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					                                                            The Great Recession,
                                                           Municipal Budgets, and
                                                              Land Development




Tuesdays at APA Chicago
29 January 2013



                                                                                                 Michael A. Pagano
                                                                  Dean, College of Urban Planning & Public Affairs
                                                                                   University of Illinois at Chicago
View From 18th Street Bridge, a watercolor by Pat Wright
                                                                                                 MAPagano@UIC.edu
The Great Recession, Municipal Budgets, and Land
                  Development
 • Setting the stage:
   –The contemporary situation
 • Challenges
    – Economy is Changing
        • Aligning Economic Base with Fiscal Authority
    – Fiscal Foundation is Changing
        • Narrowing the Tax Base
    – Linking fiscal architecture and space
        • Spatialization of revenue structures
 • Options: The Fiscal Policy Space
 • A new sustainable fiscal architecture?
                                                            Percentage of Cities "Better Able/Less Able" to Meet Financial Needs
                                                                                    In Current Fiscal Year

                    100%      July 1990-March 1991




                                                                                                                   March –November 2001
                                                                                                                   Recession




                                                                                                                                                                                  December 2007 – June 2009
                               Recession (peak to trough)




                                                                                                                                                                                  Recession
                     80%


                     60%


                     40%                                                                                   75%   73%
                                                                                       65%   68%    69%                                                              65%   70%
                                                                                 58%                                                                           63%
                                                                           54%                                               56%                                                                                           57%
                                                                                                                                          45%                                                                       43%
                     20%    33%                                     34%                                                                                 37%                      36%
                                                    21%       22%                                                                                19%
Percent of Cities




                                                                                                                                                                                                     12%      13%
                      0%

                                                                                                           -25% -27%                                                     -30%
                                                                                       -35% -32% -31%                                                          -37% -35%
                     -20%                                                  -46% -42%                                        -44%                                                                                           -43%
                                                                                                                                          -55%                                                                      -57%
                            -67%                                    -66%                                                                                -63%                     -64%
                     -40%                          -79% -78%                                                                                     -81%
                                                                                                                                                                                                    -88% -87%


                     -60%
                                                                                        Less able         Better able
                     -80%


                    -100%
                            1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012




                                                                                                                   Source: Christopher Hoene and Michael Pagano , City Fiscal Conditions
                                                                                                                   in 2012 (Washington, DC: National League of Cities, 2012)
                              Percentage of Cities "Better Able/Less Able to Meet Financial Needs Next Year



               80%




                                                                                      March –November 2001
                                                                                      Recession




                                                                                                                                                             December 2007 – June 2009
                                                                                                                                                             Recession
                                                                         64%     63%
                                                                61%                                                                    59%
               60%                                      55%                                                                                    56%     55%                                                         56%
                                                53%
                                49%     50%
                                                                                                    46%
                                                                                                                               40%                                                                         39%
               40%                                                                                             33%
                        29%
                                                                                                                                                                      21%                          20%
                                                                                                                       17%
               20%
                                                                                                                                                                                           11%
% of Cities




                0%



               -20%



               -40%                                                   -36%     -37%                                                                                                                              -36%
                                                              -39%                                                                   -41%
                                                      -45%                                                                                   -44%    -45%
                                      -50%    -48%
                              -51%
               -60%                                                                         -54%
                                                                                                                             -60%                                                                        -61%
                                                                                                             -67%
                      -72%
               -80%
                                                                                                                                                             -79%                                -80%
                                                             Less able         Better able                           -83%
                                                                                                                                                                                         -89%
              -100%
                      1993    1994    1995    1996    1997    1998    1999     2000          2001            2002    2003    2004    2005    2006    2007    2008                        2009    2010    2011    2012

                                                                                                               Source: Christopher Hoene and Michael Pagano , City Fiscal Conditions
                                                                                                               in 2012 (Washington, DC: National League of Cities, 2012)
                                    Year-to-Year Change in General Fund Revenues and Expenditures
                                                                                              (Constant Dollars)
5.0%




                                                                                                                           Recession
                                                                                                                           March –November 2001




