2016’s Cities with the Most Efficient Public Spending

Dean Stansel of SMU's O'Neil Center for Global Markets and Freedom talks about financial issues facing cities and best practices for managing those issues.

By Richie Bernardo

Like Rome, no great city can be built in a day. A solid foundation for an ideal metropolis often develops over decades, even centuries, and through strong economic leadership. But with an excess of borrowing and a shortage of sound financial planning, cities can fall too deep into debt, as demonstrated by the rare municipality bankruptcies in recent years . .  

The real test of a city’s spending efficiency is how well it manages the challenges that are unique to its communities, which requires a concerted effort among all stakeholders, not just policymakers. For a deeper examination of the issues facing local governments and insightful advice for administrators and residents alike, we asked a panel of experts to weigh in. . .

Dean Stansel:

What are the biggest issues facing city governments today?

Businesses and residents are more mobile than ever, so local governments must ensure that their tax and regulatory burdens, and the quality of their public services, are competitive, especially compared to neighboring areas. Cities with abnormally high tax and regulatory burdens and abnormally low quality public services will lose businesses and residents to other more competitive cities. The migration of people and capital out of states like New York and California and into states like Texas and Florida is a classic example of this phenomenon of people voting with their feet.

How have city finances fared through the recession and economic recovery?

Because local governments are particularly dependent upon property tax revenues to fund their expenditures, they were particularly hard hit during the recession. Housing prices in most markets have rebounded, but the recovery has been uneven.

What are some best practices for effectively and efficiently managing cities?

Keep the tax and regulatory burden relatively low and the quality of public services relatively high. Focus only on providing public services that cannot be provided by private businesses.

What makes some cities better run than others?

They follow the best practices described above.

How can residents know whether their tax dollars are being used wisely by local authorities?

This is not easy, but the work of state-based think tanks (public policy research organizations like the Texas Public Policy Foundation and the Mackinac Center in Michigan) and local taxpayer groups can be helpful.


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