, Center for Business and Economic
Research, The University of Alabama, Box 870221,
Tuscaloosa, Alabama 35487-0221.
For information on the Center for Business and
Economic Research, the Culverhouse College of
Commerce and Business Administration or The
University of Alabama:
http://cber.cba.ua.edu
http://www.cba.ua.edu
http://www.ua.edu
Economic Outlook:
July 2000
national average of 4.2 percent and the Southeastern
average of 4.3 percent for the same period. The
forecast for Alabama calls for 3.4 percent growth in
personal income for 2000.
Alabama
Alabama’s gross state product is expected to increase
by 3.4 percent in 2000. The biggest risk for the state
economy is that retailing is driving our current
economic growth. If consumer spending significantly slows down, the state’s economy could falter.
Higher prices, particularly energy prices, and higher
interest rates could certainly put a damper on
consumer spending.
Employment. From May 1999 to May 2000,
Alabama added approximately 39,000 new jobs. This
number also includes temporary workers hired to
conduct the census. Although these temporary
employees had been on the employment rolls for
only a couple of months by the end of May, they
were the reason why the government sector ended up
being the highest contributor to the state’s job
growth over the entire May-to-May period,
accounting for almost 34 percent of all net new jobs
added.
Retail trade and services were responsible for almost
all the rest of the new jobs created. From May 1999
to May 2000, services and trade accounted for about
57 percent of total new jobs. The trade sector added
12,100 and services added 10,400 new jobs. These
increases were slightly below the numbers added in
these sectors the previous year.
Manufacturing industries in the state lost 3,700 jobs.
There were 3,300 jobs lost in industries producing
nondurable goods and about 400 jobs lost in durable
goods production firms. The construction sector
also showed signs of weakness. From May 1999 to
May 2000, construction-related businesses added
3,700 new jobs, below the 6,100 jobs created in the
previous May-to-May period.
Employment in Alabama is expected to grow about
1.5 percent during 2000, adding a little over 28,000
net new jobs for the year as a whole. Most of these
jobs will be in services and retail trade. Retail trade is
expected to add 10,000 new jobs and services close to
12,000. The slower growth in retail trade is due to
declining consumer spending. Services-related
businesses are expected to pick up slightly from the
previous year. The manufacturing sector is expected
to lose approximately 2,500 jobs.
Income. Total personal income in Alabama has not
kept pace with income growth in the United States
or other Southeastern states. From 3rd quarter 1998
rd
to 3 quarter 1999, the most recent dates for which
the data are available, personal income in Alabama
increased by 3.5 percent, significantly below the
Selected Southeastern States
States in the southeastern region, in this case
Alabama, Florida, Georgia, North Carolina, South
Carolina, and Tennessee, are expected to add
535,000 new jobs in 2000. That is an increase of
about 2.5 percent over the previous year, but below
the 3 percent achieved in 1997.
Employment. Almost 42 percent of these jobs will
be in Florida, with North Carolina and Georgia
accounting for another 40 percent. Florida alone will
add 225,000 new jobs this year. Most of these jobs
will be in services-related businesses, as manufacturing accounts for only 8 percent of Florida’s
economy. Georgia is forecasted to add about
136,000 new jobs in 2000, an increase of almost 3.5
percent, but below the 4 percent job growth
experienced in 1999. Although manufacturing in
Georgia is not expected to be strong this year, some
job growth is expected in automobile-related
production, primarily due to strong automobile sales
and new production coming online related to the
Honda plant in Alabama. North Carolina, where
manufacturing accounts for almost 30 percent of the
state’s economy, is expected to add about 73,000 new
jobs, very slightly below the 2 percent rate of
employment growth last year.
South Carolina and Tennessee are expected to add
about 40,000 and 35,000 jobs, respectively. Most of
the slowdown in manufacturing in North and South
Carolina and Tennessee is expected to be offset by
improvement in exports-related manufacturing.
Exports account for a little over 9 percent of the
economy of each of these three states, significantly
above the 6 percent for Alabama and Georgia and
the 8 percent for Florida.