                                                                                                                                                                                    December 2007 – June 2009
                                                                                                                                                                                    Recession
                                         July 1990-March 1991
                                         Recession
        4.1%                                                                               4.1%
4.0%                  3.8%
         3.7%
                                                                                                                                                  3.3%
                                                                                       3.1%
3.0%                                                                                               2.8%
                                    2.5%                                                                                     2.5%
                       2.2%2.2%
                                                                                                       2.0%                                                                        1.9%
2.0%                                                                                          1.8%
                                                                                                1.7%
                                                            1.6%                    1.5%                      1.6%1.6%                                                         1.3%
                                                                                                                    1.4%                                                    1.3%
                             1.2%            1.3%                                 1.3%
               1.0%                                             1.1%
1.0%                                                                       0.9%                                                                                      0.8%
                                                                   0.7%                                   0.6%
                0.5%                                                           0.5%                                                                                                                              0.5%
                                                                                                                                                                 0.3%                                                                   0.3%
                                  0.2%                                                                                                      0.2%
0.0%
                                         0.0%                                                                          -0.1%
                                                                                                                                                             -0.2%                               -0.3%

-1.0%                                                                  -0.6%                                                                                            -0.7%
                                                                                                                                                                                -1.0%


-2.0%                                                                                                                                                -1.9%                                -1.8%

                                                                                                                                                         -2.3%                                                                  -2.3%
                 Change in Constant Dollar Revenue (General Fund)
-3.0%                                                                                                                                                                                                           -2.7%

                 Change in Constant Dollar Expenditures (General Fund)
                                                                                                                                                                                                                        -3.6%
-4.0%
                                                                                                                                                                                                                                     -3.9%
                                                                                                                                                                                                                                 -4.0%
                                                                                                                                                                                                                         -4.2%

-5.0%
                                                                                                              Source: Christopher Hoene and Michael Pagano , City Fiscal Conditions
                                                                                                              in 2012 (Washington, DC: National League of Cities, 2012)
                                       Year-to-Year Change in General Fund Tax Receipts
                                                                                  (Constant Dollars)
 8%




                                                          March –November 2001
                                                          Recession




                                                                                                                                                             December 2007 –June 2009
                                                                                                                                                             Recession
                                                                                                                                            6.3%      6.2%
                           6.0%
 6%

                                                                                     4.4%
                            4.2%                                                                                                                                           4.2%
                                                                                                                               4.0%
 4%    3.6%      3.4%                                                                                     3.3%
                                               2.8%                                                                         3.0%
                                     2.4%                                                                            2.2%    2.3%                  2.3%
                                                                                                                                                     2.2%                                                     2.4%
                    2.0%                                          2.0%
 2%                           1.5%      1.4%                                                                                                                                                       1.6%
          1.3%    1.2%                                                                                                                                             1.3%
                                      0.9%        1.0%                                                 1.0%
                                                                                                0.6%             0.5%
        -0.1%                                    -0.1%    -0.2%
 0%
        1996      1997      1998      1999      2000       2001                    2002       2003      2004       2005      2006      2007         2008          2009                    2010      2011        2012
                                                                                                                                                                                                              (budget)
                                                                                                                                                                                                                -0.8%
                                                                                                                   -1.1%            -0.3%                                                -1.0%
-2%
                                                                                                                                                                                           -2.0%                 -2.1%
                                                                                                        -2.3%
                                                                                                                                       -2.5%                                                        -2.5%

                                                                                 -3.4%      -3.2%
-4%
                                                                                                                                                                                                      -3.9%
                                                                                             -4.7%
                                                         -5.3%                    -5.1%
-6%

                                                                                                                                                             -6.6%
                         Sales Tax Collections           Income Tax Collections                               Property Tax Collections
-8%

                                                                                                                                                                                        -8.4%

-10%
                                                                                                       Source: Christopher Hoene and Michael Pagano , City Fiscal Conditions
                                                                                                       in 2012 (Washington, DC: National League of Cities, 2012)
                                             City Personnel-Related Cuts 2010 - 2012

                                                                                    45%
                  Hiring freeze                                                                             68%
                                                                                                                   74%

