City leaders are gloomy about the direction the country is heading, says a survey out Friday by the National League of Cities.

Sixty-three percent of city officials say they are pessimistic about the future, compared with 62 percent in 1992 and 19 percent in 2001, the annual survey of attitudes among city officials found.

"Let me put it to you this way: A year ago I was concerned," says Bedford, Ohio, Mayor Daniel Pocek. "I'm scared today."

Bedford, where the number of foreclosures during the past two years peaked at 320 a month, faces a $1.4 million budget shortfall. The town of 14,000 also has been hit hard by rising health-care costs for its 175 city employees and falling income taxes, which account for two-thirds of its revenue.

Pocek anticipates having to increase fees or taxes next year to sustain city services.

One-third of city officials say finding a way to finance services is the biggest issue they face. Sixty-two percent say overall economic conditions have worsened in their community in the past year.

"Part of the pessimism is that we know it won't be a quick turnaround," says Kathleen Novak, mayor of Northglenn, Colo., and the league's president. "It's hard when you hear your neighbor is laid off. It's hard not to get depressed."

She says her town of 36,000 will lose $250,000 in yearly sales tax revenue because a Circuit City store will shut down. "The impact of one store closing is big."

Despite the bad economy, 84 percent of city leaders are optimistic about the direction their cities are heading.

"That's because mayors can control their own futures a lot easier than they can control the federal government," Pocek says.

The survey also found that 64 percent of city officials say health care is the most important issue the next presidential administration will face.

Bruce Tobey, council president in Gloucester, Mass., says his town of 30,000 has seen health care costs for city employees jump by double digits in recent years. "We can only increase property taxes by 2.5 percent a year, so we have no room for double-digit increases," he says.