707: on the one hand, on the other hand


State Question 707 takes several creative financial manuevers that local governments are already permitted to do, and allows them to commit to doing them over several years.

Already, a local government can set up a Tax Increment Finance district to capture increased tax revenue in a redeveloping area and use that incremental revenue to make improvements within the district. The district around Home Depot in downtown Tulsa generated the revenue to pay for the streets and utilities for the Village at Central Park.

Already, a local government can pledge its own revenues to other governmental bodies. Oklahoma City did this with "MAPS for Kids", raising the sales tax and directing the proceeds to the many, many school districts that overlap with OKC's municipal boundaries.

But these arrangements have to be renewed on a year-to-year basis. This means that governments can't issue revenue bonds borrow against anticipated future receipts from these sources, as they can do with sales taxes, use taxes, and property taxes.

As I understand it, 707 would allow these sorts of revenues to be committed for multiple years, and rather than be limited by pay-as-you-go, local governments could issue revenue bonds against those anticipated revenues. This would make it possible to undertake larger projects that would take too long to complete if it had to be done pay-as-you-go.

On the one hand, nearly every other revenue source available to local government can be pledged against revenue bonds. This puts these special sources of revenue on par with garden variety property tax and sales tax.

On the other hand, these sources of income aren't necessarily as reliable as more traditional sources, and it's possible that a city could get in over its head.

I'm also concerned about giving local governments the ability to fund bigger projects before the Supreme Court rules on the propriety of using eminent domain to transfer land from the current private owner to another private owner. If the Court affirms that such a practice is unconstitutional, I'd be less concerned about eminent domain abuse being facilitated by the ability to issue long-term debt for such purposes.

At the moment I'm leaning in favor.

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This page contains a single entry by Michael Bates published on November 2, 2004 12:03 AM.

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