                                                                     32%
Salary/wage reduction or freeze                                                             50%
                                                                                                  54%

                                                     18%
                        Layoffs                                      31%
                                                                           35%

                                               14%
              Early retirements                               25%
                                                            23%                                                   2012

                                                                                                                  2011
                                             11%
                     Furloughs                        19%
                                                         22%                                                      2010

                                                               27%
    Reduce health care benefits                                   30%
                                                    17%

                                                    16%
         Revise union contracts                       18%
                                                   15%

                                                   15%
       Reduce pension benefits                        18%
                                       7%

                                  0%   10%          20%        30%          40%       50%           60%   70%        80%       90%      100%




                                                                           Source: Christopher Hoene and Michael Pagano , City Fiscal Conditions
                                                                           in 2012 (Washington, DC: National League of Cities, 2012)
                                               Ending Balances as a Percentage of Expenditures
                                                               (General Fund)
30




                                                                                                                          March –November 2001
                                                                                                                          Recession
                                          July 1990-March 1991
                                          Recession
                                                                                                                                                                                  25.2
                                                                                                                                                                    24.0 23.7            24.3
25

                                                                                                                                                             21.6                        24.4
                                                                                                                                                                                                                     20.8
                                                                                                                                                                                                                              19.9
                                                                                                                                        19.6                                      22.4
20                                                                                                                                               19.1 19.1
                                                                                                                 18.5 18.3                                                                                  18.2
                                                                                                         18.0                                                                                                                   18.0

                                                                                             16.2 16.1                                                                     19.0                                        16.5
                                                                                      15.7
                                 15.0                                                                    17.1
                                                                                                                 16.6                   16.9 17.2            16.9
15                        13.4                                                                                                                        16.0
                                                                               13.2                                     15.3                                                                                                    15.4
            12.3                        12.7
                                                      11.8              12.0                      14.1                                                              14.3
     11.5




                                                                                                                                                                                          December 2007 –June 2009
                                                                                                                                                                                          Recession
                   11.1
                                                                 10.5                                                                                                                                                                  12.7
                                                      12.2                            12.3 12.2
10                                      11.6
                          10.3                                                 10.5
                                 9.6                                    9.8
                   9.0                                           8.9


 5
                                                                                 Actual Ending Balance
                                                                                 Budgeted Ending Balance
 0




                                                                                                                Source: Christopher Hoene and Michael Pagano , City Fiscal
                                                                                                                Conditions in 2012 (Washington, DC: National League of Cities, 2012)
 The Great Recession, Municipal Budgets, and
             Land Development
• Setting the stage:
   – The contemporary situation
• Challenges
   – Economy is Changing:
      • Aligning Economic Base with Fiscal Authority
   – Fiscal Foundation is Changing:
      • Narrowing the Tax Base
   – Linking fiscal architecture and space
      • Spatialization of revenue structures
• Options: The Fiscal Policy Space
• A new sustainable fiscal architecture?
Bureau of Labor Statistics
Industry:   Total Nonfarm
Data Type: ALL EMPLOYEES, THOUSANDS
Bureau of Labor Statistics
Industry:   Manufacturing
Data Type: ALL EMPLOYEES, THOUSANDS
Bureau of Labor Statistics
Industry:   Service-providing
Data Type: ALL EMPLOYEES, THOUSANDS
Bureau of Labor Statistics
Industry:   Leisure and hospitality
Data Type: ALL EMPLOYEES, THOUSANDS
          Estimated Total State and Local
          User and Sales Tax Revenue Loss
$14,000


$12,000


$10,000


 $8,000


 $6,000


 $4,000


 $2,000


     $0
             2007       2008       2009       2010       2011       2012

Source: State and Local Government Sales Tax Revenue Losses from
Electronic Commerce By Donald Bruce, William F. Fox, LeAnn Luna. April 13,
2009 http://cber.utk.edu/ecomm/ecom0409.pdf
           Growth of 501-c-3
• The nonprofit sector accounts for roughly one-
  tenth of the U.S. economy, whether measured
  by employment or total spending
• Houston: A “drainage fee” last year did not
  exempt 501-c-3 organizations.
• Chicago: Nonprofits with assets below $250
  million will pay 80 percent of their water use
  by 2014 (The largest nonprofits now pay their
  full water bill.)
 Source: Daphne A. Kenyon and Adam H.
Langley, Payments in Lieu of Taxes: Balancing
Municipal and Nonprofit Interests
(Cambridge: Lincoln Institute of Land Policy,
2010).
                              PILOT Revenue as Percentage of Budget


