Budgeting and Forecasting, Business Process Improvement, Financial Foundations Framework, Economic Development, Rethinking Revenue

The Root of Local Government Revenues

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Local governments are defined by their geographic boundaries. As a result, a local government’s revenues (and expenditures) are linked to how land is used within its boundaries. Property tax revenues are a function of the value of property in the jurisdiction. Sales tax revenues are often partially determined by how many and the types of merchants in the jurisdiction. However, when local governments make decisions about land uses, they may not consider the implications for the long-term financial health of the local government, either revenue produced or the cost to serve the development over its life.

In this paper, we will demonstrate the importance of land use decisions for revenue: It may be obvious that there is a relationship between revenue and land uses, but the nature and size of the relationship may not be obvious. We will suggest actions that local governments can take to better manage their land uses for positive revenue impacts, including examples of local governments that have already taken some of these steps.