At Lincoln House May 2015

In hard times, cities turn to fees

Cities continuing to struggle with finances have been increasingly relying on user charges and fees, according to an analysis of freshly updated data from the Lincoln Institute of Land Policy's database on local government finance, Fiscally Standardized Cities.

User charges and fees - for sewer systems, waste management, parks, city-run hospitals and airports, and for a range of services including education, housing, and community development - are the only major source of revenue that has grown since the start of the Great Recession in 2007. On average, after adjusting for inflation, per capita revenues from user charges grew by over 7 percent between 2007 and 2012. During the same period, property tax revenues fell by 5 percent, and revenues from state aid and from other taxes by nearly 10 percent.

The growth in user charge revenues continues a long trend. Data from the Fiscally Standardized Cities database show that after adjusting inflation and population change, user charge revenue in the average city in the database increased by 143 percent from 1977 to 2012. Revenues from local taxes other than the property tax, such as a local sales tax, increased 88 percent, while revenue from more traditional sources increased at a lower rate in that period. State aid grew by 53 percent, and property tax revenues by 17 percent, while federal aid actually declined by 18 percent.

The increased reliance on user charges has helped cities offset drops in other revenue sources, but has not led to increased spending. In fact, real per capita spending reductions from 2009 to 2012 occurred across almost all categories of spending, including public safety and education. Further, cities have scaled back dramatically on basic investments: the largest percentage cuts occurred in capital outlays (18.4 percent). These reductions in capital spending occurred at a time when many central cities are facing large unmet infrastructure needs due in large part to aging water, sewer, and transportation systems, and during a time when the interest rate costs of financing capital investments are at historical lows.

"Cities are making unwarranted choices to make fiscal ends meet in the short term while compromising long term security and stability," said George W. "Mac" McCarthy, president and CEO of the Lincoln Institute of Land Policy, who called for a revisiting of the fundamental covenant of property taxes - the focus of opposition and tax limits - to fund services and restore "municipal fiscal health."

"The costs of these choices are invisible until they erupt in dramatic ways - when bridges fall into the Mississippi, or buildings explode in Harlem as a result of hundred-year-old gas lines, or neighborhoods are debilitated by social protests. We are facing real structural challenges regarding the way we supply the basic public goods that most people take for granted."

Writing in the current issue of the Lincoln Institute's quarterly magazine Land Lines, McCarthy noted how many municipalities are increasing reliance on revenue from traffic citations and the sale of tax liens to investors, as they struggle with decades-old planning decisions that have decanted jobs and population to the suburbs, and costly federal mandates in the upgrading of infrastructure.

The Fiscally Standardized Cities database uses data from the Census Bureau to provide a full picture of all revenues raised from central city residents and businesses and spending on their behalf, whether done by the city government or an independent overlying government. The estimates add together revenues and expenditures for city governments and an appropriate share from overlying county governments, school districts, and special districts, allowing a meaningful comparison of local public finance across 112 cities. The database includes data up to 2012, the most recent year for which Census Bureau fiscal data are available. Users can build their own tables to analyze the data in the database, to compare property tax revenues in two cities, rank all cities by their school spending, investigate changes in public sector salaries over time, or see which cities are most reliant on state aid to fund their budgets.

In 2012 both revenues and spending in most of the nation's largest central cities remain below their pre-recession levels, said Lincoln Institute fellow Andrew Reschovsky, who teamed with senior research analyst Adam Langley at the Lincoln Institute and Howard Chernick of Hunter College to create the database. "Incomplete evidence from 2013 and 2014 data suggest that in 2015 many central cities remain in weak fiscal health, with inadequate revenues to provide important public services to their residents."

The single largest category of user charges are for sewers, and these grew substantially during and after the Great Recession. Sewer charges averaged $221 per capita for the 112 FiSCs in 2012 - up 16 percent from 2007 in real per capita terms. That is nearly $900 for a family of four. In some cities, sewer charges are much higher than average, including Detroit ($728), Seattle ($662), Atlanta ($503), and Tacoma ($501). Higher sewer charges are driven by many factors, including rising costs associated with meeting wastewater treatment requirements under the Clean Water Act.

Categories of charges include sewer systems, hospitals, airports, solid waste management, parking, seaport facilities, highways, school lunch programs, higher education, parks and recreation, and natural resources. The categories are detailed by the U.S. Census Bureau in this classification manual.

Data-driven decision-making

The ability to visualize data - where residents have health insurance, how close they are to a park or library, or who is going through foreclosure - has become prerequisite in citybuilding these days. It's almost hard to imagine making policy decisions or launching initiatives without big data as a guide. And as Maggie McCullough, founder and President of PolicyMap, made clear in a presentation at the Lincoln Institute last month, the technology is getting better all the time.

PolicyMap, an online data and mapping tool that enables government, commercial, non-profit and academic institutions to access data about communities and markets across the US, is a project of The Reinvestment Fund, a nonprofit community development financial institution that works across the Mid-Atlantic. The idea was simple: create an enormous online library of place-based data and make it available through a familiar map interface, empowering individuals and organizations with "location intelligence."