       Pittsburgh

     Philadelphia
                                                                       (Estimates
     Minneapolis
                                                                       For FY2000)
     Indianapolis

          Detroit

          Boston

       Baltimore

                    0   0.2       0.4      0.6      0.8       1       1.2    1.4        1.6




States Move to Revoke
Charities’ Tax Exemptions
(February 27, 2010)                          Provena-Covenant
                                             Medical Center v.
                                             (Illinois)Dept. of
                                             Revenue (2010)
                                                                            Pittsburgh Pushes Tax on
                                                                            College Students
                State Aid to Municipalities and to All Other
                             Local Governments
                           45%                                                                                                              $400,000



                                            40%
                                                                                                                                            $350,000


                                            35%
                                                                                                                                            $300,000




                                                                                                                                                       Millions of 2005 Dollars
                                            30%
                                                                                                                                            $250,000

                                            25%

                                                                                                                                            $200,000

                                            20%

                                                                                                                                            $150,000
                                            15%


                                                                                                                                            $100,000
                                            10%


                                                                                                                                            $50,000
                                               5%



                                               0%                                                                                           $0
                                                    1971-1972 1976-1977 1981-1982 1986-1987 1991-1992 1996-1997       2001-02    2006-07
State aid as Percentage of General Municipal
                                                     24.1%      23.2%      20.8%      20.2%      21.3%      20.7%      21.9%      19.6%
                  Revenue
State aid as Percentage of Total Local Government
                                                     36.8%      37.6%      38.2%      36.7%      37.3%      37.8%      38.1%      35.2%
         Revenue, Excluding Municipalities
State Aid to Municipalities ($Millions)              $40,358   $45,450    $40,613    $46,470    $55,906    $61,064    $71,887    $68,838
State Aid to Local Governments, Excluding
                                                    $127,806   $148,942   $163,194   $194,268   $240,062   $282,247   $337,677   $335,011
         Municipalities ($Millions)
Source: Phil Oliff, Chris Mai, and Vincent Palacios, “States Continue to Feel
Recession’s Impact “ Center for Budget and Policy Priorities, (updated June 27, 2012)
http://www.cbpp.org/cms/index.cfm?fa=view&id=711
                   Federal Aid to Municipalities and to All Other
                                Local Governments
                                            16.0%                                                                                     $40,000



                                            14.0%                                                                                     $35,000



                                            12.0%                                                                                     $30,000




                                                                                                                                                Millions of 2005 Dollars
                                            10.0%                                                                                     $25,000



                                            8.0%                                                                                      $20,000



                                            6.0%                                                                                      $15,000



                                            4.0%                                                                                      $10,000



                                            2.0%                                                                                      $5,000



                                            0.0%                                                                                      $0
                                                    1971-1972 1976-1977 1981-1982 1986-1987 1991-1992 1996-1997   2001-02   2006-07
Fed aid as Percentage of General Municipal
                                                      7.3%     14.7%     12.0%      6.4%      4.6%      5.3%       5.3%      5.3%
                Revenue
Fed aid as Percentage of Total Local Government
                                                      2.8%      6.2%      5.1%      3.7%      2.8%      3.0%       3.6%      3.5%
        Revenue, Excluding Municipalities
Federal Aid to Municipalities ($Millions)            $12,145   $28,735   $23,500   $14,757   $12,119   $15,553    $17,511   $18,487
Federal Aid to Local Governments, Excluding
                                                     $9,633    $24,652   $21,927   $19,357   $17,953   $22,692    $31,966   $33,580
          Municipalities ($Millions)
Spatialization of Revenue Structures

Parcels will be identified for
development that maximize revenues or
minimize costs. This choice is informed
by a city’s revenue structure and
manifests itself spatially in the design,
land-use designations and development
patterns of the city and region, or the
spatialization of revenue structures.
                                STRATEGIC BEHAVIOR OF PROPERTY-TAX CITIES
   Property-tax cities think strategically about development based on the market value of the
    development and on the possibility of shifting service-delivery costs to other jurisdictions
                                        (fiscal externalities).




