In general, Sharp and Elkins examine the effect of pulbic involvement on local economic development policy. Specifically, they test to see if property tax stress (in terms of either tax burden or tax reliance) alters the effect of public involvement on local e.d. policy.
They begin their thoretical discussion with a brief sysnopsis of domain theory as it is applied to e.d. policy. Domain theory holds that local politics consists of different domains, each of whihc has its own political characteristics and issues. Contrasts have been drawn between "developmental" politics and "allocational" politics.
Allocational politics (which deals with distributive services such as snowplowing or garbage collection) is "characterized as open, visible, competitive, controversial, and pluralistic." (p. 126)
Developmental politics, including that surrounding economic development policy, is "characterized as having a highly centralized, behind-the-scenes, consensual, business-elite dominated foorm of politics." (p. 127)
Domain theory foucses attention, not only on contrasts between domains (housekeeping vs. economic development), but also in uniformity within domains and across cities.
Sharp and Elkins think that the uniformity may be overstated, that different cities may exhibit very different politics within a given domain, based on other characteristics of the cities.
For example, some cities have public involvement as part of their economic development decisionmaking process. So their is variation of the openness dimension within the development domain across cities.
In some cities (well, at least one city-- Cleveland) economic development policy decisionmaking came to be pluralistic, controversial, and highly participative, rather than quiet, consensual, and elite-dominated. Tax abatements were denied.
A big part of the issue in Cleveland was the existing property tax burden that made tax breaks for "well-to-do downtown investors" unpopular.
Sharp and Elkins wonder if Cleveland is a special case, suggesting two related hypotheses:
Hypothesis 1: Where there is property tax stress, greater citizen involvement in development decision making diminshes the propensity to use property tax abatement.
...
Hypothesis 1a: Where there is property tax stress, greater citizen involvement in development decision making diminshes local government reliance on locally raised taxes for economic development projects.
They also consider the effects of public participation on other economic decisionmaking consequences.
Minimizing the apparent costs
Does citizen pressure lead officials to minimize the apparent costs of economic development by adopting policies that are less visible or have less visible costs? For example, subsidized loans and loan guarantees, sale-leaseback arrangements, etc.
Other policies in this category include those that shift costs to user-beneficiaries such as TIF or special assessment districts.
Hypothesis 2: Where property tax stress is high, citizen involvement is positively associated with the adoption of tax-cost avoidance strategies for financing economic development[.]
Maximizing apparent benefits
If a community is economically distressed, do officials favor policies that are visible and allow them to claim credit for taking action? In these case is publicizing the benefits more important than hiding the costs?
Four economic development policies that allow credit-claiming opportunities:
1) infrastructure improvements designed mainly to encourage economic development,
2) building or zoning regulatory reform,
3) environmental regulatory reform, and
4) promotional activities by community leaders.
So,
Hypothesis 3: Where property tax stress is high, citizen involvement is positively associated with the adoption of projects that allow local officials to claim credit for economic development progress[.]
They point that the apparent cost minimization and visible benefit maximization strrategies are complementary.
Data sources and measurement methods
They use data from a 1984 ICMA survey of chief administrative officers regarding local e.d. policy. The population is cities >= 10,000 population.
The measure of openness to citizen involvement is an index based on responses to whether the city used one or more of (a) appointed advisory committees, (b) open meetings or public hearings, (c) citizen surveys, or (d) elected neighborhood commissions in making economic development policy decisions.
They use two measures of property tax stress: tax burden, that is per capita property tax revenues; and tax dependence, property tax revenue as a percentage of general revenue.
Economic development activity is measured as yes/no response to questions about the use of individual policies and programs.
Analysis and findings
First they look at bivariate relationship between property tax stress and the adoption of various policies. There are few statistically significant realtionships and most of those are weak or have opposite of the expected sign. (Table 3)
But the first interactive model, considering tax burden effects, finds that where tax burden is high, more civil involvement leads to greater use of cost-minimizing and benefit-maximizing programs and less use of tax abatement. (Table 4)
[An aside: I notice in their descriptive statistics that larger cities tend to have higher tax burdens. I wonder if their is a relationship between city size and civil involvement. It seems that larger cities might be more likely to adopt a greater number of more complex programs than smaller cities. Could that be a part of what they are measuring?]
The second interactive model, that using tax dependence as the measure of stress, has more mixed results. Hypothesis 1 is affirmed -- civic involvement is associated with less use of tax abatement in areas with high property tax stress. But in low-tax settings, citizen involvement is associated with more tax abatement. [Perhaps citizens have high stress in other taxes, e.g. sales and push for property tax abatement as a means of avoiding greater stress in the other taxes they pay.]
They also find that in high property tax reliance settings, citizen involvement is associated with more use of cost-minimiation stratgies, but not as distinctively so. Citizen involvement has a similar, but lesser, effect in medium and low tax dependence areas.
Hypothesis 2, having to do with propensity to use local revenues isn't affirmed by either model.
Discussion
In general, Sharp and Elkins appear to have supported the idea that
high property tax burden + high citizen involvment = less property tax abatement
They also hav confirmed, somewhat less strongly, that
high property tax burden + high citizen involvment = more cost minimization and benefit maximization policies.
They point out that this doesn't mean that the policies are necessarily more popular. It could be that those strategies can be undertaken without public awareness or approval.
Sharp, E. B., and Elkins, D.R. (1991). The politics of economic development policy. Economic Development Quarterly, 5, 126-139.
Posted by Chip on June 13, 2004 at 06:54 AM | TrackBack