When and Why do Cities Bind Themselves?

Though the social science literature has thoroughly dissected the extent, causes, and consequences of state-mandated tax and expenditure limits on cities, to date there has been no systematic knowledge about or even whether cities enact such limits on themselves. Our survey of cities shows that at least one in eight municipalities has a locally-imposed limit on taxation or spending, and that these limits focus predominantly on the property tax. We combine our survey data with a 35-year panel on municipal finances and demographics and find that voters act to restrict politician behavior in homerule cities, in cities in metropolitan areas with few municipalities, and in places where the population composition is changing quickly. We interpret these findings as broadly consistent with a model in which voters adopt TELs in an attempt to insure themselves against future political changes.