New partnership between a county and school system

As far as I know, most school districts in North Carolina are not "independent" ones; instead, they get direct funding from county governments along with other sources of revenue. NC school districts however may retain their authorities in education decision-making independent of county governments. 

North Carolina NBC affiliate WNCN-TV (6/17, Hall) reports that Wake County and the county's public school systems are considering a new partnership, in which the county would take responsibility for the building and maintenance of school facilities, "if the schools receive more funding to focus on student achievement." 

Without further financial details, the report is confusing to me in many ways. I wonder how exactly it will change the local funding mechanism and what are the incentives for both county and school districts to participate. 

Outsourcing red-light traffic control

The Wall Street Journal reports that many cities are overburdened by "time-consuming and complicated tasks" and thus elect to outsource these duties to companies. Typical examples include "auctioning off unclaimed stolen goods, unloading unwanted supplies and collecting unpaid traffic fines."

In Columbus, Ohio, Redflex Traffic Systems Inc. is hired to handle "the entire process" of running the city's red-light cameras, "including capturing the visuals of the violator, cross-checking with databases from motor-vehicle departments, verifying that a violation was committed," and "mailing out the citation and collecting the fine." In exchange, the company "receives about 40 percent of the actual fines collected." 

Spatial data mining in local finance

Data mining is the automatic process of sorting through large amounts of data and discovering patterns. It has been described as "the nontrivial extraction of implicit, previously unknown, and potentially useful information from data" (Frawley et al 1992). For an introduction to data mining, see presentation slides on the website of Professor Robert Stine, from whom I learned the topic at ICPSR. 

Spatial data ming is the application of data mining techniques to spatial data, with the objective to discover spatial patterns. Still at the early stage of development, spatial data mining is considered a new field with boundaries yet to be defined. In general, spatial data mining focuses more on large data sets and tend to be exploratory in nature, with heavy reliance on newly developed computational powers (Professor Guo). 

In a recent project I am using exploratory spatial data analysis (EDA) to visualize and analyze spatial patterns of inter-local fiscal relations with a comprehensive database that include hundreds of fiscal variables for all local governments in Georgia. This may be an example of spatial data mining in the study of public finance and local government management. I am eager to meet others with similar interests. (Click here to get my presentation slides on ABFM 2007.)

Some resources about spatial data mining: 

1. Spatial data mining research group in UMN
   
2. Spatial data mining @ University of Munich

More to come...

The birth of a new city: Menifee, CA

The Californian (6/5, Redfern) reports that a new city named Menifee was created in Riverside County after sixty-one percent of voters who cast ballots in the existing communities of Menifee (a community), Sun City, Quail Valley, and a part of Romoland approved the proposal to incorporate. 

The new city will have about 60,000 people in an area of roughly 49-square-mile. The effort to hold this incorporation referendum was approved last year by the Riverside County Local Agency Formation Commission, largely based on a 10-year financial analysis done by a consultant. That analysis determined the new city would be financially viable and "able to provide residents with the same level of services without raising taxes." [How would this work out?] 

In contrast,  the Press-Enterprise (6/5, Trone, McKinnon) reports that some residents have voiced fears that incorporation could bring higher taxation and that the timing for cityhood is not right because of the current economic downturn.

The graph is from The Inland Empire News (6/4). 

To contract, or not to contract? The case of Compton City policy department

California's Compton Bulletin (5/28, Eaton) reports that the Compon City is considering whether to bring back a "city-based police department." 

The original city policy department was disbanded in 2000 after some "corrupt practices were uncovered." The Sheriff's Department in the county assumes responsibility for policing the area since then. 

Major Eric Perrondin, however, has never been a fan of the Sheriff Department. "I think that the best law enforcement you can have is your own because they will be accountable to you," Perrodin said, "outsiders, when you pay them, they don't listen to you." Perrodin feels as though the city is constantly being "disrespected" by the Sheriff Department that "has separate policy and protocols from the city, which prevents the city from intervening in certain situations."

The city council has approved spending nearly $1 million to study "alternative options for coordination and delivery of city police services." Other than bringing back the policy department, the Compton City may also join it up with the Compton Unified School Distrct and Compton Center police to form a metropolitan police department.  

[There are many studies about why and how governments contract out services. This is an unique case of a government deciding to opt out or alter a previous contracting relationship. ]

Iowa considers fees to provide property tax relief

Iowa's Des Moines Register (5/8, Clayworth) reported that the Iowa state Legislature "likely will consider allowing local governments to substitute certain types of fees for property taxes" in a review next year of "one idea for property tax relief," which provided "more choices for local governments." 

The Register notes that Iowa's property tax system has long been criticized as complicated and unfair. The state is about to complete a two-year legislative study of the issue. The idea to raise fees for property tax relief gained prominence four years ago when Des Moines took the first step to increase a "franchise fee" on gas and electricity bills. 

