Friday, April 29, 2011

Housing & Economic Development

I investigated local government expenditures on housing and economic development activities. In order to narrow down the topic, I considered only cities and townships within the Twin Cities seven county region. I examined 140 cities and 43 townships for fiscal year 2009.

The total regional expenditure on housing and economic development exceeded $354 million. The City of Minneapolis spent by far the most, with expenditures of $121 million, more than the next four highest cities combined. Being the largest, and one of the oldest cities in the region, this seems to make sense. Along with Minneapolis, the top five in absolute expenditures included St. Paul, Bloomington, Brooklyn Park, and Roseville. All of these cities are large in terms of population, making high levels of expenditure understandable. However, a large population did not entirely predict high levels of expenditure. Notably, St. Louis Park and Richfield recorded the 6th and 7th highest absolute expenditures, but were 17th and 23rd largest in population. Because of the substantial variation in the population among the cities and towns considered, I examined expenditure using two additional measures. The first was spending as a percent of total expenditure and the second was spending per capita. In six cities in the region, expenditures on housing and economic development exceeded 20% of total 2009 expenditures. In the City of Roseville, expenditures on housing and economic development accounted for more than 27% of all city expenditures. A calculation of spending per capita revealed incredible variation from city to city. The highest spent over $300 per person, and the lowest spent $0.

While the highest levels of expenditure are interesting, perhaps more interesting are the lowest. 49 of the 140 cities examined spent absolutely nothing on housing and economic development. Admittedly, many of the cities that spent nothing were small in population, but not when considered collectively. The combined population of the 49 cities that spent nothing was over 168,000, about twice the size of Bloomington. These 168,000 people are in a way “free-riders” who benefit from expenditures made by other cities, while their government spends nothing. One rebuttal to this critique might be that the 49 cities that spend nothing lack the ability to pay. In order to address this I evaluated ability to pay at the local government level by investigating taxable tax capacity. To compare the 49 cities with zero expenditure to the 91 cities with expenditures, I compared the median tax capacity per person of the two groups of cities. The median tax capacity per person of the 49 “free-rider” cities was $1,441. By comparison, the median tax capacity per person of the other 91 cities was $254 lower.

I also examined 43 Townships. 42 of 43 recorded zero expenditure on housing and economic development. I expected this due in part to the small populations of Townships. The median population was about 1,370 residents. A lack of expenditure is understandable when considering the limited scope and size of township governments. This does not mean that townships lacked the ability to pay. The total population of the 43 townships was nearly 85,000, almost identical to the population of Bloomington (which had the third highest absolute expenditure). I hypothesized that the per capita tax capacity of townships would be lower than cities and this might justify the expenditure gap. This was not the case. Surprisingly, the median tax capacity per person of the 43 Townships was about $1,600, even higher than the per capita tax capacity of the 49 “free-rider” cities, and much higher than the 91 cities that did record expenditures on housing and economic development activities in 2009.

City of Minneapolis Revised / Adopted Budget 2009
Minnesota Office of the State Auditor, Notes and Glossary
Minnesota House of Representatives, House Research

No comments:

Post a Comment