Financial Foundations Framework

Rethinking Revenue

Taxes, user fees, and other sources of revenue must adequately fund the level of public services that a community desires for itself without creating excessive inefficiencies or unfairness in the revenue raising system. For many local governments this is a challenge.

Local government revenue structures are largely based on assumptions that no longer hold today due to digitization, globalization, demography, political changes, and other trends that might call for fundamental adjustment from local governments.

For example, manufacturing land uses have been replaced by services and office uses. These latter types of land uses typically produce significantly less property tax revenue. Further, COVID-19 has accelerated a number of trends, including decreased demand for office space as tele-work grows and increased disruption to sale tax revenues as e-commerce steadily climbs.

Changes in our economy and subsequent implications on local government revenues is also revealing deeper inequities. For example, increasing reliance on fines and fees may lead to expanding regressive revenue sources, like traffic citations. It is important to consider how revenues are raised and upon whom tax/fee burdens are placed.


For these reasons, we will look for opportunities to rethink local government revenues. In some cases, this could involve making a better match between the benefits derived from public goods/services and the costs of these goods/services. There may be opportunities that arise through technology. For example, technology could be used to more precisely assign costs to users of public services (e.g., peak use pricing) or provide an opportunity for more efficient application of taxes (making some taxes more acceptable or more cost-effective). There may be opportunities to think more strategically about how land uses contribute to local revenue (e.g., land value capture pricing mechanisms).

Project Goals

The goal of this project is to develop a series of resources that describe the principles of a sound, sustainable, and equitable revenue system for local governments (including schools) for the 21st century. The document will also describe options available for putting these principles into practice.

In addition, GFOA plans to support resources with additional tools, training, and materials that help adoption of recommendations:

  • A matrix that shows how the recommendations produced by this research helps address public policy challenges that are challenging to local government decision-makers.
  • Measuring the alignment of governments with the principles described in the document.
  • Better integration and alignment of the government’s economic base to its fiscal powers.

The ultimate goal is that the recommendations are put into practice so that local governments are positioned strongly for the foreseeable future, address historic inequities, and are resilient against changing conditions in the economic and political environment.