Deborah A. Carroll

Diversifying Municipal Government Revenue Structures: Fiscal Illusion or Instability?

This paper examines (1) whether revenue diversification leads to greater instability as represented by revenue volatility, and (2) whether revenue complexity produces fiscal illusion as represented by increased public expenditures. These questions are answered by analyzing panel data on municipal governments between 1970 and 2002. The findings suggest that fiscal illusion does not occur among municipal governments, but revenue diversification does influence levels of volatility. However, the way in which municipalities diversify is important for achieving revenue stability. When diversification is considered in isolation, both tax and nontax diversification reduce revenue volatility. When diversification and complexity are considered simultaneously, the statistical effect of nontax diversification disappears. But, when a tax revenue structure is both diversified and complex, the likely outcome is greater revenue volatility rather than stability.

The Effects of Assessment Quality on Revenue Volatility

This paper examines the relationships between assessment quality, property tax revenue volatility, and other revenue volatility using panel data of all 100 counties in North Carolina between 2003 and 2007. Findings suggest that characteristics of the property tax base are the most important predictors of property tax revenue volatility among counties over time. Specifically, increases in assessed value and years in which a mass revaluation occurs are most influential in determining property tax revenue volatility. The second stage of analysis reveals that population, nontax revenue dependence, property tax dependence, and assessment quality have the greatest influences on volatility of other revenues among counties over time. The effect of assessment quality on nonproperty tax revenue volatility is conditional upon a countys property tax dependence.

Brownfields, Crime, and Tax Increment Financing

When the determinants of property value include a central city—a location in which private businesses are often reluctant to invest—property values are no longer a simple function of land and demand features but are also influenced by health and welfare issues such as neighborhood crime and environmental contamination. To maintain economic vitality, central cities require not only the presence of market forces and the provision of public amenities that commonly increase the value of property but also the implementation and effectiveness of public policies directed at stimulating property valuation to combat the negative influences of these unique features of the urban environment. This article examines tax increment financing in relation to the health and welfare issues of crime and brownfields. The authors empirically show that the public policy of tax increment financing can effectively increase districtwide property valuation to counteract the negating effects of crime and brownfields.

Alternative Service Delivery Does Nonprofit Financing Influence State Tax Burden

We analyze panel data of U.S. states to determine whether nonprofit contribution and program service revenues are correlated with state tax burden. State tax burden is modeled as a function of (a) state tax policy, (b) nontax policy factors that affect state income, and (c) other exogenous factors that are independent of state tax policy and do not directly induce income; regression results reveal correlations with variables in all three categories. Intergovernmental revenue (IGR) paid to local governments, debt burden, tax exporting, a tax revenue limitation, and nonprofit revenue are most consistently correlated with state tax burden. Financial support for nonprofits in the form of contributions helps to reduce state tax burden and does so at a meaningful level. This finding implies nonprofits provide goods and services that are supplementary to government provision. However, the supplementary nature of nonprofit service provision is not universal. Further analysis of contribution and program service revenues for nonprofits in particular service categories finds either no correlation with state tax burden, a reduction in state tax burden, or an increase in tax burden imposed on state residents over time. By controlling for factors influencing demand for service provision and state tax policy changes, the regression results also provide evidence that government acts as a free rider.

IS THERE A 'GAAP GAP'? A POLITICO-ECONOMIC MODEL OF MUNICIPAL ACCOUNTING POLICY

Positive accounting theory suggests jurisdictions will meet their stakeholders’ financial information needs at the lowest possible cost, and current accounting policy will change if it does not accomplish that objective. This paper examines the breadth of stakeholders who are associated with accounting policy. We use multivariate methods to determine which among a group of potential users including taxpayers, interest groups, local government managers, the municipal credit market, and other governmental entities are correlated with accounting policy among municipal governments in Illinois. The results suggest one particular stakeholder - the municipal credit market - is an important determinant of the use of Generally Accepted Accounting Principles (GAAP). The analysis shows that professionalism, history, and administrative capacity are also associated with a municipality’s accounting policy.

Guns vs. Taxes? A Look at How Defense Spending Affects U.S. Federal Tax Policy

Although studies have shown a theoretical and empirical link between defense spending and economic growth and between economic growth and tax policy, the impact of defense spending on federal tax policy remains largely unexplored. This paper proposes a theoretical model and empirical test to explore the direct and indirect effects of defense spending on federal tax policy. The findings suggest that consumption expenditures for national defense directly influence the federal corporate income tax rate. However, the analysis finds no indirect relationship between defense spending and federal tax policy mediated through economic growth.

IMPLEMENTING HIGHWAY PREVENTIVE MAINTENANCE: COMPARING CHALLENGES, PROCESSES, AND SOLUTIONS IN THREE STATES

One of the central challenges facing todays state transportation policymakers is how to incorporate preventive maintenance concepts and strategies into existing asset-management systems. Seven unique challenges to implementing preventive maintenance are identified in the literature and elsewhere, and a discussion covers the ways states have addressed those challenges through various implementation strategies. Then, case studies provide examples of how that incorporation has occurred in the departments of transportation in Michigan, Kansas, and Nebraska. The three case studies are presented in an effort to demonstrate the advantages and disadvantages of these three unique approaches, herein labeled the top-down approach, for Michigan; the bottom-up approach, for Kansas; and the inclusive approach, for Nebraska. In particular, an examination is presented of how preventive maintenance concepts were integrated into the planning, budgeting, and technical needs-assessment for state highways.

Assessing the Influence of Property Tax Delinquency and Foreclosures on Residential Property Sales

We examine the influence of property tax delinquency on the sale price of nearby homes from 2002 to 2013 using more than 46,000 residential property sales in a representative midwestern central city—Milwaukee, Wisconsin. After controlling for a number of property and neighborhood characteristics including nearby foreclosures, we find property tax delinquency has a significant influence on nearby home sales. The relationship is negative; one additional tax delinquent property within 250 m of a home sale is associated with a discounted sale price of 0.79% or approximately

Taking Stock of Gaps to Be Closed Survey Findings From the States

1,085 on average. In addition, the influence of tax delinquent properties on home sale prices diminishes with distance, suggesting blight is the source of the discount. Based on these findings, the negative influence of tax delinquency is likely to be exacerbated in central cities where housing density is greater and delinquency is higher and more persistent than the surrounding suburbs, which has the potential to lead to fiscal distress as property taxes are the primary revenue source for cities. As such, we suggest a two-tiered approach for cities to mitigate the negative consequences of tax delinquency: a combination of policies to eliminate delinquency and also to help homeowners become financially stable.

Revenue Diversification in Nonprofit Organizations: Does it Lead to Financial Stability?

The Federal Highway Administration uses the term gaps to be closed to identify an incomplete roadway system. Through a national survey of state departments of transportation (DOTs), this article provides a comprehensive examination of the prevalence and location of gaps to be closed, reasons for the existence of such gaps, and the current state of practice for addressing the issue of gaps to be closed. The authors find that seven states currently have gaps to be closed, which can be attributed to a lack of funding, citizen and interest group opposition, the presence of historical landmarks, an impasse on construction plans, and other political and environmental issues. They also find evidence of formal policies and specific management approaches among the states to address the issue of gaps to be closed. Conclusions are drawn from the survey results and are provided as suggestions for states and local communities to address the issue of gaps to be closed.