At Lincoln House August 2016

Party over, fiscal challenges remain


The conventions seem long ago, in the rapid pace of this year's presidential campaign. But it's still worth considering that for both Cleveland and Philadelphia, site of the Republican National Committee and Democratic National Committee conventions respectively, the day-to-day struggle to maintain municipal fiscal health remains.

An analysis of the Lincoln Institute's Fiscally Standardized Cities database reveals that both cities are struggling with structural issues that in fiscal terms keep them on the brink. The database allows comparison of local government finances for 150 of the largest U.S. cities across more than 120 categories of revenues, expenditures, debts and assets.

The findings along with newly compiled charts showing trends in expenditures, revenues, and the impact of housing markets, appeared in an op-ed essay by Lincoln Institute research fellow Andy Reschovsky, published by Next City last month.

Like many other post-industrial cities, Cleveland and Philadelphia are grappling with population loss, declining employment, particularly in manufacturing, highly fragmented metropolitan areas, the lingering effects of the Great Recession, and the boom and bust of the housing market, Reschovsky writes. Cleveland and Philadelphia are experiencing the same turbulence as many other cities in the database:

  • After adjusting for population change and inflation, total local government spending in the average central city is lower in FY 2013 than it was in FY 2007, just before the start of the Great Recession.
  • Most types of spending have been reduced, with spending on public education being particularly hard hit.
  • The economic recession, exacerbated by the housing crisis (falling housing prices and rising foreclosure rates) has resulted in reductions in city property tax revenues.
  • The average central city has experienced large cuts in state aid. These cuts in aid can be attributed to the hit to state tax revenues from the Great Recession, exacerbated by the decision in some states to cut state income, sales, and business tax rates.
  • Federal budget policy has resulted in a steady reduction in federal aid to cities. Although cities were helped by the Federal Stimulus (ARRA), federal aid peaked in 2011, and has declined continuously since then.

There is a positive impact of hosting the major party conventions, to be sure. The US Travel Association reported that Philadelphia will reap $180 million in direct spending as a result of the DNC event. Cleveland, as well, has been investing heavily in its downtown, which was showcased during the RNC. But while the two cities were in the spotlight, we hope a serious conversation about fiscal challenges in cities can take place in this campaign.

C. Lowell Harriss Fellowships named

From the effectiveness of California's film tax credit to role of insurance in climate change resilience, recipients of the Lincoln Institute of Land Policy's C. Lowell Harriss Dissertation Fellowship will undertake a variety of research on the cutting edge of tax and land policy.

The fellowship, named in honor of the Columbia University economist (1912-2009) who served for decades on the Lincoln Institute's board of directors, supports work on doctoral dissertations. The program provides a link between the Lincoln Institute's educational mission and its research objectives by supporting scholars early in their careers. The recipients and their topics are:

  • Jamaal William Green of Portland State University will study the role of industrial land preservation in protecting and growing urban manufacturing employment.
  • Thomas Warren Hilde of the University of Texas at Austin School of Architecture will explore how scenario planning can maximize the ability of green infrastructure to make cities more disaster resilient.
  • Ben Hyman of the University of Pennsylvania will study California's $800 million film tax credit program, comparing recipients of tax credits with filmmakers who applied unsuccessfully for the credit.
  • Walter Melnik of Michigan State University will study how Ohio cities and school districts adjust their mix of income and property taxes in response to changes in local economic conditions.
  • Corbin Miller of Cornell University will study the effects of property tax limits and property tax levy elections on school spending and student test scores.
  • David Schoenholzer of the University of California, Berkeley will estimate the value of public goods like police, roads and sewers by studying how property values change when cities annex land.
  • Alpen Sheth of the Massachusetts Institute of Technology will investigate the use of insurance to protect governments from the risks of climate change.
  • Ruchi Singh of the University of Illinois at Urbana-Champaign will study the effect of the 1965 and 1992 riots on the property tax base in Los Angeles.

Odds & Ends

A thoughtful and thorough review of A Good Tax by senior fellow Joan Youngman in Urban Land magazine ... The rise of Airbnb as a housing market force ... A fervent call for the land value tax ... Planning for the driverless car revolution ... At Chautauqua, President George W. "Mac" McCarthy on the future of smaller cities (video) ... An African city's quest for fiscal health, and the role of land ... After the Olympics, the world's attention turns to Habitat III in Quito; Enrique Silva, in this video interview by Next City, talks about the role of Latin American countries ... This month's highlighted Working Paper: Leadership of Land Trusts: Generational Transition and Preparing for the Future, by Jean Hocker.

— ANTHONY FLINT & WILL JASON, Lincoln Institute of Land Policy

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