                                                       Property Tax
                                                   • Concentric urban structure
                                                   • Clear physical and historic identity
                                                   • High-end residences close to center
                                                   • High-end office and retail in center   Adapted from Ann O’M. Bowman and
                                                                                            Michael A. Pagano, Terra Incognita:
                                                                                            Vacant Land and Urban Strategies
                                                                                            (Washington, DC: Georgetown
Graphic design by Steve Price, Urban Advantage, Inc.                                        University Press, 2004).
                                        STRATEGIC BEHAVIOR OF SALES-TAX CITIES
        Sales-tax cities think strategically about development based on their mental constructs of
                     “shopping sheds” and on which market transactions are taxable.




                                                          Sales Tax
                                                       • Development pressure at urban edge
                                                       • Tax dollars drawn across city borders
                                                       • Development formulaic
                                                       • Urban center languishes                 Adapted from Ann O’M. Bowman and
                                                                                                 Michael A. Pagano, Terra Incognita:
                                                                                                 Vacant Land and Urban Strategies
                                                                                                 (Washington, DC: Georgetown
Graphic design by Steve Price, Urban Advantage, Inc.                                             University Press, 2004).
                                    STRATEGIC BEHAVIOR OF INCOME-TAX CITIES
      Income-tax cities think strategically about development based on their assessment of the
                          income growth potential of the individual or firm.




                                                           Income Tax
                                                       • Development less formulaic
                                                       • Targeted to higher incomes
                                                       • Development locations idiosyncratic
                                                       • Results depend on where tax collected   Adapted from Ann O’M. Bowman and
                                                                                                 Michael A. Pagano, Terra Incognita:
                                                                                                 Vacant Land and Urban Strategies
                                                                                                 (Washington, DC: Georgetown
Graphic design by Steve Price, Urban Advantage, Inc.                                             University Press, 2004).
                                  Site Value City?
City A


                       Commercial




                           Density determined by market forces



         City officials are motivated to behave in ways that differ
         from typical property-tax cities. The incentive to put
         land to its highest and most productive use has little
         revenue-enhancing benefit to the city treasury.




                   High Density                           Industrial



          City B                                                       City C
 The Great Recession, Municipal Budgets, and
             Land Development
• Setting the stage:
   – The contemporary situation
• Challenges
   – Economy is Changing:
       • Aligning Economic Base with Fiscal Authority
   – Fiscal Foundation is Changing:
       • Narrowing the Tax Base
   – Linking fiscal architecture and space
       • Spatialization of revenue structures
• Options: The Fiscal Policy Space
• A new sustainable fiscal architecture?
      Fiscal Policy Space of Cities
• FPS= a confined             1) Intergovernmental
  decision space within          System (tax authority, TELs,
  which city officials are        revenue reliance, state aid)

  permitted to take           2) Economic base
  action, and shaped by       3) Local legal context
  the following attributes:   4) Citizen/consumer
                                 demand
                              5) Political culture
                                                         Municipal Tax Authority by State
                       WAe

                                              MTf                                                                                                                      ME
                                                                     ND
                                                                                                                                                           VT
                  OR                                                              MNf
                                                                                                                                                                 NH
                                                                                                                                                                            MA
                                   IDf                                                             WI                                                NYa
                                                                     SD
                                                    WY                                                             MIa                                                     RI
                                                                                                                                                                      CT
                                                                                        IA                                                     PAa              NJf
                         NV                                          NE
                                                                                                                          OH
                                                                                                                                                            DEa
                                                                                                        IL   INc
                                         UT
                                                         CO                                                                         WV                     MDa
                                                                                                                                              VA
             CA                                                           KS             MOa                         KY

                                                                                                                                              NC
                                                                                                             TN
                              AZ
                                                                           OKd
                                                                                             ARb                                         SC
                                              NM

                                                                                                        MS   ALa               GA

                                                                    TX
            AK
                                                                                              LA

                                                                                                                                         FL




                         HI
                              a Income or sales tax for selected cities. b Cities can levy a local income tax, but no locality currently does so. c
                              A local income tax under certain circumstances. d Sales tax only; cities can levy a property tax for debt-
                              retirement purposes only. e Cities can impose the equivalent of a business income tax. f Sales taxes for selected
                              cities and/or restricted use only.

