Town managers, mayors, council members, and other municipal officials from all six New England states gathered this month at the Lincoln Institute to review the region’s economic outlook, learn from the fiscal challenges of San Bernardino and Baltimore, explore Boston’s fiscal and economic development initiatives and delve into the promises and risks of technology.
The seminar, Critical Issues for the Fiscal Health of New England Cities and Towns, is part of the Lincoln Institute’s effort to promote municipal fiscal health, and was co-sponsored by the New England Public Policy Center of the Federal Reserve Bank of Boston. The presentations can be viewed on the Lincoln Institute’s SlideShare page by clicking on the name of each speaker.
Robert Triest, vice president and director of the New England Public Policy Center, compared the economies of the New England states, reporting that growth is strongest in Massachusetts and weakest in Connecticut, Maine, and Rhode Island, where employment has not yet rebounded to its pre-recession peak. Christiana McFarland, research director for the National League of Cities (NLC), shared the results of the NLC’s latest survey of fiscal conditions, in which four times as many cities reported being better able to meet financial needs than those who reported being less able. Bo Zhao, senior economist at the New England Public Policy Center, reviewed research on the possibility of local option taxes, concluding that they could generate considerable additional revenue for New England cities and towns, but would not be likely to reduce fiscal disparities.
Michael Lawson, a researcher for the George Mason University Fiscal Sustainability Project, shared a fiscal comparison of Baltimore and San Bernardino, noting that the equalization of state aid and the presence of clear lines of executive authority in the city charter represent two factors among many in Baltimore’s more robust recovery. Peder Schaefer, associate director of the Rhode Island League of Cities and Towns, presented a case study of the city of Woonsocket, whose use of the Budget Commission Act helped the city reach fiscal solvency.
Ronald Rakow, Boston’s Commissioner of Assessing, argued that a heavy dependence on property tax revenues makes it essential for the city to be creative in both growing and preserving its property tax base. Lourdes Germán, fellow at the Lincoln Institute, followed with an overview of municipal access to capital markets for public projects, highlighting recent projects such as the City of Brockton’s clean renewable energy bonds. Richard England, visiting fellow at the Lincoln Institute, argued that the preferential tax assessment of rural land isn’t as effective for encouraging small farms as its enactors had hoped, and that reform is necessary to prevent misuse of this policy tool.
Finally, Adam Chapdelaine, town manager for Arlington, Mass. began a discussion of technology with a tour of Arlington’s award-winning fiscal transparency program. Marc Pfeiffer, assistant director and senior policy fellow at the Bloustein Local Government Research Center at Rutgers University, discussed the technology risks facing municipal officials, which extend beyond cyber security to financial, operational, and reputational risk.
April 18, 2016
April 11, 2016
A New Generation of Leadership for Land Trusts
In the face of climate change, growing legal complexity and other challenges, the next generation of land conservation leaders will need to be even more nimble and energetic than the pioneers who built the land trust movement over the past few decades, conservation consultant and former Land Trust Alliance President and CEO Jean Hocker said recently in a presentation at the Lincoln Institute.
In her talk, A New Generation of Leadership for Land Trusts, Hocker shared the results of a survey of two generations of land trust leaders – those who emerged during the early years of the land trust movement and those who are currently taking over as executive directors of many land trusts.
Despite many generational differences, she is confident that new land trust leaders are well equipped to lead their organizations and achieve success in private and civic land conservation.
“Over the years the unique culture has been the backbone of land trusts’ success,” she said. “It’s a culture of sharing, of respect for grassroots entrepreneurship, of ongoing learning and advancement, of producing tangible conservation results. With care, that culture will continue to foster success, even as land trusts and land conservation continue to evolve, and especially as new generations of leaders infuse the land trust movement with new energy, new skills, and ever-forward thinking.”
From 1987 to 2002, Hocker was President and CEO of the Land Trust Alliance, an organization launched by the Lincoln Institute in 1982. Now an independent organization based in Washington, D.C., the Alliance has grown to represent more than 1,100 land trusts in the United States. Hocker, now president of Conservation Service Company, LLC, is also the 2014 recipient of the Land Trust Alliance’s Kingsbury Browne Leadership Award and is a former Kingsbury Browne Fellow at the Lincoln Institute.
Click here to watch her lecture in its entirety.
April 01, 2016
March 30, 2016
The Property Tax as “A Good Tax”
The property tax, a mainstay of local government, is the subject of continual controversy, with numerous ballot measure to place caps on it, or even in some cases proposals to eliminate it completely. But in fact it is a fair, democratic, stable and efficient source local revenue, attorney and property tax expert Joan Youngman argues in “A Good Tax: Legal and Policy Issues for the Property Tax in the United States,” published this month by the Lincoln Institute of Land Policy.
The property tax generates some $472 billion per year in local revenue in the United States, making it a critical source of funding for schools, police and fire protection, and other public services. It is also a highly transparent tax, holding local governments accountable to citizens, who can see clearly how their tax dollars are spent.
