Local Fiscal Politics

Transcription

1 Local Fiscal Politics Local governments spending growing since WWII more services = need more $$ 300% Peaked in 1970s Federal aid to cities declined Local sources harder to tap 60% of local money from local taxes & fees 40% from state & federal government

2 Local Governments depend heavily on money transferred from state & federal governments Health & human services

3 Where does the money go?: Education Health / social services Housing / parks Transit Police, Fire, jails Administration planning public works

4 Local TAX sources Property Tax 72% this # inflated by schools Local sales tax 11% Local income tax 6% Misc taxes 6% Selective sales tax 5%

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6 Property Tax Less total local revenue from property tax today than 50 years ago Traditional rationale taxed real wealth (progressive) owning property = ability to pay owning = need for public services public services increase property values

7 Property Tax Contemporary Problems least popular tax less real wealth now in property home price inflation erodes ability to pay assessment increase a hidden tax now a regressive tax

8 Property Tax Your tax = (value * assessment rate) * tax rate state law sets all 3 elements Example ($250K *.95) *.013 = $3,087 ($400K *.95) *.013 = $4,940

9 Property Tax Problems Law requires periodic reassessments At times, rapid value increases Tax Revolts Initiative 722, 747 (WA); Prop. 13 (CA); Measure 5 (OR) 722 = 2% ltd in increased revenue collected 747 = 1% ltd in increased revenue collected state court Nov ruled I-747 unconstitutional Legislature adopted 1% limit on total collections» Banked capacity

10 Property Tax Other issues lump sum payments delinquencies: 2-15% exemptions ag land preservation universities public / govt. buildings non-profits

11 Sales Tax #2 source; major source for Cities State sets base rate cities / counties / transit districts can add to base Washington = 6.5% Sound Transit =.4% City of Seattle/King Co. 2.6% Crim justice levy (.10); King Co. (.15); Metro (.80); City (.85); Sound Transit (.4); etc. TOTAL = 9.5%

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13 Sales Tax Rational taxes ability to consume consume more, pay more make out-of-town folks pay in fragmented region...

14 Sales Tax Issues Regressive tax people in lowest income brackets consume all of their income; wealthy consume much less of their income with exemptions, tax less regressive Highly cyclical tax durable good sales drop in recession (like now)

15 Local Income Tax Few place use this Local option in OH, PN some states grant power case-by-case NYC has local income tax Rational tax wealth; progressive tax outsiders

16 Other Local Rev. Sources Local taxes only about 40% of local revenue 40% of total $$ from state / fed government 16-18% of total $$ = charges & fees Charges & fees about 27% of all LOCALY generated revenues

17 Charges and Fees Examples Development impact fees park entrance fees storm water fees sewerage fees airport departure / landing fees golf course user fees parking fees & fines 911 charges Bus fares

18 Charges and Fees What if National government funded by charges and fees? why not? How are cities different? What would we charge for? Airport use, highway use, EIS reviews

19 Charges & Fees Rationale only pay if you want service use more, pay more with taxes so unpopular, only way to fund services Issues ability to pay?

20 Debt Local governments can deficit spend Capital vs. operating debt Capital budgets infrastructure; long-term borrowing Types of Bonds General obligation public votes Revenue bonds no public vote?

21 Debt Creative use of revenue bonds non- guaranteed interest paid from revenue of project dorms, toll-roads, business parks, ferry terminals, airports, big growth area 25% of local debt now can operating stuff be rolled into debt issue? staff people, staff time, etc

22 Local Fiscal Crisis End of Federal gravy train 1970s no more easy revenues Property Tax revolt 1980s hard to raise taxes Globalization of capital 1990s sales tax sources (firms) more mobile Great recession of late 2000s

23 Trends in state tax revenues as % of GDP Property tax revolts Iranian oil, cut 1980 Oil crisis, 1973 Interest rates spike Dot com Bubble bursts Global fiscal crisis state taxes as % GDP

24 Local Fiscal Politics How fund a city? Equity issues everyone shares burden of costs Reality according to ability to pay? according to what they use?» what if we applied this logic to fed govt? nail the newcomers with charges & fees vs old-timers subsidize costs of new folks