Changes in the Usage of Enterprise Funds by Large City Governments

Using a nationwide sample of large cities, this article analyzes changes in the use of enterprise funds during the past decade. The major findings are that (1) the aggregate number of enterprise funds increased, with the largest increases occurring in solid waste and drainage; (2) part of the increase was offset by the elimination of some enterprise funds, particularly in the area of recreational services; (3) 60 percent of the cities experienced one or more changes in the types of enterprise funds they used; (4) the revenues associated with most types of enterprise funds have increased at a faster rate than general fund revenues; and (5) some cities are using alternative fiscal structures (e.g., special revenue funds and discrete component units) to account for services that are reported as enterprise funds in other cities. A continuum of fiscal structures is presented as a framework for addressing why cities might choose one structure over another and what the possible implications of a particular fiscal structure might be.     

Factors Underlying the Growth of Local Government in the 19th Century United States

Early in the 19th century local governmentsspent less than either the federal or stategovernments. By the end of the 19thcentury local governments spent more thanthe federal and state governments combined. This growth is obviously related to thegrowth of cities, but cities continued togrow in the 20th century, while the localgovernment share of total governmentexpenditures fell, so the growth of citiescannot be the complete answer. Anexamination of expenditures and revenues intwo cities – Boston and Baltimore –suggests that no one component ofexpenditures was responsible for increasesin total spending. Rather, it appears thatthe primary causal factor was revenuegrowth. Cities rely heavily on propertytaxes, and the increasing value of taxableproperty allowed cities to raise increasingamounts of revenue, leading to increasedgovernment spending.     

The Fiscal Consequences of Changing Federal and State Revenue Policies: The Case of Small Oregon Cities

This article examines the fiscal consequences for twelve, smallOregon cities of recent changes in federal and state intergovernmentalrevenue policies. Many small local governments have experienceddouble revenue reverses in recent years—reductions inown-source revenues because of economic decline as well as decreasesin intergovernmental revenues, especially federal aid. The twelvesmall cities are compared with all 241 cities in Oregon andthe 136 Oregon cities in the 1,000 to 49,999 population range.Using aggregate and interview data, a major finding is thatalthough stabilization and/or decline in federal-state revenuesharing and entitlement program funds have accentuated difficultlocal revenue situations, economic decline has been the moreimportant contributor to the fiscal stress of the twelve smallmunicipalities. Most of the twelve cities had limited fiscalcapacity—as indicated by low assessed property valuations—makingit difficult to produce sufficient revenue to meet basic publicservice needs. These cities were also unable to get citizenapproval of increases in property taxes.     

A median voter analysis of variations in the use of property taxes among local governments

This paper explores the variations among local governments in the composition of tax revenues, or more specifically, in the relative use of property taxes. Using a median voter framework, various hypotheses are developed concerning the factors that should influence the relative use of property taxes. A cross-sectional sample of central cities is employed to test the hypotheses. The empirical results are consistent with the hypotheses.     

How Cities in California Have Responded to Fiscal Pressures Since Proposition 13

Fiscal pressures on California cities have been severe since the passage of Proposition 13. Federal and state aid policies have, in fact, exacerbated an already wrenching pattern of revenue losses since FY 77-78. State aid, in particular, has perversely dropped the most for those cities hit hardest by reductions in other revenues outside their direct control. Despite this, California cities have kept total real per capita revenues and expenditures constant over this period by increasing revenues from a variety of local sources—and especially from current service charges for enterprise activities. Furthermore, cities hit hardest by exogenous revenue losses have increased locally raised revenues the most. In short, cities in California have responded to reductions in revenues outside their direct control by increasing revenues from sources within their direct control, rather than by reducing expenditures and their revenue-increasing responses have tended to be in proportion to the losses they have faced in exogenous revenues.     

The Equity Impacts of Municipal Tax Incentives: Leveling or Tilting the Playing Field?

The widespread use over the past two decades of Michigan's PA 198 Industrial Tax Abatement program provides an opportunity to assess the inter‐urban equity impacts of this economic development tool. Not only has PA 198 been used relatively more often by suburban municipalities, local governments at the metropolitan periphery are more likely to use abatements to attract new plants and new jobs. The older central cities primarily use the program to retain existing jobs, albeit at high cost of lost tax revenues. On balance, it appears that PA 198 has done little to alter the location decisions of participating firms.     

Changes in Federal Aid and City Finances: A Case Study of Oregon Cities

Federal aid was not found to stimulate spending for cities inOregon during 1984–1989. Oregon cities relied primarilyon their own-source revenues to finance spending increases.The exception was capital spending, where receipt of federalaid in 1989 positively influenced the rate of spending change.This most likely reflected lower spending by those cities thatdid not receive competitive federal grants. The amount of federalaid received is greatly influenced by the grants skill availableto the community. Growth in total direct current spending wassignificantly associated with increases in user fees and charges.A closer look at specific spending categories revealed a hierarchyof reliance on cities' own-source revenues. Cities increaseduser fees and other benefit charges where possible, and seeminglyonly resorted to property-tax increases when these other revenueswere inappropriate.     