In Des Moines roughly 40 percent of all property is owned by government or nonprofit organizations and thus exempted from the property tax. On the contrary, virtually all utility users pay the franchise fee, which city leaders have long argued is more fair. The fee increase however is facing a legal challenge after a resident sued the city, calling the fee an illegal tax-- because the city treated much of the money collected by the higher gas and electric as a general revenue "to lower tax rates, hire more police officers and extend library hours."

[In an earlier legal case about user fees in Michigan, Bolt vs. City of Lansing, the court ruled that a stormwater charge were instead a tax and, therefore, unconstitutional.]

Peoria (AZ) to explore privatizing jail services

The AZcentral.com (5/7, Chan) reported that the city of Peoria is considering privatizing jail services, because of "the cost to put people in county jails on the increase each year." Maricopa County, where the city is located, is predicting an 8 percent increase in the jail incarceration fee in fiscal year 2009 for Peoria, a $108,000 jump to $383,000. City Manager Terry Ellis said he would "convene a strategic work group" to explore the idea, and Peoria would likely need to partner with another city to interest a private provider.

Vallejo City (CA) declared bankruptcy

The New York Times (5/8, A24, McKinley) and Bloomberg (5/8, Marois) reports that Vallejo City, California, declared bankruptcy Tuesday, "to seek protection from creditors because it ran out of money to pay for basic services (Bloomberg)." The AP (5/7) added that city officials in Vallejo "hope, if a judge rules in their favor," that Chapter 9 bankruptcy protection will allow the city "to restructure union contracts and other debts in a way that allows the city to turn itself around."

Bloomberg notes that "cities and towns rarely go bankrupt. Since 1937, there have been 543 municipal [among a total of 80,000 or so] bankruptcies, two-thirds of which were small tax districts." The largest and most well-known case in US history was the the Orange County (CA) bankruptcy in 1994. Sajan George of Atlanta, who worked as consultant on the case before, noted that "is not a death knell, and should not be equated with that (AP)." After emerging from Chapter 9 protection, George said "Orange County is thriving."

Vallejo is the first California city facing effects of the recent housing downturn. However, "what worries some experts is that some of the problems" facing Vallejo "are all too common," including "a steep decrease in property and sales taxes and transfer fees, as a result of weakness in the housing market." Vallejo Councilwoman Joanne Schivley predicted that "there are a lot of other cities that [will] probably be in the same boat shortly (New York Times)."

JOBZ: Minnesota's Economic Development policy

Minnesota's Job Opportunity Building Zones (JOBZ) program is a signature piece of Gov. Tim Pawlenty's rural economic development efforts. 

According to the fact sheet, JOBZ are located trhoughout Minnesota, expect the seven-county Minneapolis-St. Paul metropolitan area. A qualified business located in a JOBZ signs a Business Subside Agreement (BSA) with the appropriate local government and enjoys substantive tax benefits.

For related policy issues, click here to listen the MPR audio story: JOBZ, one years old, is popular and still controversial (2004), and read two recent articles below:

• Fewer takers for program that uses tax breaks to expand business (04/13/2008)
• State's JOBZ at juncture (04/27/2008)
  

Illinois to outsource pathhole repairs

The Chicago Tribune (4/29, Channick) reported that, "overwhelmed by the depth and breadth of potholes, the Illinois Department of Transportation is turning to outside contractors to help with repairs."

IDOT has the capacity to dispatch 60 patching crews a day, but it has been receiving up to 500 pothole complaints a day "during a long winter of brutal freeze-thaw cycles and near-record snow." Unable to keep up, officials took the unusual step of bidding out eight contracts for Cook and five collar counties this month, with about $25.5 million to be spent on contracts for the work.

I am currently working on some projects to model governmental outsourcing. This case is unique in two ways. First, it is the state that contracts with local governments to provide a service, due to state's diseconomies rather than economies of scale. Second, the purpose is to improve responsiveness rather than to save money. Essentially it resembles a case of devolution in market style.

Illinois to outsource pathhole repairs

The Chicago Tribune (4/29, Channick) reported that, "overwhelmed by the depth and breadth of potholes, the Illinois Department of Transportation is turning to outside contractors to help with repairs."

IDOT has the capacity to dispatch 60 patching crews a day, but it has been receiving up to 500 pothole complaints a day "during a long winter of brutal freeze-thaw cycles and near-record snow." Unable to keep up, officials took the unusual step of bidding out eight contracts for Cook and five collar counties this month, with about $25.5 million to be spent on contracts for the work.

I am currently working on some projects to model governmental outsourcing. This case is unique in two ways. First, it is the state that contracts with local governments to provide a service, due to state's diseconomies rather than economies of scale. Second, the purpose is to improve responsiveness rather than to save money. Essentially it resembles a case of devolution in market style.

The possible merger of two towns

New Jersey's Examiner (4,17, Meggitt) reports the community reactions to a possible merger of Allentown Borough and Upper Freehold Township, as Gov. Jon Corzine "wants smaller municipalities in the state to merge and share services to cut costs." 

Some citizens argue against the governor's "fiscal fallacy" that "bigger is better, less costly and more efficient," which may not be supported by "New Jersey Politics." Additional concerns are raised about the pooling of resources -- one school district in the merger would benefit while the other would have no incentive to support such a unification. 

