Local government revenue structure: Trends and challenges

This paper examines trends in local government revenues and current challenges that local governments face in raising revenue. We also look into the future in an effort to make recommendations to local governments regarding their revenue structure. Important trends that we document include a long-term decline in the property tax and an increase in both state aid and user charges. Recent economic changes present serious challenges for local governments due to volatility of sales taxes, decreases in property values, and threats to state aid. As local governments shape their revenue structure, they will need to respond to external economic, technological and demographic changes. Only user charges offer hopeful prospects as a productive revenue source.