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The Do’s and Dont’s of City Finances

Working paper #709
Robert P. Inman

Real estate values today depend most fundamentally upon the environment in which the property is located. Households value clean streets, safety, and most importantly quality public schools. Businesses need productive infrastructure and safety as well. The primary provider of these environments is city government. Well run cities can significantly enhance the value of city properties. Five Do’s for city finance add to value. For financing, do tax city activities where they live, not where they work. For resident and business services, do pay competitive wages and hire workers for valued benefits. For finance, do balance the current accounts budget. For social services, do take advantage of local provision but fund such services at the state or federal level. And finally, for fiscal discipline, provide meaningful choice for firms through business improvement districts (BIDs) and for residents through neighborhood improvement districts (NIDs). Reform of inefficient city governments requires the clear articulation of the economic value of improved performance, and then, a means for sharing the benefits among all city residents.

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