A supporter of the merger claim that New Jersey's "multi-municipal mania" and "home rule obsession" are making the state "a high-cost place to live and nearly impossible place to retire." Nevertheless, he doesn't think that the merger would be more efficient than the extensive service sharing  that is currently existing between the two towns.

How may a city die?

According to the AP (4/14), the Virginia city of Bedford was incorporated about forth years years ago. Now, city officials are having second thoughts about returning the city to town status in hopes "that it will improve services" [?].

The city of 6,300 people already "shares services of the sheriff, judges, and court systems [possibly with the town?]," and "it contracts with Bedford County for schools, social service, and health services." The AP notes that City Manager Charles Kolakowski "said the city has signaled its intentions to give up its independent jurisdiction." [Is it due to financial difficulties or coordination problems?]

If Bedford makes the switch, it would become just the third city in the state to revert to a town in the past 20 years. (Courtesy of ICMA Newsletter.)

State and Local Tax Burdens, 1959-2000

From Robert Tannenwald's article, Are State and Local Revenue Systems Becoming Obsolete?

State and Local General Revenues, 1977-1999

From Robert Tannenwald's article, Are State and Local Revenue Systems Becoming Obsolete?

A "poster child" case for Value Capture

Stone's Throw is a 619 acre master planned community located in the fastest growing corridor in the State of Minnesota. It will have +/- 136 acres of commercial, retail, office, industrial and mixed use property types right around a proposed I-94 interchange. The mixed use land is for sale under an "Exclusive Investment Offering" -- this can be an example of "value capture," a source of public finance by capturing part of benefits that will incur with the construction of the interchange.

Before knowing more about this project, one question that occur to me is the timing of this "offering." Is it better to sale the parcels now, or to hold them until later? Would all the parcels be sold one time or bit by bit gradually? Some may say that the government may have to sell the land earlier in order to have money for construction. However, as long as there is a reasonable expectation of future revenue, the government can still borrow money through municipal bonds to be repaid by proceeds of future sales -- if the later- or gradual-offering is shown to be a better approach.

(Thanks, Bob, for suggesting this case.)

Do bond rating agencies discriminte municipal bonds?

Thanks Jeff for suggestion this article: States and Cities Start Rebelling on Bond Ratings (03/03/08, Creswell and Bajaj).

Issued by state or local governments, municipal bonds are generally much safer than those issued by corporations. The level of safeness is call "credit quality," the extent to which a bond issuer will be willing and able to pay back its debt. This is reflected by bond ratings assigned by several bond ratings agencies. The ratings will in turn affect the interests (borrowing cost) for the payback of these bonds.

In recent weeks, some governmental officials complain that ratings firms assign municipal borrowers low credit scores compared with corporations. And it is the taxpayers who ultimately pay the price, in the form of higher fees and interest costs on public debt. Bond rating agencies, however, have their rationales for the practice of double-standards.

Data of local finance and education performance, North Carolina

1. North Carolina County and Municipal Finance Information
   
2. NC Schools Data and Statistics
   
3. Public School Clearing House
   

Post-Proposition 13 revenue-raising strategies

Thanks Jan for suggestion this article on Planetizen.com: How We Pay For Growth.

On June 6, 1978, the voters of California passed Proposition 13, a citizen initiative that cut property taxes by more than half. The original intent was to reduce the size of government by controlling the amount of property tax levy. "But it is not the basic impulse of government to cut its own size," or as I like to argue, nor do governments have the capacity to "do something for nothing." Since then, "local government agencies throughout the state have gone into survival mode in two different ways."

"First, they have intensified their competition with one another for the revenue sources available." According to the report, the revenue competition has led to the plethora of outlet malls, entertainment retail centers, and regional malls, and even "the boomlet in the creation of new cities" in the last twenty years.

"Second, they have been endlessly inventive in finding new sources of revenue that are not subject to Prop. 13's limitations." Those "post-Proposition 13 revenue-raising strategies" include parcel taxes, Mello-Roos taxes, development impact fees, or special assessment districts.

Minnesota's local sales tax

Comparing with many other states, Minnesota’s local governments have much higher reliance on local property taxes, less so on local sales and use taxes. As of 2004, general local sales taxes exist in only 10 of Minnesota’s 853 cities and in only one of the 87 counties (Cook County).

In 1971, while the state general sales tax rate was increased to 4 percent as part of the “Minnesota Miracle," the legislature enacted a prohibition against new or increased local taxes on sales or income (M.S. 477A.016). According to the report, "Minnesota's Local Sales Tax (2004)," state policymakers have been reluctant to provide broad authority for local-option sales taxes or other local revenue sources out of concern over the uneven distribution of revenues across communities. However, this concern may not be necessary. My recent article on Public Budgeting and Finance shows that, in Georgia, although local options sales tax (LOST) is more unevenly distributed than property tax, adding LOST to the property tax has actually reduced the original level of fiscal disparities -- because the two taxes have different patterns of spatial distribution.