A veteran in housing at local, state, and federal agencies, McCullough said she saw the need to present a wide array of data in an easy-to-understand and actionable format. Whether at the city level or at the Census, CDC, or FBI, information is "available but not accessible," she said. Users can build maps based on 37,000 data indicators including demographic information, home sale statistics, health data, mortgage trends, school performance scores, unemployment rates, and crime statistics. The maps have been used for research, market studies, business planning and site selection, grant applications, and impact analysis - the latter especially important at a time when scarce resources need to be targeted for maximum impact. The applications are numerous, from siting health care centers, supermarkets, or neighborhood libraries, to tracking tax delinquencies and vacant lots.

The platform has a unique application as well in fostering interdepartmental coordination and strategic planning by sharing data across city agencies, McCullough said.

"It's always better to be making decisions based on information, rather than based on intuition," said Lincoln Institute President George W. "Mac" McCarthy, who promised future collaboration with PolicyMap on zoning and land use information, for example. "We want to bring data to practice and policy on the ground."

The presentation, The Power of Data-Driven Decision-Making, part of the Lincoln Institute's spring lecture series, can be viewed in its entirety here.

McCullough has worked for the City of Philadelphia's Office of Housing, Governor Casey of Pennsylvania, the Office of Management and Budget in the Clinton Administration, and within the U.S. Department of Housing and Urban Development. She joined The Reinvestment Fund in 2004, conducting housing-related research and analysis for several of its public sector and foundation clients. She holds a Masters Degree in Governmental Administration from the University of Pennsylvania and has a B.A. in Economics and Political Science from St. Joseph's University.

Renewal, house by house, in Detroit

The shrinking of Detroit and the city's vast areas of abandoned and vacant land - about 20 square miles, roughly equivalent to the size of Manhattan - have been well-documented. But a lesser-known story is how some neighborhoods are stemming the tide, fending off disintegration block by block and house by house. Representatives of the Detroit Land Bank Authority led a tour this week of homes in the East English Village neighborhood that are being auctioned off and rehabilitated. One woman who had purchased the home for about $8,000 was busy replacing floors and fixing up a big back garden. Another home drew prospective buyers at a recent open house; despite being in very rough shape, the property could sell for $20,000.

If the trend continues, Detroit could cut in half the 80,000 structures set for demolition by a blight task force, said Craig Fahle, director of public affairs at Building Detroit. The excursion to the east side, near Grosse Pointe, was part of a Journalists Summit (On Twitter: #RVPSummit) organized by the Lincoln Institute and the Center for Community Progress, in association with the 2015 Reclaiming Vacant Properties Conference. About two-dozen writers and editors were in attendance.

Tamar Shapiro, president of the Center for Community Progress, and Lincoln Institute President George W. "Mac" McCarthy led the group through the history of land banks and reclaiming abandoned properties. There is great interest in rehabilitating blighted properties, but often it just takes too long to get required permits or a certificate of occupancy - details in the bureaucratic process that need to be streamlined, McCarthy said.

The journalists heard from Jeff Hebert, Executive Director of the New Orleans Redevelopment Authority ("Weak Market, Strong Market, and Everything Between: The Role of Market Responsiveness in the Fight Against Blight"); Alan Mallach, co-author of Regenerating America's Legacy Cities ("What's Really Happening on the Ground: Reinvestment and Displacement in Post-Industrial Cities"); Gus Frangos, president of the Cuyahoga County Land Reutilization Corporation, and Kim Graziani, director of National Technical Assistance, Center for Community Progress ("120 Land Banks and Counting: Can They Transform America's Distressed Neighborhoods?"); Frank Alexander, Sam Nunn Professor of Law at Emory University ("Zombies, Delinquents, and Other Trouble Makers: Understanding How Properties Get Stuck"); and Toni Griffin, director of the J. Max Bond Center on Design for the Just City, who showcased a new platform for sharing innovations ("Designing a Just Post-Industrial City").

The group engaged in a spirited conversation about the challenges of writing about struggling cities and gentrification, even as there is a growing readership for stories about cities and numerous online venues such as Next City and CityLab. As organizer of the Journalists Forum on Land and the Built Environment and partner in UN-HABITAT's Urban Journalism Academy, the Lincoln Institute seeks to improve the dialogue about land policy by helping turn often highly technical material into compelling journalism.

Odds & Ends

In regenerative design, a new standard for being green, buildings make a positive contribution back to Mother Nature ... In Houston, the delicate business of branding a neighborhood ... On Route 66: our report on zombie subdivisions is cited in this Guardian dispatch on development in New Mexico ... The key to opportunity? Access to transportation ... Praise for the land tax, lessons from Fairhope, and why billionaires don't pay much in property taxes ... Measuring municipal fiscal health ... This month's highlighted Working Paper: Local Public Goods and Property Tax Compliance: Evidence from Residential Street Pavement, by Marco González-Navarro and Climent Quinta-Domeque.

— ANTHONY FLINT, Lincoln Institute of Land Policy

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