Local Government Fragmentation, Finance, and Accountability

Abstract

Local governments are important to the provision of public goods. Budgetary initiatives at the state level often trap local governments in a fiscal vise, squeezed on one side by the desires of their citizens for public and club goods and on the other side by declining state revenue sharing. As a result, many municipalities have turned to alternative methods of financing, such as implementing special taxing districts at neighborhood levels. These special taxing districts have unique democratic features, such as first mover agenda setting and weighted voting and their implementing legislation often allows governments to act as perfect price discriminating monopolists when setting tax levels. In the end, these changes have enabled savvy political actors to fracture cities into many mutable and often overlapping districts by taxing individuals to maximum allowable levels and jury-rigging elections to ensure that these districts are passed through popular vote. This results in gentrification and differentiation in demographics and a general increase in the provision of select public and club goods for certain affluent subsections of the population.