At our Council meeting last week, the City’s Independent Auditors presented their Comprehensive Annual Financial Report for the year 2010. The good news is that the auditors gave high marks to the City’s financial oversight, noted the significant savings we have achieved through those aspects of operations under municipal control, and lauded the City’s judicious use of fund balance to mitigate the effects of the economic downturn during the past four years. The bad news is that revenues remain flat and mandated costs continue to escalate, meaning that we will continue to face tough choices in the months and years ahead.

Although these conditions have serious local implications, the source and scope of our challenges are much bigger than New Rochelle: the national and regional economy has a huge impact on our local fiscal challenges. The auditors themselves noted that every community they examine is wrestling with similar trend lines. This past weekend, an editorial in the New York Times put it well:

“States and cities had already endured a harrowing three-year financial slide when the debt-ceiling crisis darkened their outlooks even further. In the space of just a few weeks, the Republican-led standoff on spending and taxes brought them a triple dose of bad news: a budget deal that will probably lead to a significant reduction in federal aid; a bond downgrade that could eventually trickle down to the local and state level, making borrowing more expensive; and a stock market plunge that is bleeding state employee pension funds.”

To be clear, we still have a local responsibility to balance our books, live within our means, and shape budgets that best reflect the values, interests, and priorities of the people of our community. But it’s important to understand that these judgments aren’t made in a vacuum, and that choices in Washington and Albany may impact local taxpayers and residents even more profoundly than those made at City Hall.