Effects of Housing Costs and Home Sales on Local Government Revenues and Services
Allee, David J.
The subtitle of this paper should be " How recession and federal devolution have caused local governments to cut services and raise property taxes --now, what should be done in response to the resulting clamor for local government consolidation?" Housing drives local government services. Home sales represent opportunities for more income and more costs. Intergovernmental competition for tax base and the role of state and federal aid to provide equity between jurisdictions are central to the quality of the results. Recent cuts in sales taxes, plus reductions in state and federal assistance are transmitted to the voters through increases in the property tax. This has produced a reaction -consolidate! But that is advice urged and largely ignored since Woodrow Wilson included it in an 1895 textbook. To go beyond this conventional wisdom be sure to add some complementary ideas. Small governments may be at a disadvantage in producing some services, but they should have an advantage in representing preferences and that should not be overlooked. Different services will be best produced by different configurations of cooperating local governments. Thus take a service by service approach and look for the best of the many ways available to implement intergovernmental cooperation. Research suggests you may not cut expenditures much, but you will probably get better services. Get organized for a regional approach and do some strategic planning. Besides looking inward for reform opportunities, look outside as well. Local governments have to take responsibility for coordination of the many agencies at higher levels of government that are involved in any particular type of service or it won't happen. Local officials have to bring a sharp focus on their problems. This means working through state associations with other local governments that have the same problems, and learning to lobby more effectively. A policy education approach by the housing and home building network is suggested.
Charles H. Dyson School of Applied Economics and Management, Cornell University