PREMEETING HOMEWORK
EDWARD J. HUCK
FOR RICK GALE
AUGUST 6, 2002

First and foremost, all local governments and the state should be using GAAP accounting procedures. The state should not impose a different chart of accounts than local governments currently use. Often municipalities are compared to school districts, but they have a different chart of accounts than local governments. Please use caution. School district charts of accounts are confusing and make it difficult to see where tax dollars are actually going.

Benchmarking in a vacuum does a greater disservice than service. Regional differences as to cost of living, the age of the infrastructure, density, concentrations of poverty and wealth, all influence the cost of government. For an excellent review of benchmarking practices go to www.icma.org. Then search for benchmarking.

An Idea

The State of Virginia does Comparative reports on Revenue Capacity, Revenue Effort and Fiscal Stress of all its Cities and Counties. State and local governments use this as a guide for state and local policies. This could be done in conjunction with a regional economic development task force. (See item # 6) For copies of the Virginia reports, go here.

Issue #2, Shared revenue

The term "entitlement," though used in the statutes and state government in a non-pejorative sense, makes the payments to local government sound like welfare. They are not. The state shared revenue program is revenue sent back to local governments because the state has limited their ability to tax and has eroded their tax base through property tax exemptions. Finally, it is designed to create "Tax Base Neutrality" so that when competing for wealth, business or families, they can compete on an equal basis. 

An Idea

First the state should create a six-year plan for transforming shared revenue, as we know it, into another program. I recommend three separate programs. First, a utility payment that would also include the value of telephone companies’property in determining municipal utility payments. Use gross book value (original cost) instead of the net book value for electric utilities. Calculate the utility payments based on average, annual equalized value tax rates for towns, villages, and cities. (About $2.50 for towns, $6.20 for villages and $8.25 for cities) and eliminate the current law provision that caps the maximum value of utility property at a specific site at $125 million.

Second, the state should at the end of six years have two shared revenue programs. One revenue-sharing program for the 51 non-urban counties and their cities, towns and villages. A second revenue-sharing program for the 21 urban counties and the municipalities within them. Attached is a revenue sharing schedule that showing that in the 21 urban counties the county government and local governments receive more than 70% of the total fund. A statewide program should continue for most of the counties and their local governments, but at a much lower GPR commitment for the state. At the end of six years the second system would use the equalization portion of the shared revenue program as the foundation for regional equalization using regional tax options. Regional options could include a payroll tax, sales tax, and gas tax. (This requires discussions about regional government and constitutional amendments.)

Third, the per capita component in the 21 urban counties could be converted to incentive payments possibly as a "smart growth dividend."

I recommend the state create regions as defined as the Metropolitan Statistical areas (see s.66.0135,Stats.). In the interim institute a two tenths of a mill state property tax, keep the dollars raised in the 21 urban counties in those counties, and increase each shared revenue payment on a percent basis to use all the money raised. The other 51 counties would divide the remaining dollars distributed the same way. This would set up the idea of sharing economic growth within regions, and establish a basis for regional economic development planning. Fast growth would then subsidize slow growth, which is consistent with the goals of the program. Finally, this would relieve the state of adding more GPR revenues in the 21 counties.

Issue # 3, Long-term decisions

A six year plan should be adopted that includes rewriting the duties of county government in urban counties and changing the case law regarding the "public purpose doctrine" by a constitutional amendment so regional revenue sharing can be created. The idea here is to create the same regions for economic development, transportation, housing, libraries, recreation, land use planning, jails and schools. Other responsibilities of the regions would include revenue sharing through regional sales taxes or income taxes. Property taxation by the county, except for capital projects, would be prohibited. In its stead the counties would create a fee system for service offered. They could distinguish services between urban and rural. If a town decides to develop urban land it would pay an ever-increasing fee to the county for eligible services whether or not it actually accepted them. This would eliminate double whammy and create an incentive to allow development to be annexed. Finally, the county would be responsible for coordinating regional service delivery in "subsets" within the county.

Issue # 4, A system approach

The new system of government outlined above is one that creates more local autonomy. Local autonomy should be distinguished from local control. Local autonomy means creating a system that allows city leaders to better self-govern. Local control is more about turf. Only if state government decentralizes what it does to the regional level can local governments realize greater ability to self-govern. The state cannot continue to micro-manage local governments and call it a partnership. Outcomes can be mandated but solutions require local creativity! Someone must address the externalities that currently exist that impede cities’ ability to self govern, if local autonomy is to betruly realized.

Issue # 5, Barriers to best practices

The current system of government impedes the ability of minorities to choose where to live and has encouraged redundancy of infrastructure, rewarded sprawl, impeded opportunities for education and increased our tax burden. Best practices can be shared but the real problem is too many governments! Also, go to www.icma.org, then search for best practices.

Issue # 6, Economic Growth

State government should use the regions created in s.66.0315, Stats., to build and support regional economies through a partnership between state and local governments. The state could mandate a Regional Economic Task Force. (RETF) to:

• Collect and analyze demographic and economic data (i.e., education levels of the workforce, inventory of core industries and support industries, sales tax receipt, etc.)
• Analyze economic trends.

Jointly the RETF’s should create a sustainability scorecard to measure the strengths and weaknesses of a regional economy. Each RETF would measure their strengths and weaknesses and report to the Governor and the Legislature. Each RETF would then create a regional plan to reach sustainability that incorporate goals, measurable objectives, implementation strategies and a work plan.

State government should also make regional planning commissions creatures of and co-terminus with s. 66.0315, regions. The regional planning commissions would collect data; coordinate smart growth planning; and draft transportation plans that include:

Streets and highways, harbors, airports, passenger and freight railroads, light rail and water resource management.

Neither state nor local government should subsidize any growth outside the plan. The overriding goal of regional planning should be to establish and foster a sustainable and growing economy with a sound environment. Toward that end regional planners should: study the carrying capacity of the region’s land and other natural resources; emphasize redevelopment as opposed to new development; eliminate wasteful spending on infrastructure; create disincentives for growth contrary to their plans; and reduce the number of automobile trips within the region.

Issue #7,  Common overhead

See issue 3.

Issue # 8,  Local revenue sources

Local option revenue sources could include utility gross receipt taxes and fees for services offered. A constitutional amendment to allow for police and fire fees on tax exempt property should also be considered.

Issue #9, Government workforce

See issue 4.

Issue # 10, Regulatory mandates

See issue 4.