3
Gross State Product. Georgia is expected to have
the fastest growing gross state product (GSP) in the
region. Georgia’s GSP will increase by close to 5
percent in 2000, followed by Florida at 4.2 percent,
and North Carolina at 4 percent. Tennessee’s GSP
will grow 3.4 percent and South Carolina’s growth
will be 3.5 percent.
United States
Mixed Signals. Is the U.S. economy really slowing
down or are we seeing just a temporary blip,
particularly in consumer spending? Although
current economic conditions are favorable for a
sustained slowdown, in the second quarter the
economy actually grew by 5.2 percent. Growth for
the first quarter was revised downward to 4.8 percent.
However, we may not see consumer spending
making a strong turnaround in the third and fourth
quarters, as happened in 1998 and 1999. Present
economic indicators are sending some very mixed
signals. Although new housing starts have declined
slightly, sales of existing homes remain strong. Retail
sales statistics point toward a slowdown in consumer
spending; however, consumers still feel upbeat about
the economy, as evidenced by a sharp increase in the
consumer confidence index.
Consumer spending increased by only 3 percent in
the second quarter of 2000, versus a 7.6 percent
increase in the previous quarter and a 5.1 percent
increase during the second quarter of 1999. One of
the most significant declines was in spending on
durable goods. Spending on durable goods declined
by 3.9 percent, versus an increase of 23.6 percent
during the last quarter and an increase of 9.1 percent
during second quarter 1999.
Energy prices. Oil prices have increased from
approximately $15.00 per barrel to around $29.00
per barrel, a jump of 87.3 percent in the first half of
the year over the same period last year. Higher
energy prices act very much like a tax on consumers,
reducing their purchasing power. Eventually the
effects of higher energy prices work their way
through to other products, either through increases
in production costs or increases in transportation
costs. It takes 15 to 18 months for oil prices to begin
affecting the economy, primarily because all large
consumers of energy either hedge, or buy futures or
forward contracts for their oil purchases. There is a
good chance that the economy may continue its
4
current slow upward pace at least through the end of
this year. The effects of high energy prices may not
be very visible until the first half of 2001.
Trade Deficits. Although the United States is
expected to run a trade deficit of approximately
$380 billion in 2000, the dollar still remains strong
against the currencies of major trading partners.
Technically, a trade deficit of this magnitude should
lower the exchange rate value of the dollar. A trade
deficit increases the supply of U.S. dollars in world
markets, resulting in a decline in the currency’s
value. However, the dollar has remained strong, and
a strong dollar has affected U.S. exporters by making
their products expensive in world markets.
One of the reasons for the strong dollar is a
significant increase in inflow of dollars into U.S.
equity markets. The high interest rates in the United
States compared to other countries have attracted
investment from abroad, particularly from Japan,
where interest rates are practically at zero percent.
This large inflow of funds from abroad has kept the
U.S. dollar strong, resulting in high trade and current
account deficits. However, increased energy and
import prices could reduce some of the trade deficit.
Although there is no fundamental reason for the
economy to dip into an outright recession, economic
growth is expected to remain subdued for the
remainder of the year, mainly due to a slowdown in
consumer spending. Consumer spending accounted
for almost 86 percent of the economic growth in
1999, and is expected to account for about 70
percent in 2000. Consumer spending is expected to
increase around 3.4 percent for the remainder of the
year. Lower stock market valuations have also
contributed to slower consumer spending by
decreasing the market’s “wealth effect.” New
housing starts will average around 1.6 million in
2000, below the approximately 1.7 million new starts
in 1999. Employment growth for 2000 will be
around 2.1 percent, slightly below the 2.3 percent
rate seen last year. The nation will add approximately 2.7 million new jobs.
The forecast for the U.S. economy calls for a 5
percent average annual rate of growth for 2000.