Comparing Central City Finances Using Fiscally Standardized Cities

Abstract

Because fiscal institutions and arrangements differ widely across US cities, it has until now been very difficult to conduct comparative analysis of spending, revenues, and debt in US cities. This paper describes a new city fiscal dataset, called fiscally standardized cities (FiSCs), that directly addresses the varying roles of municipal governments, counties, school districts, and special districts in the financing of central cities. By taking systematic account of fiscal data for all the major units of government in large cities over a long time period (1977–2012), the FiSC data permit investigation of a wide range of important comparative policy issues for cities. The article describes the methodology used to construct FiSCs, and gives a number of examples to illustrate the potential uses of the FiSC data. For example, it shows how spending comparisons between cities can be fundamentally misleading unless account is taken of the varying roles of overlapping governmental units. It also demonstrates how the FiSC data can be used to benchmark fiscal data for one city against comparable cities.     

Municipal Capital Spending during the "Boom"

This article analyzes municipal governments, capital spending, and revenue-raising decisions between 1993 and 2000, an era of unprecedented economic growth. It finds that, as anticipated, greater-than-expected revenues allowed many cities to advance projects from their capital improvement plans to their capital budgets. Moreover, the article concludes that growth in cities' own-source-revenue-generating capacity and transfers from carryover or ending balances from earlier years, rather than debt issuances and intergovernmental aid, seem to be the most important fuel for the remarkable growth rate in capital spending.     

Decentralization,Fiscal Independence,and Poverty in the Philippines

Decentralization is a common public sector reform in developing countries. Its basic rationale is that local governments have an informational advantage regarding the needs and preferences of consumers. However, decentralization also has drawbacks. Foremost is the efficiency advantage of the central government in providing public services because of economies of scale and better access to resources. This study looked at the relationship between decentralization and poverty using data from Philippine cities and municipalities. Results suggest that decentralization, as represented by fiscal independence and measured by the share of locally sourced revenues to total local government revenues, is indeed associated with lower poverty. However, this effect is not linear—the marginal effect of decentralization on poverty diminishes as decentralization increases. Moreover, decentralization moderates the positive effect of good governance on poverty reduction and the magnitude of the relationship between poverty and decentralization is stronger in poorer municipalities than in richer ones.     

Fiscal Structure and the Post-Proposition 13 Fiscal Regime in California's Cities

Two and a half decades after the passage of Proposition 13 in 1978, California state and local governments continue to feel the intended and unintended effects of tax and expenditure limitations. While considerable time has passed since voters enacted Proposition 13, the effects of the property tax revolt continue to be dramatic. This article examines the fiscal structure of California's city governments from 1972 to 2002. The analysis reveals that California's cities have become less reliant upon property tax revenues and more reliant upon charges and fees, and have not increased reliance upon sales tax revenues as much as expected.     

Urban local government finance in Nigeria: The case of Lagos municipal area

One of the most important results of the global reform of local governments in Nigeria in 1976 was to initiate a progressive increase in the amount of monetary transfers to local governments (LGs) by federal and state governments (especially the former). The proportion of federally collected revenues devoted to LGs increased rapidly from less than 2 per cent in 1976 to 15 per cent in 1990. This has enabled Nigerian LGs to play a more visible role in total public expenditures. On the other hand, huge federal transfers have led to sharp declines in absolute and relative terms in locally generated revenues. The two Lagos municipalities are able to generate up to 50 per cent of their total revenues. In contrast, the average for all local governments in the country is 4–5 per cent. The relatively large internal revenue sources in the two Lagos municipalities results in generous surpluses, which they are able to channel into capital development or special project expenditures. The single most important internal revenue source is the property tax, which is not even collected in some other large cities, such as Kano, Ogbomosho and Sokoto.     

Decentralization and local public finance in Tunisia

The Tunisian government has long admitted that its excessively centralized administrative and political systems have generated heavy costs in terms of inefficiency and citizen alienation. A major decentralizing reform effort was launched in the mid-1970s, the most important parts of which dealt with changes in local taxation powers, and in the sources and size of grants and loans which Tunisian communes receive from national sources. The result to date has been a modest increase in communal revenues from the new or increased taxes, and a more significant increase in central government grants to local governments. Smaller and more rural communes are heavily dependent on grants to undertake development actions, their tax base being negligible. The revised systefn generates more revenue, and distributes resources more equitably, than the previous arrangements. In theory, it gives a greatly increased latitude to elected communal councils. Nonetheless, the local governments-and the communes in particular-remain severely constrained by central government authorities. The conclusion is that the decentralization reform has been partial and halting, and will in all probability continue in the same manner.     

Reinventing the central city as a place to live and work

Abstract

Public policies for urban development have traditionally emphasized investment in physical infrastructure, the development of large‐scale commercial facilities, the construction of new housing, and the renewal of existing neighborhoods. Most efforts to revitalize central cities by building new facilities for visitors have focused on suburban commuters and tourists. At the same time, many housing initiatives in central cities have concentrated on low‐income communities because outlying suburban areas have attracted traditional middle‐income households.

