Grant Financing of Metropolitan Areas : A Review of Principles and Worldwide Practices

In the new information age in the globalized and interconnected world, metropolitan areas hold the key to the future prosperity and growth of nations. This paper takes a closer look at grant-financing regimes faced by metropolitan areas and their role in facilitating or hindering improvements in economic and social outcomes of residents of metropolitan areas. A review of 42 large metropolitan areas worldwide shows that, with a few notable exceptions, metropolitan areas in general are hamstrung from playing their potential role in economic advancement. Metro areas have large economic bases and therefore little a priori needs for grant financing, yet they have strong dependence on central transfers. This is because of the highly constrained fiscal autonomy given to these areas, especially in developing countries, with the singular exception of metro areas in China. Such a strong reliance on transfers undermines local autonomy and local accountability. General purpose transfers are formula based , transparent and predictable yet they discriminate against metropolitan areas as they utilize a one size fit all (common formula) for all local governments -- large or small. Such formula typically incorporate equal per jurisdiction component that discriminates against large metropolitan areas. Compactness is rarely rewarded and the greater needs of metro areas for transportation, education, health, culture and welfare go unrecognized. Overall the emphasis in grant financing of metro areas deals with vertical fiscal gaps or project based specific purpose grants. To ensure that metropolitan areas can play their dual roles in improving economic and social outcomes for residents, it is important to strengthen their fiscal autonomy while at the same time enhancing their accountability to local residents. The paper argues that results based grant financing of social and transportation services and tournament based approaches to encourage inter-jurisdictional competition need to be given serious consideration to ensure metropolitan autonomy while strengthening citizen based accountability.

Bibliographic Details

Main Author:	Shah, Anwar
Format:	Policy Research Working Paper biblioteca
Language:	en_US
Published:	World Bank, Washington, DC 2012-03
Subjects:	access to education, accountability, accountability in governance, assignment of taxes, autonomy, borrowing, budgetary autonomy, business taxes, Capital costs, capital expenditures, capital finance, Capital grants, central administration, central government, central tax administration, central taxes, central transfers, centrally collected revenues, city metro areas, City Metropolitan Area, City Politics, community development, community participation, comparative advantage, Comparative Studies, congestion charges, contractual obligations, Corporate Income Tax, corporate income taxes, decentralization, Development Assistance, Development Bank, disabled, disabled persons, district, district offices, economic development, economic growth, economic success, electricity, enrollments, environmental protection, environmental taxes, equalization, equitable access, equity objectives, excise taxes, expenditure, Expenditure Need, expenditure needs, external financing, Federal District, federal grant, Federal-Provincial, finances, Financial Development, financial reporting, financing needs, fiscal autonomy, fiscal capacity, Fiscal Federalism, fiscal gaps, fiscal surplus, fiscal transfers, formula based transfers, fuel taxes, gambling, governance models, governor, grant allocation, Grant design, grant programs, greater access, health services, households, housing, income, inflation, institutional arrangements, intergovernmental finance, Intergovernmental Fiscal Transfers, Intergovernmental Relations, Intergovernmental transfers, International Bank, international finance, lack of access, Large Cities, laws, level of government, levies, licenses, limited access, local autonomy, Local Finance, local financing, local fiscal capacity, local government, Local Government Finance, local governments, Local Public Finance, local taxes, mass transit, matching grants, mayor, mayors, Metropolitan area, Metropolitan Areas, Metropolitan cities, metropolitan finance, Metropolitan Government, metropolitan governments, municipal, municipal finance, Municipal Government, municipal governments, municipal services, municipalities, Municipality, natural resources, Operating costs, personal income taxes, Policy Reform, Political Economy, ports, Poverty Reduction, productivity, property tax, property tax base, property transfer taxes, province, provinces, provincial cities, provincial city, provincial governments, provisions, public, Public Administration, public agencies, public goods, public health, Public Policy, public sector, public sector wages, public services, public spending, public transit, public-private partnerships, real estate, real property, receipt, receipts, regional government, residential property, residential property taxes, revenue base, revenue bonds, revenue collection, Revenue Sharing, revenue sources, roads, savings, school finance, self-financing, slums, small towns, social development, social services, social welfare, Solid Waste disposal, sources of finance, special districts, street lighting, streets, sub-national, sub-national expenditures, surcharges, tax, tax administration, tax autonomy, tax bases, tax basis, Tax collection, tax decentralization, tax effort, tax relief, Tax sharing, taxation, Town, towns, transparency, transportation services, tuition, unfunded mandates, Urban Development, Urban Government, Urban Public Finance, urban services, user fees, value added taxes, villages, wages, water supply,
Online Access:	http://hdl.handle.net/10986/17124
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