Tax Revenue Forecasting Documentation, Fiscal Years - NYC.gov
STRUCTURING HEALTHY COMMUNITIES TAX REVENUE GENERATION AND FISCAL HEALTH.
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Transcript of STRUCTURING HEALTHY COMMUNITIES TAX REVENUE GENERATION AND FISCAL HEALTH.
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STRUCTURING HEALTHY COMMUNITIES
TAX REVENUE GENERATION AND
FISCAL HEALTH
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Presentation to the Governmental Research AssociationAugust, 2007
LeeAnne ClaybergerKerry Moyer
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STUDY OBJECTIVESSTUDY OBJECTIVES
• Detail the relative fiscal health of Pennsylvania’s municipalities
• Identify formidable threats to revenue generation (for instance, existing state legislation)
• Determine public attitudes toward local government and fiscal health
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THE STUDYTHE STUDY
• Includes 2,551 municipalities
• Compares fiscal health with tax effort and tax capacity
• Looks at changes from 1970 to 2003
• Uses maps to tell the story
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Fiscal Health MeasuresFiscal Health Measures
• EFFORT (two components)
Total Non-Real Estate Resident Tax Revenue
Aggregate Household Income
Total Real Estate Revenue STEB Market Value (Market Based Millage)
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Fiscal Health MeasuresFiscal Health Measures
• CAPACITY
5% of STEB Market Value + Aggregate Household Income
Number of Households
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SUMMARY OF STUDY SUMMARY OF STUDY FINDINGSFINDINGS
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Five Stages of Five Stages of Municipal Fiscal HealthMunicipal Fiscal Health
• Prosperity with low taxes• Increasing demand for services and gradually
rising tax rates and service fees• Taxes increase; reductions in non-core services• Tax revenues decrease; reductions in core
services• Loss of tax base, population, and increasing
fiscal distress
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Current set of tools is Current set of tools is insufficient to reverse insufficient to reverse the current momentumthe current momentum
• Act 511 of 1965-menu of taxes, rates, caps
• Act 111 of 1968-strikes and binding arbitration
• Act 195 of 1970-right to organize/negotiate
• Act 205 of 1984-funding employee retirement obligations
• Act 47 of 1987-declaration of fiscal distress
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Keep local municipal Keep local municipal identity but administer identity but administer regionallyregionally
• Fundamental mismatch between fluid economy and structured municipal boundaries
• Pennsylvanians like their local governments to remain local
• Research does not show a public outcry for consolidations and mergers of municipalities
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MUNICIPAL FISCAL MUNICIPAL FISCAL HEALTH STATEWIDEHEALTH STATEWIDE
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Five Stages of Fiscal Five Stages of Fiscal Health in 2003Health in 2003
Progression
Cities Boroughs 1st Class Township
s
2nd Class Township
s
Stage 1 0 0 27 399
Stage 2 15 99 26 259
Stage 3 1 213 1 512
Stage 4 1 366 29 256
Stage 5 39 228 8 29
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Extremes on the Healthy/ Extremes on the Healthy/ Distressed Spectrum; Distressed Spectrum; Comparison with State Comparison with State AverageAverage
CharacteristicTop 10% Distresse
d
Top 10% Healthy
Above average income 4 of 254 245 of 254
Above average BA degrees
26 of 254 207 of 254
Above average poverty 202 of 254
9 of 254
Above average 65 year olds
192 of 254
75 of 254
Above average pop density
225 of 254
96 of 254
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CORRIDORSCORRIDORS
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Example of a Example of a CorridorCorridor
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Corridor Example, Corridor Example, ContinuedContinued
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Geographic CorridorsGeographic Corridors
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Pennsylvania’s CitiesPennsylvania’s Cities
• Fiscally, PA’s most-distressed municipalities
• All 56 fall below, and most fall significantly below, the state average for tax effort/capacity
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Pennsylvania’s Pennsylvania’s BoroughsBoroughs
• Most severe negative change seen for boroughs in Adams, Allegheny, Beaver, Berks, Cambria, Chester, Dauphin, Delaware, Erie, Lawrence, Lehigh, Perry, Somerset and Westmoreland Counties
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Pennsylvania’s First Pennsylvania’s First Class TownshipsClass Townships
• 70 of 91 lost ground since 1970
• One township moved from below to above average
• 25 moved from above to below average
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Pennsylvania’s Second Pennsylvania’s Second Class TownshipsClass Townships
• Group shows relative fiscal health with 948 (about 65%) above the state average
• Since 1970 more townships became healthier (57%) than less healthy (43%)
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Municipal/County Municipal/County Clusters and Clusters and SubclustersSubclusters
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The Nature of Clusters The Nature of Clusters and Subclustersand Subclusters
• Boroughs cluster within fiscally distressed regions, but not within fiscally healthy regions
• Many counties have subclusters with varied fiscal health
