More than a third of U.S. municipalities plan to borrow in 2013 for capital projects, the most in at least two years, as officials gain confidence in the economic outlook, according to a National League of Cities survey.
About 37 percent of cities plan to issue debt this year, up from 20 percent in 2011, when the annual report began. Sixty percent expect to boost investment in new infrastructure this year, up from 35 percent in 2011.
“Although there continues to be significant barriers to across-the-board economic growth, a tenuous recovery is taking hold,” Christiana K. McFarland and J. Katie McConnell, the co- authors, wrote in the report for the Washington-based group.
States and cities are mending their finances after the 18- month recession that ended in June 2009, the longest since the 1930s, reduced tax collections and increased unemployment.
While more municipalities plan to boost issuance this year, 61 percent of officials would cut the number of capital projects and 54 percent would reduce the scope of such developments if the federal government limits the tax-exemption of municipal bonds, according to the survey.
President Barack Obama has proposed restricting the value of the muni tax break for higher earners to 28 percent. Borrowing costs for states and cities would rise if the federal government reduces or ends the tax-exemption on municipal securities, analysts at Citigroup Inc. have said.
Construction of new homes increased in 2012, with 52 percent of cities reporting a boost in housing starts. Residential property values improved last year for nearly half the localities.
Officials in 66 percent of cities said underemployment is a major or moderate concern, according to the survey. The U.S. jobless rate was 7.7 percent in February, down from a 27-year high of 10 percent in October 2009.
The group, which advocates for municipalities, conducted the survey in January, sending questionnaires to chief elected officials in 1,127 cities. It received 310 responses.