Financing Cities

Abstract

The macro-economic and micro-economic evidences makes a persuasive case for cities as important centers for productive efficiency, innnovation, and economic growth. For cities to achieve their full economic potential, however, complementary public services are required. This paper reviews the arguments and the evidence for the efficient financing and governance of city public services.Against the criterion of efficiency, city services should be limited to those services valued by city residents; financing should assign residential taxes to residential services and business land taxes and fees to business services; and city governance should foster competition and choice.

Institutional Constraints, Rule‐Following, and Circumvention: Tax and Expenditure Limits and the Choice of Fiscal Tools During a Budget Crisis

“…On the one hand, the use of personnel cuts can lead to positive outcomes. City governments are often accused of having a bloated workforce, and for providing salaries and benefits for their employees that are higher than their private sector counterparts (Inman ). To the extent that TELs lead to greater reliance on tools that reduce the size of the municipal workforce and control employee salaries and benefits, it can be argued that TELs are forcing cities to become more cost‐efficient, which is certainly good news for taxpayers.…”

“…To simplify it greatly, marketization redefines the role of government as a “seller” of local public services, and treats citizens as “buyers” of those services. Some argue that by requiring fees for services, governments can more effectively channel resources in delivering services that their residents prefer and are willing to pay for, improving local allocative efficiency by matching supply with service demand (Inman ). Nevertheless, user fees raise equity concerns especially with regard to service access by underprivileged residents.…”

Funding Sustainable Cities: A Comparative Study of Sino-Singapore Tianjin Eco-City and Shenzhen International Low-Carbon City

“…These financial instruments are used to finance the development of transportation, buildings, water/waste, and energy. Inman [13] holds the view that local public services can be funded through user fees, resident-based taxation, and business-based land value taxes. Of these, user fees can be applied to both residential and business services, resident-based taxation is adopted to finance residential services, and business-based land value taxes are applicable to business services.…”

Management of Large City Regions: Designing Efficient Metropolitan Fiscal Policies

“…In the United States, large regions are frequently governed by multiple, sometimes overlapping, governments, with substantial authority to make regulatory, taxing and spending decisions (Mitchell‐Weaver, Miller, and Deal, 2000). Research on metropolitan growth and on local fiscal policy and spending has typically focused on one or the other, with less attention to how they interact, although a recent strand of literature has developed that focuses on these interactions in more depth (Haughwout and Inman, 2002, 2004; Sole‐Olle and Viladecans‐Marsal, 2004; Inman 2006; Rossi‐Hansberg, Sarte, and Owens, 2009). Below, we discuss how agglomeration externalities interact with the local and regional fiscal systems, and how the interdependence of cities and suburbs in large MSAs presents additional challenges and opportunities for increasing productivity in the U.S. economy.…”