Urban Core vs. Suburban Fringe: Asymmetrical Fiscal Effects of Tax and Expenditure Limitations in Metropolitan Areas

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Date

2009-09-25

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Publisher

Virginia Tech

Abstract

This dissertation assesses the effects of tax and expenditure limitations (TELs) on principal items of revenue, largest components of expenditure and the levels of public debt of local governments serving urban cores and suburban fringes of the largest metropolitan areas in the US.

The first part of the dissertation consists of 4 chapters. Chapter 1 examines the formal aspects of TELs; Chapter 2 explores historical evolution of fiscal limits between 1800 and 2009; Chapter 3 examines substantive nature of TELs; and Chapter 4 reviews the extant research on TELs. The past research suggests that TELs are associated with increased centralization, diminished government responsiveness, and suboptimal outcomes of the entire local public sector.

The second part of the dissertation, Chapters 5-6, presents the empirical study of the asymmetrical fiscal effects of TELs on different geographic segments of metropolitan areas. The study employs the quasi-experimental multiple comparison group time series research design and measures fiscal outcomes associated with the imposition of TELs. It relies on a standard fixed effects dummy variable OLS model with constant slope coefficients and variable intercept. The sample (N = 166,530) contains 7 periods of observation at 5 year intervals of 745 metropolitan counties from 270 metropolitan areas. The unit of analysis is the metropolitan county area.

The study found that in the urban cores and suburban fringes of metropolitan areas: 1) overall fiscal effects of TELs follow general asymmetrical trends identified by past research; 2) specific fiscal effects varied by comparison group, type of TEL imposed, and measure of fiscal outcome; 3) local governments in the urban cores are more adversely affected by TELs; 4) general revenues and expenditures declined in all comparison groups but urban core local governments experienced larger declines; 5) in all comparison groups own source revenues declined, intergovernmental revenues increased, spending on public education and public safety declined with larger declines in the urban cores; 6) long-term debt (especially non-guaranteed) has been rising more quickly in the urban core segments of metropolitan areas; and 7) in general, the effects of TELs were more negative and more pronounced for local governments experiencing fiscal stress.

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Keywords

Local Government, Tax and Expenditure Limits, TEL, Revenues, Expenditures, Debt

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