Property tax base. --The declining fiscal position of the property tax base has complicated the central city's fiscal problems and made them more acute. Only a limited number of central city areas depend heavily on nonproperty taxes to finance all local governments serving them.* Looking at only the locally assessed real property values, the extraordinary dependence of central cities on the nonresidential portion of the tax base is evidenced by the material drawn from 1961 property tax values as reported in the 1962 Census of Governments. More than half of the locally assessed base was in the commercial and industrial category in the cities of Cleveland and Boston, and in 23 of the other 30 large cities for which data were available, the proportion ranged from onethird to one-half (Table A-17). State-assessed, locally-taxed property (largely utility property) is almost exclusively nonresidential in nature. Insofar as the real property was supplemented by business personalty, the commercial and industrial proportion would be increased. Generally speaking, the areas outside the central cities depend much more on residential property; but this, in turn, reflects higher income and higher housing values. The current movement of industry and commerce to the areas outside the central cities improves the fiscal position of the outlying areas and reduces the relative resources in the central city. A problem for most cities outside of the West and South is the slowing down in the rate of growth of the property tax base in recent years. Table 24 shows a definite retardation in the growth of the tax base of most large central cities. Of the 27 central cities for which comparable Census assessed-value data are available for 1961 and 1966, only Los Angeles and New York experienced increases in their property tax bases that were greater than those of their environs. The extraordinary commercial building boom in midtown and lower Manhattan contributed to New York's superior growth. However, the growth in New York's tax base was quite small compared with that in many of the outside areas in other The property tax base actually declined in Buffalo, Rochester, Cleveland and Portland while, except in the latter, their surrounding jurisdictions experienced substantial increases. State and Federal Aid While local taxes were increasing inside and outside the city, aid to the localities from both the Federal and State governments also grew rapidly during the period 1957 to 1965. Although debate is likely to continue over the distribution of functional and fiscal responsibility among the three levels of government, we are now witnessing significant upward shifts in the financial support of education, public welfare and a number of urban functions, with little or no change in the assignment of administrative responsibility for carrying them out. * Counties and the school districts that serve the central cities draw on the central city tax base, and those governmental units rely almost exclusively on property taxes. Washington, D.C., with its special circumstances, New York City and Philadelphia are the only central city areas which show a significant overall dependence on nonproperty taxes. TABLE 24.--ASSESSED VALUATIONS, SELECTED LARGE CITIES AND THEIR ENVIRONS, 1961 AND 1966 1/ Excluding the minor portion of Kansas City, Missouri located in Platte county. 2/ Excluding the minor portion of Portland, Oregon located in Clackamas county. Source: Bureau of the Census, Taxable Property Values (1962 Census of Governments, Vol. II), and Assessed Valuations for General Property Taxation (1967 Census of Governments, Preliminary Report, February 1968, CG-P4). In 1965, total State and Federal aid was identical in central city and outside central city areas of the large SMSA's, with an average of $78 per capita throughout (Table 25).* While this finding clearly indicates that, when viewed in the aggregate, total Federal and State aid scores rather low marks from an equalization standpoint, the situation would have been much worse were it not for the equalizing impact of a number of direct Federal-local programs that by their very nature favor the central city (for example, urban renewal and public housing). The fact must also be underscored that the 1965 data could not reflect the equalizing power of Title I of the Elementary and Secondary Education Act. Adequate funding of the Model Cities program would also work in behalf of equalization. Even without these two new programs, 19 of the central cities came out somewhat better than their suburban communities, due in no small measure to this direct Federal aid factor. Considered in relation to expenditures, State and Federal aid supports 27 percent of central city expenditures, 29 percent of outside central city expenditures and 37 percent of the local expenditures in the remainder of the Nation (Table 26).** The lower the aid contribution, of course, the more must be made up from the city's own revenue sources. Relative to local taxes, the other major source of local revenue, Federal and State aid represents 44 percent of central city taxes, 53 percent of outside central city taxes and 74 percent of the local taxes collected in the rest of the country. Support for education.--The level of total Federal and State aid conceals the specific aid for the crucial function of education, which constitutes the largest single portion of total aid in both central cities and outlying areas. In many central cities aid to education is of primary importance. In 1957 it represented 47 percent of all central city aid. Outside the central cities it was even more important, constituting almost 72 percent of aid that year.3/ Per capita aid to education reached $16.12 in the central cities and $28.43 outside in 1957.*** In the ensuing five years this relative neglect of the central cities was aggravated. By 1962, per capita education aid in the central cities was $20.73, but it had risen to $37.66 outside.4/ Even on a per pupil basis, the central cities received less aid than the outside central city areas and this gap was aggravated by the perverse effect of many State educational aid "equalization" formulas. Although Federal aid for education may reduce this gap subsequent to 1964-65, the dollar magnitude of the disparity is enormous. * Unweighted basis, which adheres more to the pattern of the smaller of the 37 largest SMSA's. ** Noneducation aid reversed this pattern, reaching $18.60 per capita in the central cities but only $11.83 outside the central city areas. *** On a weighted basis. |