ProGov21 Policy Roadmap: Public Finance & Investment
- What is the Problem & How are Progressives Addressing It
In recent decades, federal and state governments have systematically pushed down responsibilities for critical investments to the local level, without providing the necessary financial resources. While local governments have suffered enormous budget shortfalls. As a result, the common perception that cities and counties are broke ignores the multiple opportunities local governments have for raising funds for investments in our communities.
Across the nation, local governments are employing various financing mechanisms and value-capture techniques to finance investments in public transportation, affordable housing, education facilities, reducing air pollution and more. Used wisely, these tools can allow local governments to generate revenues from assets that would otherwise benefit private entities and powerful interests for free. Used unwisely, they can have the opposite outcome, funneling money from taxpayers to powerful private interests. ProGov21 offers a variety of resources on local financing mechanisms, including model ordinances, case studies, ballot initiatives and other materials that highlight both the promise and the perils of such financing tools.
- Available Local Levers & Targets of Reforms
Local governments across the nation make use of multiple financing mechanisms, including Tax Increment Financing (TIF), Business Improvement Districts (BIDs), Special Assessments (SA), Land Value Taxes (LVT), Development Impact Fees (DIF), sale of air rights, joint development with the private sector and more.
Local governments should also take into consider the possible legal restrictions imposed by to other levels of government (see our guide to home rule). Many states, for example, prohibit changes to municipal property tax rates beyond minor adjustments, or require permission from the state legislature to institute changes in sales taxes.
- Current Reforms & Tools to Fight for Them
Local governments can leverage their public assets, including land, buildings and waterfronts, to invest in critical public goods. ProGov21 offers a wealth of resources on financing mechanisms and value-capture techniques used by cities, towns, and counties across the nation.
Fort Worth, TX, for example, provides us with a policy brief on its stormwater utility monthly user fee, used to finance the city’s stormwater drainage system. From Utah we bring a sustainable and scalable financing model for high quality preschool, which has been successfully implemented in Granite School District in Salt Lake City. We offer example ordinances, such as the seven-year levy approved in Seattle, WA, used to finance investments in educational services and academic achievement; an ordinance creating a TIF District in Portland, ME, to finance investments in its arts and creative industries; and an ordinance creating the Chicago Infrastructure Trust, a public-private partnership that uses private investments to pay for public infrastructure projects.
ProGov21 also provides supporting research on financing mechanisms, including a study on the use of value capture to fund an infill Metrorail station in Washington D.C. and its impact on urban sprawling, and a comparative study of financing mechanisms for economic development.
We also offer broad reviews on transit financing mechanisms from the American Public Transportation Association and the Center for Transportation Studies in the University of Minnesota; a toolkit on special assessments from the Minnesota League of Cities; a handbook of financing urban infrastructure from the New Cities Foundation, and much more!
- Taking it to the Next Level
Moving forward, local governments should consider converting more services into publicly-owned utilities, and charging utility fees from all users. Cities and countries should make more use of conservation pricing, so lower-income households pay a lower rate and bulk users – such as commercial and industry – pay higher rate.
When designing and implementing specific financing tools, local government should asses its outcomes relative to four criteria: economic efﬁciency, equity, sustainability, and feasibility. TIFs and BIDs, for example, can end up funneling money to private interests or make financial decisions less transparent to the public.
Local financing mechanisms should be deployed to finance much needed investments in mitigating climate change and other environmental concerns, as outlined in a report prepared by the C40 Cities Climate Leadership Group in collaboration with Siemens and Citi.
- Helpers, Allies, and Other Useful Organizations
- The Mayor’s Innovation Project provides a wealth of resources on innovative financing mechanisms for local governments
- The Lincoln Institute of Land Policies offers various resources and suggestions related to land value capture at the local level.
- Local Progress, a national network of progressive elected local officials, provides multiple policy briefs and guides related to financing mechanism from a progressive perspective.