However, a series of populist revolts, beginning with California’s Proposition 13 in 1978, have weakened the property tax and led to unintended consequences.
“Ironically, many property tax limitations enacted in the name of fairness have actually distorted the tax base and introduced inequities,” Youngman said. “I hope this book will serve as a roadmap for a new path forward, helping policymakers strengthen the property tax as a fair, stable and efficient source local revenue and autonomy.”
Through a detailed analysis of the legislative and administrative issues facing policymakers, Youngman outlines ways in which state and local governments can provide taxpayer relief, when necessary, while preserving crucial provisions of the property tax, such as the accurate assessment of every property based on the fair market value.
“At a time when many governments are facing fiscal difficulties and the need to address delayed or deferred financial obligations of all types, an effective property tax can be a valuable instrument for the common good,” Youngman writes.
The comprehensive assessment of the current state of the property tax covers the following topics:
- Progressivity, Regressivity, and Fairness
- Values and Valuation
- Property Taxes and School Finance
- Tax Increment Financing
- Classification and Differential Taxation
- Open Space and Conservation Easements
- Farmland Assessment and Current Use Taxation
- The Valuation of Federally Subsidized Low-Income Housing
- Exemptions and Payments in Lieu of Taxes
- Tax Restrictions and Assessment Limits
- Tax Limitations and Accurate Assessments: The Massachusetts Experience
Youngman is a senior fellow and chair of the Department of Valuation and Taxation at the Lincoln Institute. She is an attorney and author of numerous articles concerning the taxation of land and buildings. She is the author of Legal Issues in Property Valuation and Taxation: Cases and Materials (2006), a co-author of State and Local Taxation: Cases and Materials (10th edition, 2014), and coeditor of Erosion of the Property Tax Base (2009), Making the Property Tax Work – Experiences in Developing and Transitional Countries (2008), and The Development of Property Taxation in Economies in Transition: Case Studies from Central and Eastern Europe (2001).
March 24, 2016
March 17, 2016
Lincoln Institute Expands Signature Fiscal Database
As local governments continue their struggle to recover from the Great Recession, the Lincoln Institute of Land Policy has expanded a signature interactive database to allow for the meaningful comparison of finances across 150 U.S. cities, just one piece of a larger effort to make public finances more transparent. With the addition of 38 new cities, the Fiscally Standardized Cities (FiSC) database now includes at least two cities in all but two states, allowing for a broader analysis of how the nation’s largest cities pay for public services, from schools to police to public works.
“Transparency is the linchpin of fiscal health,” said George W. “Mac” McCarthy, president of the Lincoln Institute. “As local governments and citizens grapple with tough issues like education, infrastructure and land use, having a clear picture of how 150 cities pay for public goods and services is incredibly valuable.”
Created in 2013, the FiSC database provided the first meaningful comparison of local government finances at the city level by untangling the complex web of governmental entities in each city – including counties, independent school districts and special districts – to provide an overview of revenues raised from city residents and businesses and spent on their behalf. The database includes data for each year from 1977-2012, tracking more than 120 categories of revenues, expenditures, debt, and assets (for more details, view the working paper “Methodology Used to Create Fiscally Standardized Cities Database”)
Later this year, the Lincoln Institute will further enhance the database with the addition of a new year’s worth of fiscal data from the U.S. Census Bureau, new data on public pensions, and analysis that will help put the data in context. In addition, the Institute will unveil a new Municipal Fiscal Health Dashboard, which will provide a visualization platform for the FiSC database, incorporate additional financial and demographic data, and add features such as a liquidity calculator, another step toward greater fiscal transparency.
March 16, 2016
In Prague Towards Habitat III, Financing the New Urban Agenda
A delegation from the Lincoln Institute is on the ground this week in Prague for the UN-HABITAT Europe Regional Meeting for Habitat III, continuing our engagement in the run-up to the global cities summit in Quito, Ecuador this fall, with an emphasis on financing the New Urban Agenda.
A presentation is planned on the recently posted Policy Unit 5 paper Municipal Finance and Local Fiscal Systems, authored by experts brought together by the Lincoln Institute and the World Bank. The paper establishes how municipal governments oversee the provision of public goods and services to a growing majority of the world’s inhabitants, and “accordingly, improving the capacity of local governments to fund those services, and the transparency and accountability of the funding process, impacts the quality of life and level of citizen engagement … Municipal finance is the operational fulcrum on which the success of ongoing future rapid urbanization rests.”
Enrique Silva, senior research associate for the Latin America and Caribbean Program, today presented case studies from Brazil to highlight critical issues in municipal fiscal health and illustrate innovations in planning and land based financial tools, including value capture, at a side event co-sponsored with the Organization for Economic Co-operation and Development (OECD) titled “How to Govern Land Use In Metropolitan Areas”.