Ahmad Ijaz
The Existing Home
Market in Alabama Just
Keeps Rolling Along
The existing home market in Alabama continued to
expand through the first half of the year, with the
number of homes sold increasing every month
except April. June continued the expansionary
trend, with total homes sold increasing from 3,347 in
May (revised upward from 3,332) to 3,664 in June,
an increase of almost 10 percent from the previous
month. Average days on the market, as reported by
local area associations of REALTORS®, declined
slightly, from 146 days in May to 140 days in June.
Average selling prices, however, declined in June by
almost $8,800. In contrast, home prices rose almost
$10,000 between April and May. Although there is
significant month-to-month variation in home
prices, overall, housing prices are about $4,000
higher than last year at this time. In June housing
inventories declined slightly from the previous
month; however, not too much should be read into
the data on housing supply.
Existing home sales also increased throughout most
of the rest of the country. The National Association
of REALTORS® reported that home sales in the
United States rose by 2.8 percent in June. Previously, many analysts were predicting a 2 percent
fall in home sales. Existing single-family home sales
actually set a 10 month high in June, increasing to a
seasonally adjusted rate of 5.23 million units. For
the year, however, U.S. home sales are still down
from a year ago.
It is worth noting that the South was the only region
of the country that reported an increase in housing
starts in June, the second month in a row that
housing starts increased. Although June housing
permit data for Alabama were not available at the
time this report was written, F.W. Dodge reported
that contracts for future residential construction in
Alabama declined in June by $82 million.
The increase in the number of homes sold in
Alabama was broad-based. In June, 16 of the 20
reporting associations recorded increases in existing
home sales. The Tuscaloosa Association of
REALTORS® reported that the number of homes
sold in June, 149, set an all-time record. For the
year, home sales in Tuscaloosa are up by 123 units
over last year at this time. For the four locations
reporting a decrease in home sales for June, the size
of the decline was slight.
Average selling price rose in eight of the 19 reporting
locations. Of those locations recording falling
prices, Eufaula reported the greatest decline in price
of $55,000, followed by Baldwin County, where
existing home prices fell by almost $31,000 in June.
These sizeable declines largely explain why the
statewide selling price fell last month. In contrast,
Tuscaloosa reported the largest increase in existing
home prices, which rose by almost $10,000 during
the same period.
Overall, these numbers suggest that the existing
home market in Alabama remains strong. Rising
incomes, low unemployment, and high consumer
confidence continue to power this market, although
higher mortgage interest rates seem to have cut into
the new home market. Since the Federal Reserve
decided to hold the line on further interest rate
increases, at least in the near term, mortgage rates
have moderated and are now around eight percent
for 30 year fixed rate financing. However, given the
Fed’s recently expressed concern that better than
expected second quarter growth could be inflationary, future rate increases are not out of the
question. Future interest rate increases and a sharp
decline in housing inventory could put upward
pressure on prices. Barring those events, the housing
market in Alabama for the second half of the year
should be a repeat of the first half of 2000.
Leonard V. Zumpano
5
Alabama Home Sales Report
AVERAGE STATEWIDE STATISTICS
Current Month
June-00
Total Homes Sold
3,664
Average Selling Price
113,264
Average Days on Market
140
Total Homes Listed
23,174
Last Month
May-00
3,347
122,058
146
23,256
Last Year
June-99
3,555
116,517
159
YTD
June-00
17,296
114,250
144
YTD
June-99
16,925
110,279
151
Local Statistics
These statistics reflect residential sales of houses, condominiums, and townhomes by REALTORS® in the
following local boards/associations of REALTORS®.
