Thursday, March 26, 2009

The trade-off between tax and fee for parks

The city of Minneapolis has a unique, semi-autonomous administrative body—Minneapolis Park and Recreation Board (MPRB) for all the parks and green spaces. Its main source of general fund revenue has been property tax (constitutes about 70% of the total). This is legitimate, because a well-maintained urban environment has great influence on the value of houses and the living quality of residents.

However, along with the passing of the 3.9 Property Tax Cap (Minnesota Public Radio May 19, 2008) and the imminent decreasing in Local Government Aid (Politics in Minnesota January 28, 2009), the park board is left with limited revenue generators. When I interned at the park board, one phrase that I constantly heard was “revenue diversify”. One of the major budget initiatives taken by MPRB in 2008 was to diversify and grow revenue through establishing grants, increasing fees, permits and sales. (For detail, refer to Page 10 of 2008 Third Quarter Financial Status Report and Budget Strategy Initiatives Update of MPRB)

Although in class, we talk about fees and charges being regressive and it’s generally considered to be inefficient and less transparent, I have a different feeling towards the proposal by the park board. For one thing, the different fees, including Sailboat Buoys, Outdoor Wedding Rentals, and Canoe Racks are more of a luxury enjoyed by the wealthy than a burden on the poor. Thus it is related to the capacity to pay and is favorable in terms of equity. Besides, for the reason that different people put different value on enjoying the parks, and fees/permits are more directly related to the utility (or the costs) of having certain enjoyments than taxes, they are more efficient. And fees are usually more politically feasible. In this sense, raising user fees seems reasonable. The only concern is whether this source is adequate and can be depended upon for the long-term.

After reading State Auditor Rebecca Otto’s article, I started to form a holistic picture in my mind about the revenue system in Minnesota. Parks rely on property tax, but the “no new tax” pledge drives the property tax up, causing political pressure on lowering the tax, then for non-essential programs as parks, it would be compromised and forced to seek out alternative revenue sources, even though it’s a legitimate usage of property tax in the first place.

But there is still one question remained: what is the best revenue system for parks? There is no single revenue source that is perfect. A good revenue system, in my opinion, is the best combination of revenue sources that can offset each other's disadvantages but maximize the advantages. So, in regards to parks, should the property tax cap be removed? In response to Shawn’s posting below on “Minneapolis user fees”, should higher fees be collected? Or should we admit that we can not afford a high quality park system?

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