Financing Central Cities: The Economics Underlying Fiscal Strategy Options

A consortium of Syracuse City and Onondaga County governments along with a number of local area non-profit organizations have recently organized a commission on Local Government Modernization for the Syracuse area. The Report makes three major recommendation to strengthen the local public sector in the Syracuse region: seek opportunities to share public services across local jurisdictions to reduce costs, adopt the Minneapolis region model for sharing revenues from new commercial and industrial development across localities, and work toward merging Syracuse City government with Onondaga County government. At the same time, current non-city residents would not have responsibility for the city or school district’s legacy debts or post-employment benefit obligations. The working paper reviews the urban economics and local public finance literature in the context of fiscal viability of central cities. Central cities form the heart of knowledge-based economies and those benefits redound to the entire region in the form of higher property values and incomes. In addition, suburban enclaves have developed in part through discriminatory policies and practices at the federal and local levels and they have weakened the fiscal viabilities of central cities. It also reviews the relevant local public finance literature on city annexation and government mergers, optimally sized jurisdictions, non-profit entities’ payments in lieu of taxes in cities, efficient local government taxes, and related topics. Based on the review, the economic development of a region depends on the economic and fiscal sustainability of its central city. Suburban resident benefit in tangible ways from the economic activities in their respective cities and suburban areas could reasonably devote a portion of their tax base to enhance the resources available to the city to service the city’s legacy debts and other obligations. The working paper concludes with fiscal implications for Syracuse City and its metropolitan area

Foreign Direct Investment in the United States: Issues, Magnitudes, and Location Choice of New Manufacturing Plants

What effect does foreign direct investment (FDI) have on job creation, wages, and productivity in the U.S.? How does FDI impact the budget deficit? How do changes in states\u27 fiscal policy affect plant location choices? Ondrych and Wasylenko address these and other politically-charged questions concerning FDI. Provided is empirical evidence drawn from a pooled cross-section and time-series data set that identifies the criteria foreigners use to make location decisions. The authors also develop a model, against which they compare their findings, and review policy options available at the state and federal levels. Information provided will help states shape, focus, and refine their recruitment strategies for attracting foreign plants.https://research.upjohn.org/up_press/1082/thumbnail.jp

Conceptual Issues and an Alternative Approach to the Determination of Pubic Expenditure Levels

For over two decades researchers have attempted to econo­metrically estimate the variables that determine public expendi­ture levels. Most of these studies employ linear regression to estimate the relationship between per capita expenditure on a particular public function and socio-demographic and economic variables. Since the purpose of many of these studies is to determine statistically significant relationships between per capita public spending and the socio-demographic variables, these studies are often, and appropriately, criticized for their lack of an under­lying economic theory. However, the lack of adequate measures of either public sector output or the price of public output makes conventional empirical analysis of the demand and supply of public output difficult, if not impossible. This paper will examine the implications of the lack of adequate measures of public sector output or prices on the anal­ysis of demand for public output, and suggest an alternative approach to determining public expenditure levels. The con­clusion is that the alternative approach suggested in this paper, i.e., the determination of public sector inputs and input price levels, is both operational and more useful in terms of ex­plaining public expenditure patterns