Why Federal aid cutback will have smaller impact on Southern cities

When the paring begins on federal funds for cities as it will soon, Southern cities will be more prepared than most to get along on a thinner slice. That doesn't mean there won't be grumblings in city halls across the South or any less scrambling than elsewhere for funds to make up for federal cuts.

But the shock will be less severe than in many cities in other regions for several reasons, analysts point out.The most important factors they cite are:

1. Southern cities have been less dependent on federal funds than most cities , so they are giving up less when the cuts come.

2. The South is continuing its rapid gain of new people and jobs -- providing new sources of taxes.

Southern cities are "much better able to withstand them [the Reagan cuts in aid to cities]" than in other regions, says Larry C. Ledebur of the Urban Institute in Washington.

Because of this, Southern cities may be spared some of the tough, political infighting that has begun in some cities in the face of the pending federal cuts. but all cities need to de vel

Although less dependent on federal funds, and in a rapidly growing region, Southern cities do face some tough challenges, he adds. Much of the new growth, he points out, is occurring outside the cities, adding demands on the cities without adding new revenue.

But a recent report by the Southern Growth Policies board, a research group supported by Southern state and local governments, notes that "the fiscal outlook for Southern cities is far better than that for Northern cities." The study attributes this outlook, in part, to annexations by Southern cities of tax-rich areas, something Northern cities long ago hemmed-in by incorporated areas have been unable to do.

The report also notes a sharp cutback in many southern cities in spending and long- term borrowing, the kind that usually pays for such things as road paving, sewers, lights, and public buildings. Nationally, such borrowing has been increasing during the late 1970s, the most recent period for which data were available.

Such reductions in borrowing probably reflect "a more conservative mood in the South," says George Israel, Republican mayor of Macon, Ga., and former member of the President's Urban Advisory Task Force.

Macon's voters have not been asked to approve another bond issue since 1976, when they approved $12 million for a medical school and roads. Since Mayor Israel's election, the city payroll has been cut more than 25 percent along with some services.

But to catch up in meeting the needs of the poor and to keep up with demands for services and facilities, cities need greater taxing and annexation authority from their state governments, Mayor Israel says.

The decline in borrowing in the Southern cities studied by the Southern Growth Policies Board was a puzzling surprise, says Patricia Dusenbury, the board's associate director for urban affairs.

Are cities simply shifting some of the burden to developers -- such as requiring them to put in their own streets, sewers, and lights for a new subdivision? she asks. Or, she wonders, are city needs merely being put off?

Putting off debts makes a city "vulnerable" in a time of decreasing federal assistance, says the Urban Institute's Mr. Ledebur. Cities in all parts of the country are going to be forced to raise local taxes and work more closely with businesses to share costs of some pro jects, he says.