TOTAL HOMES SOLD
BOARD
Baldwin
Birmingham
Calhoun County
Cullman
Dothan
Enterprise
Eufaula
Gadsden
Huntsville
Jackson County
Lake Martin
Lee County
Marshall County
Mobile County
Monroe County
Montgomery
Morgan County
Muscle Shoals
Phenix City
Tuscaloosa
Current Month
June-00
214
1,183
106
37
79
30
16
61
444
3
19
88
82
470
17
390
125
95
56
149
Last Month
May-00
199
1,078
96
35
67
38
7
67
430
10
16
68
81
437
15
318
114
110
44
117
Last Year
June-99
158
1,132
76
50
78
38
25
57
440
10
29
87
80
446
14
430
164
113
30
98
YTD
June-00
994
5,418
497
165
369
182
59
284
2,342
28
119
319
397
2,363
62
1,778
603
472
260
585
YTD
June-99
831
5,342
433
192
392
202
87
212
2,168
76
103
323
395
2,416
73
1,931
531
522
234
462
TOTAL HOMES LISTED
BOARD
Baldwin
Birmingham
Calhoun County
Cullman
Dothan
Enterprise
Eufaula
Gadsden
Huntsville
Jackson County
6
Current Month
June-00
2,968
6,176
805
1,089
730
N/A
75
701
2,558
138
Last Month
May-00
3,119
6,514
784
632
727
N/A
70
733
2,576
125
BOARD
Lake Martin
Lee County
Marshall County
Mobile County
Monroe County
Montgomery
Morgan County
Muscle Shoals
Phenix City
Tuscaloosa
Current Month
June-00
275
364
791
588
105
2,488
896
1,015
454
958
Last Month
May-00
339
374
778
620
113
2,438
900
1,023
450
941
AVERAGE SELLING PRICE
BOARD
Baldwin
Birmingham
Calhoun County
Cullman
Dothan
Enterprise
Eufaula
Gadsden
Huntsville
Jackson County
Lake Martin
Lee County
Marshall County
Mobile
Monroe County
Montgomery
Morgan County
Muscle Shoals
Phenix City
Tuscaloosa
Current Month
June-00
183,665
150,423
102,222
105,476
106,022
80,616
81,000
89,989
133,678
97,333
174,833
130,427
97,530
118,696
78,943
123,613
100,188
101,365
76,912
132,344
Last Month
May-00
214,610
151,636
95,212
99,953
99,944
94,245
136,571
104,512
129,351
87,790
166,629
153,101
101,400
128,455
81,695
121,098
112,880
116,968
121,838
123,275
Last Year
June-99
161,043
158,750
89,374
97,952
137,168
87,695
85,746
94,076
133,127
111,200
190,157
126,090
95,968
119,781
76,794
121,727
116,144
112,418
83,314
131,821
YTD
June-00
194,646
149,270
94,067
100,429
100,460
82,810
104,764
88,246
121,458
83,187
154,195
137,137
105,484
119,542
95,671
115,724
109,693
106,907
96,944
124,371
YTD
June-99
165,163
150,231
92,841
110,367
109,023
89,911
85,828
90,682
121,562
84,740
160,285
128,763
92,268
112,923
74,211
115,845
106,803
99,441
88,344
126,346
Last Month
May-00
211
90
167
143
143
286
33
154
130
119
218
159
142
109
176
120
134
109
135
134
Last Year
June-99
151
N/A
167
142
132
316
N/A
159
163
223
167
107
131
102
306
95
99
122
140
146
YTD
June-00
195
N/A
173
110
156
201
N/A
165
130
127
193
147
140
107
120
106
142
121
113
139
YTD
June-99
128
N/A
147
137
144
276
N/A
163
179
149
178
147
145
102
222
107
109
117
128
145
AVERAGE DAYS on the MARKET
BOARD
Baldwin
Birmingham
Calhoun County
Cullman
Dothan
Enterprise
Eufaula
Gadsden
Huntsville
Jackson County
Lake Martin
Lee County
Marshall County
Mobile
Monroe County
Montgomery
Morgan County
Muscle Shoals
Phenix City
Tuscaloosa
Current Month
June-00
197
87
129
94
154
193
182
171
131
205
120
138
112
104
182
95
135
114
116
135
NOTE: This representation is based in whole or in part on data supplied by the reporting boards/associations
of REALTORS® or their Multiple Listing Service. Alabama Real Estate Research and Education Center does
not guarantee and is in no way responsible for its accuracy. Any market data maintained by the Center does
not necessarily include information on listings not published at the request of the seller, listings of brokers who
are not members of a local board/association or MLS, unlisted properties, rental properties, etc.
