In the La Follette Policy Report
Central City Revenues after the Great Recession
Andrew Reschovsky and co-authors Howard Chernick and Adam Langley explore the fiscal future of American cities.
Database makes for easy comparisons among cities
The 112-city Fiscally Standardized Cities database provides a unique resource for policymakers, journalists, researchers and others interested in exploring government finance in the largest cities in the United States.
The web-based format, developed by Adam H. Langley of the Lincoln Institute of Land Policy, makes it easy to construct custom tables using drop-down menus to display online or downloaded as a spreadsheet. The datasets include data for each fiscally standardized city and each of its component governments — cities, counties, school districts, and special districts.
Nationally, two examples illustrate the importance of the fiscally standardized cities estimates:
- According to city government data, Baltimore spends three times more per capita than Columbus, Ohio. However, fiscally standardized cities estimates show that per-capita spending in the two cities is nearly identical. This contrast exists because the city government provides nearly all public services in Baltimore, while in Columbus the overlying county government and independent school districts provide many public services.
- City government data suggest that the most important source of tax revenue in Tucson, Arizona, is the sales tax. In Buffalo, almost all of the city government's tax revenue comes from the property tax. The fiscally standardized cities estimates for these two cities tell a very different story. Because the county government in Tucson relies mainly on property taxes, Tucson residents actually pay more in property taxes than residents of Buffalo, where the county government relies on sales taxes.
Also, the recent bankruptcies of Detroit and several California cities highlight the importance of studying the fiscal conditions of America's central cities. With a few clicks one can discover that:
- Spending per capita in Detroit fell 28 percent from its 2003 peak to 2010 after accounting for inflation, more than any other fiscally standardized city during that period.
- Between 2007 and 2010, inflation-adjusted, per-capita federal and state aid to Miami and other Florida cities fell by about 25 percent. During the same period, aid to Houston and Dallas increased by more than 20 percent.
- Property taxes per capita in 2010 were higher in Atlanta ($2,618) than in any other Southern city. They were lowest in Montgomery, Alabama ($395).
The Fiscally Standardized Cities database joins other databases in Resources & Tools section of the Lincoln Institute of Land Policy's website.
As Detroit faces bankruptcy and other U.S. cities address an ongoing crisis in municipal finance, a new interactive database allows for the first time meaningful comparisons of city finances — from spending on schools, police, and public works to revenues from the property tax and other sources.
For example, Madison, Wisconsin, relies on the property tax for a larger share of its general revenue than all other cities in the 112-city Fiscally Standardized Cities database, says Andrew Reschovsky, professor emeritus of public affairs and applied economics. Forty-six percent of 2010 general revenues in Madison came from the property tax. The only other cities relying on the property tax for more than 40 percent of general revenues are Austin, Texas, and Boston, Massachusetts.
With a few exceptions, the database includes all the nation's largest central cities. It allows users to compare local government finances for 112 large U.S. central cities across more than 120 categories of revenues, expenditures, debt and assets. Based on U.S. Census data, the database provides 34 years of data (1977-2010), with more years to be added as data become available.
"Until now, making meaningful fiscal comparisons among the nation's central cities has been virtually impossible because of major differences in how cities deliver public services, with some city governments providing a full array of public services while others share the responsibility with a variety of overlying independent governments," says Reschovsky, who created the methodology behind the database with Howard Chernick, Hunter College and City University of New York, and Adam H. Langley, Lincoln Institute of Land Policy, where Reschovsky is a visiting fellow.
The unique methodology of the Fiscally Standardized Cities database accounts for these differences in local government structure by adding together revenues and expenditures for each city municipal government and an appropriate share for overlying governments, including counties, independent school districts, and special districts, Reschovsky says. "The concept of the fiscally standardized city provides a full picture of revenues raised from city residents and businesses and spending on their behalf, whether done by the city government or a separate overlying government."
The database allows for apples-to-apples comparisons of local government finances at the city level, whereas comparing the finances of city governments alone is like comparing apples and oranges and thus is misleading, Reschovsky says.
Compared to Madison, Milwaukee relies less on the property tax to finance government services. In 2010, Milwaukee's property tax accounted for 26 percent of general revenue in Milwaukee, somewhat higher than the average among all 112 fiscally standardized cities. Milwaukee ranked 51st in its reliance on the property tax.
"The reason for Madison's heavy reliance on the property tax is not because government spending is particularly high in Madison," Reschovsky says. "The fiscally standardized data indicate that in 2010 Madison spent $4,204 per capita, $792 less than median spending among all 112 central cities. Per-capita spending in Milwaukee was $5,173. Although that amount is above median spending, per-capita spending was higher in 45 central cities."
Madison relies so heavily on the property tax because local governments in Wisconsin (including school districts and county governments) have few other local (excluding state or federal aid) revenue sources, Reschovsky notes. "The property tax accounted for 70.4 percent of Madison's locally raised revenues. Only three cities (Boston, Worcester, and Springfield, Massachusetts) put more reliance on the property tax as a local source of revenue than Madison."
Milwaukee raised 53 percent of its locally raised revenues (excluding all federal and state grants) from the property tax 2010. Milwaukee ranks 15th among all 112 fiscally standardized cities in its reliance on the property tax as a local revenue source (the national average is 43.7 percent).