US cities are a magnet for FDI. “At the moment, the US economy is envied around the world,” said Jason Furman, chairman of the White House council of economic advisors, at a recent press conference of the US advocacy organisation National League of Cities (NLC).

Nevertheless, the 'great recession', which began in 2008, hit cities and local municipalities hard. Tax revenues shrank, resulting in massive city and municipal worker layoffs. But the country’s city finance officers report in a NLC 'city fiscal conditions in 2014' study, released in mid-October, that fiscal conditions are improving. In fact, 80% claim that their cities are more able to meet fiscal needs than in 2013.

Advertisement

However, local fiscal health has not yet fully returned to pre-recession levels. “The growth in revenues appears to be stagnating,” said Christiana McFarland, research director of the centre for city solutions and applied research at NLC.

What is holding back the recovery? Top on NLC’s list is infrastructure needs, followed by the cost of health benefits and pensions. Speaking at the news conference, Chris Coleman, mayor of St Paul, Minnesota and NLC president, described the long-term impact poor infrastructure can have on a city’s financial health. “We know that much of our infrastructure is in dire need of repair and upgrade,” he said. “We also know that cities are being forced to maintain infrastructure on their own as fewer financial resources available from state and federal sources."

The exception are projects such as Union Depot, a multimodal transit hub in St Paul, which was the result of public-private partnership that included local and federal sources.

Moody’s Analytics senior economist, Dan White, stressed that cities need more co-operation from states, and that states need more co-operation from the federal government. “There’s a lot of cross governmental issues that need to be worked out,” he said.

The good news is the issue has the attention of the administration of US president Barack Obama, which has just launched the Grow America Act, a multi-year surface transportation reauthorisation proposal. The NLC survey also indicates that revenue growth for US cities is increasing. Challenges still exist, but the curve is going in the right direction. This provides an even stronger position for US cities in their ability to attract FDI.