Cultivating Community Wealth: Wealth and Local Government

This post is part of an eight-week series on Cultivating Community Wealth.

Thinking back to the first post in this series, political capital was one of the forms of community wealth, as were built and financial capital. It stands to reason that local government has a significant impact on community wealth.

Local officials are the gatekeepers to many community processes. Research has shown that when elected officials support a community development project (although they may not be directly involved), it has an improved chance of successfully building various types of capital in the community (e.g., social, cultural, built, etc.). When local officials oppose a project, there is a high likelihood it will not succeed.

The influence of government is not unique to the current crop of rural and community wealth creation frameworks. Local governments have long played a role in local and regional economic development, and government is a key component in the Porter Diamond of regional competitiveness (Porter 1998). Local government affects funding for education, infrastructure, and other services. It sets the zoning ordinances and regulations that reflect community values and establish the rules.

On the other hand, Fannin and Honadle (2014) note that local governments really control very little about their environments. Higher levels of government set the rules establishing the existence and financing of local government. Yet, local government is on the front line, reacting to changes in environmental and economic situations.

If, as Murdock et al (2014, p 81) anticipate under current demographic differentials, Texans’ average household income declines, tax receipts per household will decline even as the need for education and other services and infrastructure increases. However, today’s investments across all forms of capital will affect tomorrow’s wealth—both the wealth of individuals and households and that of the community.

Fannin and Honadle define financial capital as an intermediate source of wealth to be invested “into ‘real capital’ that generates benefits to a region” (p. 105). Fiscal health is essential to the delivery of benefits over the long-term and to the creation of local wealth. Balancing the local budget let alone making wise investments are no easy task. When we think of the “burden of riches” in oil-rich parts of the state, some of the first things that come to mind are road maintenance and expansion of water and other infrastructure to serve oilfield workers. Regions with growing populations face the need for expanded infrastructure that may not generate income for months or even years. Regions with declining populations and economies face the burden of maintaining services and infrastructure in the face of stagnant or reduced budgets.

Fannin and Honadle (2014, p. 112) state, “…it is not popular with voters to raise taxes or add user fees to pay for services when such necessities can be avoided in the short run. It is not uncommon for local officials to announce plans to pay for large capital expenditures with revenues from sources that have yet to generate any money. This may create the illusion of budget balancing, but is often just a way of gaining support for the projects by asserting that there is a way to pay for them.”

Local debt is a significant concern and has become a focus point for the Texas Comptroller, who created the Tell the Truth Texas local debt website (Combs 2014). It’s not just the elected officials who are responsible for debt; citizens share the responsibility. The Comptroller reported that 2011voter turnout for bond elections ranged from 5.8 to 16.2 percent (Combs 2012). Again, some debt constitutes wise investment, and not all debt is voter approved (e.g., revenue bonds or certificates of participation in some states) (Culotta 2002).
Officials and other citizens are called to evaluate that investment. The Texas Association of School Boards provides a guide for analyzing school bonds aimed at school board members of but interest to citizens in general. The last page of the Comptroller’s Texas, It’s Your Money document discusses how citizens can participate in the process of wise investment and public resources and thus help create lasting community wealth (Combs 2012).

Resources:

Combs, Susan. 2012. Texas, It’s Your Money. Texas Comptroller of Public Accounts. Austin, TX, September. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=30&ved=0CFYQFjAJOBQ&url=http%3A%2F%2Fwww.texastransparency.org%2FSpecial_Features%2FReports%2Fpdf%2FTexasItsYourMoney-LocalDebt.pdf&ei=QrRXVKG7PISdyASUrYKQCQ&usg=AFQjCNF0B_SXE8nmmm22OBlasVRZ2eGrQA&sig2=VNOg329652o9faEOi8luhg&bvm=bv.78677474,d.cGE

Combs, Susan. 2014. Tell the Truth Texas. Texas Comptroller of Public Accounts. Austin, TX. http://tellthetruthtexas.org/debt/ Accessed November 3, 2014.

Culotta, Jim. 2002. Debt Management for Counties. Association of Minnesota Counties. St. Paul, MN, July. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&cad=rja&uact=8&ved=0CDsQFjAF&url=http%3A%2F%2Fwww.mncounties.org%2Fpublications%2Ffyis%2Fpdf%2Fdebt_mgmt08.pdf&ei=KrNXVI2xMJKjyAShk4LgDg&usg=AFQjCNGCrY3L8lKRn1aP-r-JFlLgTQspWg&sig2=fCux5aFGjmblx1EevPlQbQ Accessed November 3, 2014.

Fannin, J. Matthew, and Beth Walter Honadle. 2014. Defining and measuring public sector wealth: how much control does the public have over public wealth in a fiscally stressed world? In Rural Wealth Creation, John L. Pender, Bruce A. Weber, Thomas G. Johnson, and J. Matthew Fannin, eds. Routledge, New York, p. 102-114.

Porter, Michael E. 1998. On Competition. (Michael Porter, ed.), Boston: Harvard Business School Press.

Texas Association of School Boards. 2011. Financial Responsibility Guide. Austin, TX, October. https://www.tasb.org/Services/Legal-Services/TASB-School-Law-eSource/Business/Financial-Responsibility-Guide.aspx or https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&ved=0CD4QFjAE&url=https%3A%2F%2Fwww.tasb.org%2FServices%2FLegal-Services%2FTASB-School-Law-eSource%2FBusiness%2FFinancial-Responsibility-Guide%2Fdocuments%2Funderstanding_bonds.aspx&ei=BbJXVIONIIOhyASW-oLIDg&usg=AFQjCNHHAsNOw7rmXTSD3biVuOZhXv_D4g&sig2=bQsNKv30OTJUHqo7sYZlag&bvm=bv.78677474,d.cGE&cad=rja Accessed November 3, 2014.

Rural Wealth Creation
www.rurdev.usda.gov/Reports/rd-ERR131.pdf – USDA-ERS report related to the book
http://www.choicesmagazine.org/choices-magazine/theme-articles/rural-wealth-creation/theme-overview-rural-wealth-creation – Choices Magazine issue on the subject of rural wealth, mostly by book authors

WealthWorks
http://www.wealthworks.org/

Wealth Creation and Rural Livelihoods
http://www.wealthworks.org/ – includes a forum and listserv

Pender, John, Alexander Marre, and Richard Reeder. 2012. Rural Wealth Creation: Concepts, Strategies, and Measures. U.S. Department of Agriculture, Economic Research Service. Economic Research Report Number 131. Washington, DC: March. www.rurdev.usda.gov/Reports/rd-ERR131.pdf

 

About Rebekka Dudensing

Dr. Rebekka Dudensing is an Associate Professor and Extension Economist - Community Economic Development with Texas AgriLife Extension and Research in the Department of Agricultural Economics at Texas A&M. Her research interests include the evaluation of economic development opportunities, taxation and public/private goods issues, entrepreneurship, and regional economic cooperation.
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