Abstract

Following the rise of tax and expenditure limitations in the 1970s, scholars have focused on assessing the effects of these limitations on local government fiscal outcomes. One key takeaway has been local governments’ decreasing reliance on property taxes and increased use of nontax revenue sources, in particular fees and changes. This study builds on this work by focusing on a particular type of fee—that is, payments in lieu of taxes (PILOTs). We find that, in Wisconsin, revenues received by municipalities from two PILOTs programs are affected quite differently. The extent to which the economy, municipal fiscal condition, tax and expenditure limits, and community characteristics affect PILOTs’ revenues depends on the extent to which the municipality can manipulate the payment structure.

Highlights

  • When compared with recent economic recessions, local governments in the United States (US) faced unprecedented financial difficulties during the Great Recession

  • Cities were forced to dramatically reduce everything from parks, libraries, community centers and basic services like Police and Fire protection...reductions to municipal utility payments in lieu of taxes (PILOTs) payments will no doubt force increases to property taxes on homeowners, requiring homeowners to pick up a greater share of the services we provide to utilities. (Public Service Commission, 2013, appendix, p. 6)

  • In Wisconsin, average municipal per capita total general obligation debt from 1997 to 2010 was $2.95 in the utility PILOTs model and $2.97 in the nonprofit PILOTs model; those were less than the US average ($4.41)

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Summary

Introduction

When compared with recent economic recessions, local governments in the United States (US) faced unprecedented financial difficulties during the Great Recession. Did local financial difficulties occur due to diminished sales and income tax bases from the collapse of US stock market prices, and the deep housing bubble bust affected tax bases and property tax collections critical to most local governments (Grusky, Western, & Wimer, 2011). Federal and state governments cut intergovernmental revenues and grants for ongoing public service programs during the Great Recession. Citizens’ opposition to tax policies to overcome resource scarcity further exacerbated local fiscal challenges PILOTs: What are they and are they affected by institutional and/or economic constraints? Journal of Public and Nonprofit Affairs, 4(3), 265-283.

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