Historical Monthly Housing Statistics are available on the web at Alabama Real Estate Research and Education
Center’s homepage www.arerec.ua.edu.
7
Alabama Retail Sales,
1998-1999
Alabama retailers rang up taxable sales totaling $4.0
billion in December 1999, a 4.9 percent increase
over the $3.81 billion tallied in December 1998.
Nationally, monthly retail sales rose 11.0 percent for
December 1999 compared to December 1998. In
Alabama, December sales gains were strongest in
apparel, up 14.6 percent; automotive, which gained
7.2 percent; drug stores, with sales climbing 16.0
percent; and miscellaneous retail, where sales rose
13.6 percent. December 1999 sales at general
merchandise stores were 5.6 percent higher than a
year ago.
For 1999 as a whole, Alabama retailers reported
$39.7 billion in sales, up 4.7 percent from 1998.
However, Alabama’s annual increase was just over
half the national gain of 9.1 percent. Statewide,
apparel sales showed the sharpest rise during the
year, climbing 12.4 percent. Automotive sector sales
posted a gain of 8.3 percent during 1999, while sales
of lumber and hardware rose 8.2 percent. The
automotive and lumber and hardware sectors were
among the U.S. retail sales growth leaders during
1999, with increases of 11.8 and 10.6 percent,
respectively.
Across Alabama, retail sales in the miscellaneous
category were up 9.9 percent in 1999. But sales at
eating and drinking places increased a modest 3.5
percent for the year, while general merchandise sales
rose just 3.2 percent. Reported food store sales
declined by 1.4 percent for 1999 compared to 1998.
Alabama Taxable Retail Sales by Kind of Business
(millions of current dollars)
December
1999-
December
1998-
Percent
Change
Dec98-Dec99-
1998Total
1999Total
Food
499
494
0.9
5,688
5,607
-1.4
General Merchandise
853
808
5.6
5,933
6,125
3.2
Apparel
245
214
14.6
1,470
1,653
12.4
Furniture
227
221
2.7
1,881
1,907
1.4
Automotive
606
566
7.2
7,183
7,779
8.3
23
23
-0.5
286
276
-3.4
Lumber and Hardware
320
308
4.2
3,714
4,016
8.2
Eating Places
321
320
0.3
3,659
3,788
3.5
44
38
16.0
357
361
1.0
Miscellaneous Retail
439
387
13.6
2,889
3,176
9.9
Nonretail and Unclassified
422
434
-2.8
4,836
5,003
3.4
4,000
3,812
4.9
37,895
39,690
4.7
Gasoline Service Stations
Drug Stores
Total
Source: Center for Business and Economic Research, The University of Alabama, July 2000.
Note: Monthly total retail sales for Alabama MSAs and counties can be found on the CBER web site--select
E-Data, then Alabama Business, to access monthly files in .prn or .xls format.
8
Percent
Change
1998-99-
Alabama’s retail mix shifted slightly during 1999.
Strong growth in automotive sales boosted the
sector’s share to 19.6 percent of all retail sales, up
from 18.9 percent in 1998 and 17.3 percent in 1990.
General merchandise stores pulled in 15.4 cents of
every dollar spent at retail in Alabama in 1999, while
food stores took in 14.1 cents, down from 15 cents
in 1998 and 18.4 cents in 1990.
CBER calculates monthly retail sales from reports
received by the Alabama Department of Revenue.
A periodic disaggregate survey of multi-county firms
is administered by the Department of Revenue to
collect information needed to allocate sales to
individual counties. CBER’s county-level data series
is currently based on the 1996 survey. Beginning
with January 2000 data, results of a 1999 survey will
be incorporated. More frequent disaggregate surveys
are planned, enabling a more accurate and continuous county-level retail sales series. State-level
Census of Retail Trade:
Comparative 1992 and
1997 Alabama Retail
Trade
Comparing SIC-based results of the 1992 and the
1997 Census of Retail Trade from the U.S. Census
Bureau shows the strength of Alabama’s retail sector.
