The Fiscal Implications of Municipal Annexation: The Effects of Local Government Fiscal Structure
*Names in bold indicate Presenter
This research investigates if local government fiscal structure makes differences in annexation's fiscal implication. The analysis uses multi-city regression analysis with a sample of about 11,000 general purpose municipalities across the states with various revenue structures. The annexation and financial condition data are from the Census of Governments, and Census Bureau's Boundary and Annexation Survey (BAS) to present the changes between 1990 and 2000. Cities are categorized as property tax dependent and sales or income tax dependent according to the proportions of property tax and sales or income tax in their own source revenues. Also included is a measure of intergovernmental aid formula, which is whether the state intergovernmental aids formula is based on population changes of the municipality. With other demographic, socio-economic, and governmental variables controlled, municipal annexations' impacts on local government revenue and spending are investigated. The results show that municipalities with diversified taxing authority and/or with a balance of “inelastic” and “elastic” revenue sources are more likely to improve their financial conditions through annexation.