Property + sales + income                                Property + sales OR Income                                        Property or sales only
                                                     Source: Michael A. Pagano and Christopher Hoene, “States and the Fiscal Policy Space of Cities” in Michael
                                                     Bell, David Brunori, and Joan Youngman, eds. The Property Tax and Local Autonomy (Cambridge, MA:
                                                     Lincoln Institute of Land Policy, 2010), pp. 243-284.
                                           Municipal Revenue Reliance by State
                      WA

                                            MT                                                                                                                 ME
                                                                   ND
                                                                                                                                                    VT
                 OR                                                             MN
                                                                                                                                                         NH
                                                                                                                                                                MA
                                 ID                                                             WI                                             NY
                                                                   SD
                                                 WY                                                            MI                                               RI
                                                                                                                                                              CT
                                                                                     IA                                                   PA             NJ
                       NV                                          NE
                                                                                                                         OH
                                                                                                                                                    DE
                                                                                                     IL   IN
                                      UT
                                                      CO                                                                       WV                   MD
                                                                                                                                         VA
            CA                                                           KS           MO                            KY

                                                                                                                                         NC
                                                                                                          TN
                            AZ
                                                                          OK
                                                                                          AR                                        SC
                                            NM

                                                                                                     MS   AL              GA

                                                                   TX
           AK
                                                                                           LA

                                                                                                                                    FL




                       HI




Three tax sources                     Two tax sources                   One source + low 2nd source                                  One tax source
                                                 Source: Michael A. Pagano and Christopher Hoene, “States and the Fiscal Policy Space of Cities” in Michael
                                                 Bell, David Brunori, and Joan Youngman, eds. The Property Tax and Local Autonomy (Cambridge, MA:
                                                 Lincoln Institute of Land Policy,2010), pp. 243-284.
                                 TELs and Municipalities

           WA

                                MT                                                                                                        ME
                                                 ND
                                                                                                                               VT
      OR                                                   MN
                                                                                                                                    NH
                                                                                                                                           MA
                      ID                                                   WI                                             NY
                                                 SD
                                     WY                                                   MI                                               RI
                                                                                                                                         CT
                                                                IA                                                   PA             NJ
            NV                                   NE
                                                                                                    OH
                                                                                                                               DE
                                                                                IL   IN
                           UT
                                          CO                                                              WV                   MD
                                                                                                                    VA
 CA                                                   KS         MO                            KY

                                                                                                                    NC
                                                                                     TN
                 AZ
                                                      OK
                                                                     AR                                        SC
                                NM

                                                                                MS   AL              GA

                                                 TX
AK
                                                                      LA

                                                                                                               FL




            HI
                            Green          no TELs
                            Yellow         non-binding prop tax limits
                            Blue           binding property tax limits
                            Orange         expenditure limits
                            Red            Rev/Exp limit and Prop Tax limit
                                                    State Clusters
               WA

                                     MT                                                                                                          ME
                                                        ND
                                                                                                                                      VT
          OR                                                      MN
                                                                                                                                           NH
                                                                                                                                                   MA
                          ID                                                      WI                                             NY
                                                        SD
                                          WY                                                     MI                                               RI
                                                                                                                                                CT
                                                                       IA                                                   PA             NJ
                NV                                      NE
                                                                                                           OH
                                                                                                                                      DE
                                                                                       IL   IN
                               UT
                                               CO                                                                WV                   MD
                                                                                                                           VA
     CA                                                      KS         MO                            KY

                                                                                                                           NC
                                                                                            TN
                     AZ
                                                             OK
                                                                            AR                                        SC
                                     NM
AK
                                                                                       MS   AL              GA

