Three Essays on the Formation and Finance of Local Governments

• Main Author: Brien, Spencer T.
• Format: Others
• Published: ScholarWorks @ Georgia State University 2012
• Subjects: property tax; contract cities; local government; tax relief; government outsourcing; tax exemption
• Online Access: http://scholarworks.gsu.edu/pmap_diss/37; http://scholarworks.gsu.edu/cgi/viewcontent.cgi?article=1036&context=pmap_diss

This dissertation follows a three-essay format. Each essay evaluates a different fiscal institution from a public administration perspective. In the first essay I examine whether state-funded property tax exemptions are effective in reducing the property taxes. This class of exemption is characterized by a grant from state to local governments that is intended to replace property tax revenue and lower property tax payments. Two separate theories of local fiscal behavior predict that that price effects and fiscal illusion will reduce the effectiveness of this type of tax relief. I test these predictions using panel regression analysis on county-level data from Georgia. I find that only two thirds of the revenue allocated to this program is actually used for tax relief. In the second essay I test a model of the property tax in which the levy is set to balance the difference between budgeted expenditures and expected receipts from all other revenue sources. This model demonstrates how the property tax can be used to offset unexpected changes to other revenues given a change in personal income. This model is contrasted with an alternative model in which expenditures are budgeted after expected total revenues have been determined. I will estimate both models for local governments in Georgia and test which more accurately describes local fiscal performance. I will also use both to predict changes to the property tax over a period of time and measure which model generated the more accurate forecast. Unlike the first two papers, which are quantitative analyses of fiscal data, this chapter is a case study of the contract city model of governance as implemented in the newly incorporated city of Sandy Springs, Georgia. I investigate whether the scope of outsourcing in contract cities creates additional challenges for city officials that manage contractor performance. I evaluate the incentive structures in the contract agreements that influence the principal-agent relationship using a textual analysis research method. I find that certain combinations of municipal functions in a single public-private partnership creates the potential for negative synergies to arise which would increase the difficulty of monitoring and managing the private partner.