During these five years, Alabama outpaced the
nation in overall growth of retail establishments,
employees, and sales. According to survey results,
Alabama’s landscape was dotted by 25,586 retail
businesses in 1997, an increase of over 1,500 since
1992. The state’s 6.3 percent gain in the number of
establishments compares to a U.S. gain of 2.3
percent. Retail employment in Alabama grew to
342,835 in 1997. The addition of over 73,000 retail
workers between 1992 and 1997 marked a 27.1
percent increase, well above the 15 percent national
average increase. Alabama retail sales rose 35.6
percent during this period, slightly above the U.S.
gain of 34.4 percent.
Across Alabama, the number of businesses selling
new and/or used cars rose to 1,106 in 1997, a 25
percent increase over the 885 car dealers in the state
in 1992. The number of eating and drinking
Retail Sales Share by Kind of Business, 1999
Gen. Merchandise
15.4%
Apparel
4.2%
Furniture
4.8%
Automotive
19.6%
Food
14.1%
Gas Serv. Stations
0.7%
Drug Stores
0.9%
Nonretail & Unclassified
12.6%
Lumber & Hardware
10.1%
Misc. Retail Eating Places
9.5%
8.0%
Source: Center for Business and Economic Research, The University of Alabama.
retail sales calculations are not affected by
disaggregation.
Carolyn Trent with assistance from Kathryn Rivers
establishments jumped by 812 to 6,140, a 15.2
percent gain, while the number of businesses selling
furniture, furnishings, and consumer electronics and
appliances rose to 2,043, an 11.9 percent increase.
Slight declines were reported in the number of food
stores, drug stores, and apparel stores.
Many new Alabama retail employees hired between
1992 and 1997 found themselves working at eating
and drinking places, where the number of full- and
part-time employees increased by 32,049; or at
general merchandise stores, which added 14,203
workers. Sales gains for the period 1992 to 1997
were strongest in the lumber and hardware and
automotive sectors, topping 50 percent.
Data from the 1997 economic censuses were the first
based on the North American Industry Classification
System (NAICS) rather than the Standard Industrial
Classification (SIC). To permit comparison with the
1992 economic census, the Census Bureau has
released summary state and national statistics for
1997 recalculated using SIC categories. These
comparative statistics for all industry categories can
be found at on the Internet at www.census.gov/
epcd/ec97sic. The Census Bureau’s economic
censuses are based on a survey of firms in each
industry. Thus, these retail data may differ from
retail sales data tabulated by CBER.
Carolyn Trent
9
A Look at Medium-Size
Alabama City Budgets
With the current economic expansion providing
national and state budget surpluses, how are
Alabama cities faring? Where do cities get their
money, and how do they use it? Are most city
budgets about the same, or are some very different?
These questions can be answered by examining city
financial reports, but for a state with 444 cities and
towns it is a Herculean task. The task is complicated
by the uniqueness of each city, which can be seen in
differences in geographic location, resources, socioeconomic, and demographic factors. However,
grouping the cities makes the task somewhat easier.
This article looks at Alabama’s medium-size
cities—those with 10,000 to 100,000 inhabitants.
Population estimates for Alabama cities and towns in
1998 ranged from seven people in Gantts Quarry to
252,997 in Birmingham. Four cities, Birmingham,
Mobile, Montgomery, and Huntsville, had populations of more than 100,000. Forty-nine cities were
between 10,000 and 100,000, with nine having
populations of more than 30,000. There were 179
cities and towns with populations of 1,000 to 10,000,
and 212 towns with less than 1,000 inhabitants. We
examined fiscal year 1998 city financial reports for a
sample of eleven medium-size cities, using revenue
and expenditure classifications for governmental
accounting, auditing, and financial reporting.
About half of Alabama’s medium-size cities had
budget surpluses in 1998. However, those cities with
red ink had deficits that were much deeper than the
heights of the surpluses of the other cities. These
deficits seem to be the result of large capital outlays.
