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Fiscal Aspects of Metropolitan Governance

Author

Listed:
  • Richard M. Bird

    (International Tax Program, Rotman School of Management, University of Toronto)

  • Enid Slack

    () (Enid Slack Consulting Inc.)

Abstract

The aim of this paper is to review from a fiscal perspective the different models of governing structure found in metropolitan areas around the world. While there is considerable dispute in the literature as to exactly how, and how much, the design of governing institutions matters in affecting outcomes, it is indisputable that money matters: who has it, where does it come from, and under what conditions it can be spent and by whom. How public expenditures are financed directly affects the feasibility of any developmental proposal or service provision goal and is thus always a key issue in any city or metropolitan area strategy. In particular, experience suggests strongly that the ability to “self-finance”--that is, to be free to at least some extent from the whims and wishes of others -- is a critical factor in determining which metropolitan institutions live and thrive and which fade away or die in bickering between contending financial supporters. We set out the key parameters of four models of government structure used around the world (one-tier, two-tier, voluntary cooperation, and special districts). We evaluate how these different models work in practice, drawing on real-world examples to illustrate the argument. We consider how well each model achieves coordination of service delivery over the entire metropolitan area, the extent to which they allow for the equitable sharing of costs of services throughout the metropolitan area, and their ability to reduce negative or positive spillovers of service delivery across local boundaries. We examine some aspects of local government expenditures and also look at main sources of revenue, evaluating the advantages and disadvantages of different revenue-raising tools for different governing structures. Finally, we summarize our findings on the fiscal aspects of governance for metropolitan regions around the world and made a few suggestions with respect to possible future fiscal developments in Latin American metropolitan regions.

Suggested Citation

  • Richard M. Bird & Enid Slack, 2004. "Fiscal Aspects of Metropolitan Governance," International Tax Program Papers 0401, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  • Handle: RePEc:ttp:itpwps:0401
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    File URL: http://www-2.rotman.utoronto.ca/iib/ITP0401.pdf
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    References listed on IDEAS

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    1. Frey, Bruno S. & Eichenberger, Reiner, 1996. "FOCJ: Competitive governments for Europe," International Review of Law and Economics, Elsevier, vol. 16(3), pages 315-327, September.
    2. Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 195-227.
    3. Lars-Erik Borge & Jørn Rattsø, 2003. "The Relationships Between Costs and User Charges: The Case of a Norwegian Utility Service," CESifo Working Paper Series 1033, CESifo Group Munich.
    4. Olga Lucía Acosta N. & Israel Fainboim & Catalina Gutiérrez S. & Blanca Cecilia Zuluaga D., 1999. "Relaciones fiscales entre el Distrito Especial de Bogotá y la Nación," COYUNTURA SOCIAL 013094, FEDESARROLLO.
    5. Richard M. Bird, 2009. "Taxing Business," World Bank Other Operational Studies 11117, The World Bank.
    6. Richard Bird & Pierre Gendron, 1998. "Dual VATs and Cross-Border Trade: Two Problems, One Solution?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(3), pages 429-442, July.
    7. Massimo Bordignon & Silvia Giannini & Paolo Panteghini, 2001. "Reforming Business Taxation: Lessons from Italy?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(2), pages 191-210, March.
    8. Bird, Richard & Wallich, Christine, 1992. "Financing local government in Hungary," Policy Research Working Paper Series 869, The World Bank.
    9. Andrew F. Haughwout, 1999. "Regional fiscal cooperation in metropolitan areas: An exploration," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 18(4), pages 579-600.
    10. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
    11. Kitchen, H., 1993. "Efficient Delivery of Local Government Services," Papers 93-15, Queen's at Kingston - School of Policy Studies.
    12. Richard M. Bird, 2003. "Fiscal Flows, Fiscal Balance, and Fiscal Sustainability," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
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    Citations

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    Cited by:

    1. Andrea ZATTI, 2012. "New Organizational Models In European Local Public Transport: From Myth To Reality," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 83(4), pages 533-559, December.
    2. Richard M. Bird & François Vaillancourt, 2007. "Reconciling Diversity with Equality: The Role of Intergovernmental Fiscal Arrangements in Maintaining an Effective State in Canada," Chapters,in: Fiscal Fragmentation in Decentralized Countries, chapter 3 Edward Elgar Publishing.
    3. Enid Slack, 2006. "Cities in Canadian Federalism," International Tax Program Papers 0603, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    4. Slack, Enid, 2007. "Managing the coordination of service delivery in metropolitan cities : the role of metropolitan governance," Policy Research Working Paper Series 4317, The World Bank.
    5. Andrea ZATTI, 2011. "Organizational models in European local public transport: is the new paradigm really dominant," Departmental Working Papers 2011-29, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    6. Richard M. Bird, 2004. "Getting it Right: Financing Urban Development in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0435, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    7. Andrea Zatti & Fiorenza Carraro, 2013. "Environmental taxation and municipal fiscal federalism: remarks and perspectives on the Italian case study," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2013(2), pages 61-92.

    More about this item

    Keywords

    metropolitan; agglomeration economies; urban government; Latin America;

    JEL classification:

    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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