Local Revenues. By József Hegedüs Metropolitan Research Institute, Budapest. Urban and City Management Course May 13-22, Kiev

Transcription

1 Local Revenues By József Hegedüs Metropolitan Research Institute, Budapest Urban and City Management Course May 13-22, Kiev

2 Sub-national revenues own revenues user charges revenues from property local taxes grants and transfers borrowing József Hegedüs, MRI 2

3 Overlaps between local revenue and transfer User charges: if the rates are determined by Central Government Shared tax: if the tax rate and tax base are determined by local government Taxing local business: implicit transfer Borrowing: if rationed among local governments József Hegedüs, MRI 3

4 User charges Types service fees public prices specific benefit charges Issues efficiency (administration, etc.) equity József Hegedüs, MRI 4

5 Local taxes Who sets them? tax base(s) tax rate(s) administration of the tax(es) Good local taxes: Tax base evenly distributed Revenue yield is stable, predictable, visible Easy to administer József Hegedüs, MRI 5

6 Overlap between local tax and user charge User charge with no relation to consumption: fee for housing Cross-subsidies as an implicit tax on business József Hegedüs, MRI 6

7 Specific issues: Tax Exporting tax is paid by residents of other jurisdiction examples: resort communities local business tax József Hegedüs, MRI 7

8 Specific issues: Tax Competition do not increase local taxes because of the competitive disadvantages aim: to increase the tax base limits: on expenditure side jurisdictions which do not increase taxes may lack public services that attract citizens and business József Hegedüs, MRI 8

9 Responsibility defining the user charge Decision Central government Local government Company Procedure One sided decision Approval Proposal Role of the law Production cycle and pricing József Hegedüs, MRI 9

10 Criteria for efficient pricing Allocative efficiency Equity Cost recovery Public health Environment efficiency Consumer acceptability and fairness Administrative cost József Hegedüs, MRI 10

11 Elements of user charge structure Connection charge User charge Fixed charge Volumentric charge Block charge (increasing or decreasing) Minimum charge József Hegedüs, MRI 11

12 Principles of pricing Revenue requirements: to recover the costs of the production and fair return Short-run marginal cost: reflects the costs at specific increments of time Long-run marginal cost: reflects the costs of the construction of the service capacity Subsidies related to user charges: equalization of the regional production costs and equalization of the cost/income ratios József Hegedüs, MRI 12

13 Types of user charge I. Time-of-day user charge Seasonal user charge User charge by customer classes User charge with social consideration József Hegedüs, MRI 13

14 User charge types II. One-part user charge system Two-part user charge system Block user charge system User charge systems depending on external factors József Hegedüs, MRI 14

15 User charge and investments Depreciation Return Connection charge József Hegedüs, MRI 15

16 Controlling user charge: price adjustment formulas Rate of return Security for the investors Disincentive for efficiency Price index Overall price index Weighting the price factors Efficiency factor: RPI X József Hegedüs, MRI 16

17 Factors influencing the efficiency of billing Communication, consumer oriented collection Periods: short-term loan Collection methods: check, cash, transfers Sanctions: cut off, slow down Administration: keeping record current Organizational structure: in-house or contracting out Piggyback different billings József Hegedüs, MRI 17

18 Fairness and pricing of public services Same services for the same price Natural, ecological conditions Economics of scale: education Regional differences of the prices Different efficiency Compensation for the differences gives bad incentives: balanced solution is needed József Hegedüs, MRI 18

19 Sector approach: legal and regulatory conditions Responsibilities of the local government Rules of the sector setting fees environmental protection requirements Local regulation József Hegedüs, MRI 19

20 Services: supply and demand analysis Fiscal conditions (capital need, financing operation costs etc.) Organizational conditions (alternative organizational structures, advantages and disadvantages, etc.) Trend analysis (demography, impact of economic forecasts, etc.) SWOT analysis on the sector (strengths and weaknesses, options, threats) József Hegedüs, MRI 20

21 Financing: costs and resources capital costs assets capacity property rights investments operation costs general costs variable costs fixed resources (grants, earmarked subsidies,etc. ) local (shared revenues, user charge, support from foundations) other cross financing local grants József Hegedüs, MRI 21

22 Organizational typology within the mayor s office budgetary institution (full rights or partial rights) company or foundation fully in municipal ownership mixed ownership company private company József Hegedüs, MRI 22

23 Asset management Unknown wealth ( windfall gains ) Equity issue Allocation issue Central versus local governments Among local governments Risk related to the financial and real assets József Hegedüs, MRI 23