This article argues that emerging demographic and cultural trends—combined with changes in the structure of business organizations and technological advances—provide new opportunities for cities to retain and attract middle‐class households. Using gay and lesbian populations as an example, it focuses on the role that nontraditional households can play in urban redevelopment. In light of the rise of nontraditional households and the growth of self‐employment and small businesses, cities should adopt policies that make them attractive places in which to live and work.     

Potential Effects of Federal Policy Devolution on Local Housing Expenditures

As 1994 came to a close, the future of the U.S. Department ofHousing and Urban Development (HUD) and the continued role ofthe federal government in low-income housing assistance washighly uncertain. The agency was targeted for elimination bycongressional leaders, its budget was the object of recissionattempts, and agency officials proposed a radical reinventionto alter housing programs and the delivery system for federalhousing assistance. Given the likelihood of either more budgetcuts (resulting in greater reliance on nonfederal sources offunds) or the devolution of policy responsibility through blockgrants, there is heightened concern for how local governmentsallocate housing funds. This article examines housing expenditurestrategies of large U.S. cities. The analysis describes factorsrelated to a greater use of nonfederal housing revenues by cities,and examines the impact of funding source on program and beneficiarytargeting. The data suggest that reduced federal spending ora shift to block grants is likely to result in more housingbenefits directed to moderate-income households and to homeownersand homebuyers.     

Structure of State‐Level Tax and Expenditure Limits

While much consideration has been given to the approval process, base classification, and codification of tax and expenditure limits (or TELs), these factors tell us nothing about how they actually work. This study focuses exclusively on the technical elements of these limits and finds how states estimate their limits have over time eroded their potency. More specifically, if a state resets or rebases its limit annually by using actual revenues or expenditures for the preceding year, the limit will trend closely with actual revenues or expenditures, effectively restricting growth in spending as prescribed by law. However, if the law requires a state to estimate its limit using the appropriation limit for the preceding year instead of actual revenues or expenditures, that is, without rebasing, the limit will reflect cumulative changes to the base when it was first approved. Over time, the TEL cap is significantly above the states revenues or expenditures as it remains unaffected by the state's underlying fiscal and economic environment.     

Revenue Cyclicality and Changes in Income and Policy

The past two recessions have proved alarming to state government finances. In 2001, a relatively shallow national recession led to a severe downturn in state revenues that took three years to unwind. In the wake of the recent economic downturn, signs of fiscal stress are readily apparent. In this paper, we investigate whether the revenue patterns surrounding these two recessions are the result of state government revenues having grown more sensitive to economic conditions. We find that the responsiveness of revenues to measures of business cycle conditions has grown since the 1990s. We use data on state government revenues, state‐specific information on economic conditions, and measures of state policy to examine fiscal performance and budgeting practice over the economic cycle. Our findings suggest that increasing income cyclicality, in particular of investment income, has made state revenues more responsive to the business cycle since the mid‐1990s. We also find that changes in policy making have served to increase revenue cyclicality.     

Tax and Spending Effects of Municipal Enterprises: The Case of Florida Electric Utilities

This study tests the appropriateness of two competing hypotheses drawn from the public finance literature about the impact of municipal utility profits on local tax and spending patterns. By comparing data from cities that own their electric utilities to nonelectric cities, this research finds that neither city expenditures nor property tax rates are significantly affected by the transfer of profits. The evidence suggests that the profits are used by cities with relatively weak tax bases to obtain revenues from tax-exempt institutions, homeowners, and nonresidents.     

Embedded Government Control and Nonprofit Revenue Growth

This research combines insights from resource dependence and institutional theories to examine the growth of Chinese nonprofit revenues. The authors propose the concept of embedded government control (EGC) to capture the complexity of the government–nonprofit relationship along two dimensions: government regulation of nonprofits’ public fund‐raising qualifications and the political embeddedness of nonprofits with the government. Using a data set of 2,159 Chinese philanthropic foundations for the period 2005–12, the authors test hypotheses about the implications of EGC for nonprofit revenues in China following two major external shocks: the Wenchuan earthquake in 2008 and the Guo Meimei scandal in 2011. The empirical analysis shows that EGC can help philanthropic foundations obtain more government subsidies, donations, and market revenues. However, external shocks may either strengthen or weaken the enabling role of EGC in helping foundations acquire relatively more donations.     

When Efficiency Is Unbelievable: Normative Lessons from 30 Years of City–County Consolidations

We use a new model of city-county consolidation to analyze 12 local government consolidation attempts during the last three decades. Using a rigorously designed comparative case study, we identify the critical variables that explain why some consolidations succeed and others fail. Arguments for consolidation typically fail when they focus on the increased equity to be gained from the redistribution of revenues from the suburbs to central cities. Traditional arguments that are based on increased efficiency are also unsuccessful. Instead, the essential element of a successful consolidation is a group of civic elites who define the economic development vision for the community, determine that the existing political structure is incapable of supporting and implementing that vision, and convince the voters that city–county consolidation is the key to economic development that will benefit the whole community, not just the elites.