                                                        TX
                                                                             LA

                                                                                                                      FL




                                    Blue            2 or 3 general tax sources, relatively autonomous
                                    Green           no TELs
                                    Yellow          ????
                                    Orange          TELs, one tax source
                                    Red             most constrained
 The Great Recession, Municipal Budgets, and
             Land Development
• Setting the stage:
   – The contemporary situation
• Challenges
   – Economy is Changing:
       • Aligning Economic Base with Fiscal Authority
   – Fiscal Foundation is Changing:
       • Narrowing the Tax Base
   – Linking fiscal architecture and space
       • Spatialization of revenue structures
• Options: The Fiscal Policy Space
• A new sustainable fiscal architecture?
         A Sustainable Fiscal Architecture?
The fiscal shock of the Great Recession ought to
encourage a political discourse about reforming the
fiscal architecture of municipalities:

1. If States Want Cities to be Responsible for Their Actions,
   States Should Give Them Adequate Tools. Diversify.
   Authorize access to taxes. Eliminate TELs.

2. The Fiscal Mismatch Is Weakening Cities. Reform the tax
   structure: Tax structures might be designed that link closer to
   cities’ underlying engines of growth or to income and wealth.
   Tax on income/wages. Is a tax on income at the place of
   employment (such as Ohio’s, Kentucky’s) or a gross receipts
   tax (such as Washington state’s Business and Occupation Tax)
   a more accurate measure and reflection of a city’s tax base?
    Broaden the sales tax base. As the retail sales tax base has narrowed as a
    percent of consumer spending, is it time to reconsider a sales tax on
    services?

    Restructure the property tax. As real estate loses much of its value, as vacant
    properties lie fallow, and as the number and value of tax-exempt properties
    increase, might cities consider moving from a uniform to a split-rate system?
    What’s lost and gained by exempting so much property from the tax roles?

3. Jointly Provide Services and Share Service Delivery Costs.
   Create regional taxing powers. Municipalities will be looking for
   regional partners and allies in designing a system that is less
   destructive to the region’s long-term interests and fairer in
   distributing the costs to the users.

4. Pricing Drives Consumer Behavior and Often Disadvantages
   Cities. Approximating the market value of city-delivered services
   would possibly reduce subsidies to free-riders. Mileage fee? Fee
   for service? ….
                     a brief digression ….
Pricing infrastructure must include and recognize the
importance of planning, managing and financing.….

  Finance, Budgeting, Management

                Planning                Financing
              Infrastructure          Infrastructure
                  Project                Projects




                            Managing
                          Infrastructure
                              Assets
The Utah Model. Government Performance
Project Grade (2008): A
Statutory Set aside of 1.1% of value of fixed assets in the
Operating Budget for maintenance and repair of state
buildings.

Political Challenge: Future legislatures are (theoretically)
bound by prior legislature’s decisions.
…. And returning to the Elements of a Sustainable Fiscal Architecture …




  5. Revisit the Social Compact. The social
  compact of the last century that bound
  generations, socio-economic classes,
  neighborhoods, cities and regions needs to be
  reconsidered in light of demographic shifts,
  the transformation of the underlying economy,
  the forces of globalization, and an irrepressible
  resolve to enhance the human condition.
•   fairness of revenue systems;
•   Spatial/land-use effects of revenue structures;
•   Benefits principle v. ability-to-pay;
•   pro-cyclical nature of local and state budget
    practice;
•   accumulated long-term liabilities (pensions,
    OPEBs, and infrastructure);
•   definition of “core services”;
•   pricing services and infrastructure assets;
•   Horizontal and vertical regional partnerships in
    service delivery …
                                                            The Great Recession,
         THANK YOU
                                                           Municipal Budgets, and
                                                              Land Development




Tuesdays at APA Chicago
29 January 2013



                                                                                               Michael A. Pagano
                                                                Dean, College of Urban Planning & Public Affairs
                                                                                 University of Illinois at Chicago
View From 18th Street Bridge, a watercolor by Pat Wright
                                                                                               MAPagano@UIC.edu

				
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