Effects of Major New Revenues for Local Government

I'm undertaking an analysis of the local economic effects of a major new revenue source for a local government. The revenues would not be subject to spending limitations, nor would they require offsets in other local government spending, e.g. reductions in property taxes. Specific expenditure priorities are under discussion but have not yet been established. Questions have been raised of the economic effects of different expenditure packages, e.g., 30% to expand general administrative services, 15% to road and bridge construction (using contractors), 15% to low-income housing programs (construction), 10% general housing programs, 5% to general community development, 15% other economic development initiatives,5% to workforce development, and 5% invested. Given the limited details about future expenditures of the funds I'm contemplating an approach that would combine institutional spending and private activity events to estimate the impacts [with many caveats]. For example, for the above I would combine the 533 Employ/Payroll Non-education spending for the admin and community development, Sectors 56/60/63 for road and housing construction, 523 Other Local Real Estate for housing programs, 526 Other Local Enterprise for economic development, and 534 Employ/Payroll Education for workforce development. My search of the Forum didn't yield a topic that seemed to address a similar situation. I'd appreciate your thoughts to the approach (merits, pitfalls/cautions) or a link to case study or topic thread addressing a similar study. Thanks in advance
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  • Hello, Typically we don't recommend using the government payroll Sectors as these primarily function as place holders in the list. You would only want to use those Sectors is you were looking at changes in government payroll without any associated Intermediate Expenditures. To capture both you will want to use the government spending patterns. There are, as you mention a number of areas you may want to hone in on as you do your analysis but combining the Institution Spending Patterns with Industry Activities is fine in a study as long as you keep you definitions clear. General government admin might be most closely linked to the State & Local Government Non-Education spending pattern found at the Activity Options>Import> Institutional Spending Pattern in the Setup Activities screen. Your construction private Industry Sectors seem sensible. With outside contractors there are also a number of caveats to consider as regards their location relative to the Study Area. Depending on what type of government revenue (federal- subject frequently to GSA scheduling or State & Local Government) you are looking at this can be more significant to consider along with the size of the geography. For the other housing programs, what would be the primary function of those programs would they be only government administrative? Likewise for workforce development, is that basically an administrative government program as defined for your project? Hopefully this begins to help you address what you are looking for. Looking forward to hearing back from you on how we can provide additional help.
  • Thanks for reply and guidance to use the state/local non-education institutional spending to capture the intermediate inputs to government services. When I reviewed that spending pattern I see a rather substantial coefficient for state government spending. I assume this reflects the current relationship between state and local government employment in the region. It's not clear that the increase in local government revenues would trigger much increase in state government employment within the region,i.e. perhaps some transportation dept. but probably not natural resource mgmt or revenue/taxation. The statewide relationship is lower (once you net out the state capital), so I am thinking of shifting some state govt spending to the local govt category. Your thoughts? Your questions about the other programs triggered more thought. The government spending would not be entirely administrative. For example, the housing outlays would be a combination of housing program administration, increased maintenance of existing housing, and perhaps some new housing construction. I'll work on disaggregating these expenditures between local government spending (per above), maintenance of residential structures, and perhaps new residential construction and the real estate. Again, your thoughts would be appreciated. Also, can you direct me to the report showing the household income effects of a scenario, by the various household income groups? I find the current stats under model overview, and the household institution spending pattern activities, but have been unable to locate a tab under results that shows the distribution of income effects by household income groups. The reason I'm wondering is that I would like to explore whether the distribution approximates the employee compensation profile of local government workers (recognizing the appropriate differences in personal income, compensation, and other income constructs), or whether I need to make further adjustments in the income distribution associated with the local government spending. Thanks again.
  • Glad to help. We would recommend removing the Event for state payroll and summing that coefficient value into the local government Event, but again your Activity Level should only be the value of the administrative portion of the activities, not the remaining portions. Likely even though the renovations and the new construction are funded by the government they are paid to construction companies that are privately operated, so the private Sector spending patterns would be appropriate for those activities. Typically we would recommend looking at the residential new and/or the maintenance & repair construction Sectors respectively for the remainder those two types of activities. This way each type of activity is making specific input purchases for that function in your local economy. What function were you considering the real estate Sector to examine? Unfortunately, the results section does not contain the data you are looking for in the Household Income category breakdown. There isn't a direct way to obtain these results it would take some calculation outside of the Model. However the Detail Results screen does break down Value Added into its component parts (Employee Compensation and Proprietor Income). To determine how the Employment Compensation value is split you would go into the Explore> Study Area Data and the Area Demographics View By: drop-down menu. From this menu you can determine the total number of Households and the proportion of each of the 9 income types to the total that is represented in your area. This same split is used for the Employment Compensation payments across Household Spending Patterns.

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