• Clusters may present better ways to functionally consolidate services than groupings of adjacent communities
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REALITY VS. TAX REALITY VS. TAX POLICYPOLICY
Since 1970:• Significant population shifts (sprawl or
suburbanization)• Growth in households, not population• Continued reliance on property taxes
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Demographic Changes Demographic Changes from 1970 to 2003from 1970 to 2003*Inflation Adjusted Dollars*Inflation Adjusted DollarsAverages per householdAverages per household
Index 1970* 2003 Difference
%
Population 11,800,766
12,365,455
564,689 5%
Households
3,692,191 4,761,900 1,067,739 29%
Income $46,632 $52,706 $6,074 13%
MarketValue
$61,263 $100,343 $39,080 64%
Real Est Tax
$458 $325 ($133) (29%)
NonRealEstTax
$450 $487 $37 8%
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Compounding Factors, Compounding Factors, 20032003*Not including Philadelphia*Not including PhiladelphiaAverage per householdAverage per household
Cities* Boroughs
1st Class 2nd Class
Income $38,130
$46,298 $67,669 $60,112
STEB $54,334
$74,132 $132,398
$133,242
Rl Est Tax $535 $283 $421 $156
NonRlEstTx
$266 $209 $230 $250
Totals $801 $492 $651 $406
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Problems identifiedProblems identified
• Overall, municipalities are increasingly fiscally distressed
• There is a growing use of earned income taxes and fees, but many communities still rely heavily on property taxes
• Revenue caps remain largely unchanged from the 1950s
• There is a general lack of flexibility in current legislation
• Communities need sufficient discretion in deciding how to tax themselves
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PUBLIC PUBLIC UNDERSTANDING OF UNDERSTANDING OF FISCAL HEALTH AND FISCAL HEALTH AND LOCAL GOVERNMENTSLOCAL GOVERNMENTS
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Representation and Representation and ResponsivenessResponsiveness
• Citizens equate local government to the local officials who run them
• Support of local government often stems from a fear of losing representation and local funds for local projects
• Local officials are “people like us”
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Limited Knowledge of Limited Knowledge of Local GovernmentLocal Government
• Despite strong sentiment, citizens do not know a great deal about local governments, nor do they spend much time thinking about them
• Most citizens are not concerned about fiscal distress as this “happens in larger cities”
• Citizens in larger cities tended to underestimate their fiscal distress
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Bigger is Not Bigger is Not Necessarily BetterNecessarily Better
• Local governments represent community norms in a manner that the state cannot
• Even if wasteful and expensive, those issues are on a smaller scale for local government
• Most citizens see local government as the primary form of government; state exists to serve local governments
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State Government is State Government is Distant and Distant and UnresponsiveUnresponsive
“…these people (local government officials) are all visible to us and I think that there’s probably a sense that the farther government gets away from the people, the less responsive they are going to be.”
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Some Support for Some Support for Functional Functional ConsolidationConsolidation
There was general support for functional consolidation when:Local governments get their fair shareServices are improvedMoney is savedDirected toward health care and pension
sharing, joint administration efforts, and regional police forces
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RECOMMENDATION #1RECOMMENDATION #1
Allow communities to decide how and how much to tax locally minimum restrictionsmaximum constituent
input
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RECOMMENDATION #2 RECOMMENDATION #2 Modernize and enhance Modernize and enhance existing tax revenue existing tax revenue optionsoptionsfor municipalitiesfor municipalities
• Occurs on the state level• Avoids “one-time fixes”• Evaluate outdated legislation and
change or replace as necessary• Remove restrictions in lieu of local
options
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RECOMMENDATION #3 RECOMMENDATION #3 Place wide menu of Place wide menu of revenue generating revenue generating tools in communities tools in communities to avoid future fiscal to avoid future fiscal distressdistress
• Again, a subtle difference – “communities”, not municipalities
• Includes sources of revenue in addition to taxes (fees, licensing, debt management)
• Include counties, school districts, and local authorities
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RECOMMENDATION #4 RECOMMENDATION #4 Promote shared Promote shared expertise for complex expertise for complex issues/servicesissues/services
• Volunteers especially need assistance• Provide incentives, if needed• Many municipalities cannot, on their
own, afford professional or technical assistance
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RECOMMENDATION #5RECOMMENDATION #5Conduct further studyConduct further study
Define and standardize measures of fiscal health
Forecast future municipal fiscal healthAnalyze the expenditure and services side
of the fiscal equationCreate a baseline databasePay particular attention to the costs of
retirement systems, health care and tax collection (Part 2 will begin early fall)