Silva, who is also the co-chair of the Research and Academics Constituent Partner Group of the General Assembly of Partners, will participate in a second side event organized by the GAP titled “The Straight Path to Habitat III: Part III Knowledge Platform for the New Urban Agenda.” GAP is an initiative of the World Urban Campaign that provides a platform for consensus building and partnerships within the preparatory processes toward Habitat III and beyond. As co-chair of the RACPG, Silva advocates on behalf of an international network of academics and researchers within GAP initiatives and the set of preparatory meetings leading up to Habitat III, and in Prague will be working with other GAP representatives on the draft of the final Prague Declaration.
The Lincoln Institute has submitted a request to address the meeting organizers and Habitat III Secretariat, with a brief statement about our mission and recommendations for the Habitat III process and the content of the Summit’s final product, the New Urban Agenda.
All 10 Policy Unit papers can be viewed here.
March 10, 2016
Toward Transparency in the Municipal Bond Market
At $3.7 trillion, the U.S. municipal bond market is so massive it is incomprehensible to many citizens. And as the source of financing for two thirds of schools, roads, hospitals, and other infrastructure, it is critical to the quality of life of states, cities and towns of all sizes.
A financial market cannot function well without one key ingredient – transparency -- said Lynnette Kelly, executive director of the Municipal Securities Rulemaking Board, at a recent presentation at the Lincoln Institute.
“Transparency promotes future access, lower borrowing costs and improves credibility with stakeholders,” said Kelly, noting that a transparent municipal debt market benefits state and local governments as much as it does investors.
Historically, information about municipal bonds has not always flowed freely, a problem that came to a head in the 1970s when New York City sold billions of dollars of bonds based on overinflated revenue projections, and reached the brink of bankruptcy after the local bond market collapsed. The Municipal Securities Rulemaking Board was created by Congress in 1975 in response to that upheaval.
The MSRB regulates bond dealers, underwriters, and advisors that participate in the municipal debt market, and the agency also maintains a public database of disclosures, prices and other information about municipal bonds. Over the past four decades the MSRB has helped increase transparency and narrow the information gap between large institutional investors, financial firms, individuals, and bond issuers.
But challenges remain. Six years ago, with the passage of the Dodd-Frank financial reform legislation, the MSRB received new authority to regulate municipal advisors, who act as counsel to cities and towns accessing the bond markets. The MSRB established a professional qualifications exam and basic rules these advisors, who had previously gone unregulated.
Last month, the MSRB announced new regulations to address so-called “pay-to-play” arrangements, whereby advisors make political contributions to local government officials or bond measure campaigns to help secure them as clients. The new rules prevent advisors from doing business with a municipality for two years after making certain contributions.
“This is such an integral rule to prevent conflicts of interest and insure that professionals are hired based on merit," Kelly said.
The presentation, including a conversation with Lincoln Institute Fellow Lourdes Germán, can be viewed in its entirety here. The event was the latest installment in a series devoted to municipal fiscal health.
February 23, 2016
Tilting against tax breaks
Sometimes, tax incentives can be useful. Public officials can offer them to encourage a company to clean up and reuse land in a struggling postindustrial city, or open a grocery store in a food desert.
But more often than not, cities and states provide tax breaks in a desperate attempt to compete with one another for jobs, using them even when they play little, if any role in a company's decision about where to locate.
In a recent presentation at the Lincoln Institute – the second installment in our series of lectures under the theme of municipal fiscal health – Greg LeRoy, executive director of the Washington, DC-based organization Good Jobs First, described how large companies pit cities and states against each other, encouraging them to offer greater and greater incentive packages, to the tune of more than $70 billion per year nationwide.
"Public officials' view of the process gets incredibly distorted because they think they're actually influencing the behavior when they are not," LeRoy said in a conversation with Lincoln Institute President George W. "Mac" McCarthy.
LeRoy discussed the variety of property tax abatements, corporate income tax credits and other breaks offered in increasingly large amounts to retain or attract jobs, such as the state of Washington's record-breaking $8.7 billion offering to Boeing in 2013, or Nevada's $1.3 billion package awarded to Tesla Motors in 2014. A relatively modest but still notable package of incentives was offered to General Electric in that company's relocation of headquarters form Fairfield, Conn. to Boston.
When large companies relocate, or open a new facility, they focus on the factors that relate directly to their business model, such the cost of labor, the availability of a skilled workforce, or the proximity to important infrastructure. A Lincoln Institute study found that tax breaks have almost no impact on a firm's profitability. Property taxes, the study found, average much less than 1 percent of total costs for the U.S. manufacturing sector.
However, companies have come to expect state and local tax incentives, and they have the leverage to push for them.
For local and state officials, the political risk of losing a company to a rival location outweighs that of providing overly generous incentives, even though they come at taxpayers' expense, LeRoy said.
The good news is that some cities and states are taking steps to reduce the use of wasteful tax incentives. They are creating agreements with one another to refrain from actively "poaching" companies, and requiring companies that receive tax breaks to meet performance requirements. In addition, new disclosure requirements – especially at the state level – and government accounting standards are helping to provide more transparency about the cost of tax incentives.