Hopefully, even with large capital expenditures, more
of our cities will run budget surpluses enabled by the
current economic climate.
City revenues come from taxes, charges for services,
intergovernmental transfers, licenses and permit fees,
fines and forfeitures, interest, and miscellaneous
revenues. From their revenues, cities make
expenditures for public safety, public works, and
other social services. There are additional charges
for capital projects, debt service, running the
government, and miscellaneous charges.
10
Not surprisingly, taxes are the major source of
revenues, about 58 percent. License and permit fees
are the next major component of revenues, and raise
about 15 percent on average. Charges for services
and intergovernmental transfers bring in about 9
percent each, and the remainder is raised through
fines, interest, and miscellaneous income. A word of
caution in interpreting these findings is that not all
charges for services may be reported; some cities
have water and sewer boards whose financial
statements are not included in their financial reports.
What is interesting is the wide range that the top
three components of revenues cover. Taxes range
between 41.1 and 70.1 percent; license and permit
fees, 8.7 to 19.7 percent; and intergovernmental
transfers, 4.6 to 21.0 percent.
Social services average 61 percent of total city
expenditures, but the range among cities is from 48
to 81 percent. Running city governments averages
12 percent of expenditures, ranging between 5 and 22
percent. The remaining 27 percent of total expenditure is allocated to capital outlay, debt service, and
miscellaneous expenses. Expenditures on other
services (health and welfare, culture and recreation,
education, and economic and urban development)
have the widest range, 3.0 to 44.6 percent.
Interestingly, public safety takes up about 25 percent
of expenditures, while only 21 percent is spent on
health and welfare, culture and recreation, education,
and economic and urban development. If communities could reduce crime, perhaps more attention
and resources could be devoted to providing good
health, schools, libraries, parks, job training, and
other quality-of-life services. Alternatively, cities
could raise more revenues and devote the additional
funds solely to providing social services and
raising the quality of life. This look at our
medium-size city budgets suggests that if we
expect city governments to provide citizens a
higher quality of life, the citizenry must expect
to pay for it.
What is really impressive is that about half of
the cities spend less than 10 percent on
running city governments. In addition, more
than a third spend greater than 70 percent of
total expenditures on social services. These
are laudable achievements, and for them,
kudos to our city governments. About a fifth
of the cities spend more than 20 percent on
their governments, and another fifth spend
less than 50 percent on social services. For
these last expenditure shares, we must be
concerned.
Samuel Addy
Sample Cities’ Population, Revenues and Expenditures
Fiscal Year 1998
City
1
2
3
4
5
6
7
8
9
10
11
Anniston
Athens
Cullman
Enterprise
Eufaula
Northport
Opelika
Ozark
Phenix City
Prattville
Selma
Population
1998 Estimate
Total
Revenues
Total
Expenditures
Excess
(Deficit)
25,524
19,720
14,437
21,663
13,463
20,247
24,490
12,660
27,353
25,769
22,037
$32,892,982
13,944,106
18,833,149
15,982,949
10,182,683
13,926,006
22,704,109
9,553,452
17,481,203
13,964,588
21,752,536
$31,475,842
14,064,522
17,670,597
15,650,885
14,196,135
13,274,927
29,447,518
10,673,317
20,953,443
13,491,108
20,536,244
$1,417,140
(120,416)
1,162,552
332,064
(4,013,452)
651,079
(6,743,409)
(1,119,865)
(3,472,240)
473,480
1,216,292
Sources: FY 1998 city financial reports; U.S. Bureau of the Census; and Center for Business and Economic
Research, The University of Alabama.
11
Sample Cities’ Detailed Revenues and Expenditures, Fiscal Year 1998
(Percent of Total)
Note: Sums may not total 100 percent due to rounding.
Sources: FY 1998 city financial reports; Alabama Department of Public Examiners; and Center for Business
and Economic Research, The University of Alabama.
The University of Alabama
Center for Business & Economic Research
Box 870221
Tuscaloosa, Alabama 35487-0221
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Permit Number 16
Tuscaloosa, AL 35401