Solutions for Declining Municipal Revenue

For the entire “Quick Policy Analysis: Solutions for Declining Municipal Revenue in the City…” click here.

Executive Summary

This report analyzes the problem of declining revenue within the City of Royal Oak (henceforth the City). I describe the municipality’s current economic development plan, and I analyze three alternatives to it. Declining revenue in Royal Oak has caused much stress for it residents, elected officials, and public employees. Declining municipal revenue has recently resulted in emergency financial meetings and service cutbacks. Indeed, according to MyFoxDetroit.com, “Facing cuts to the police department, Royal Oak city leaders decided Tuesday to accept a pay cut of their own” (2011).

In a Problem Analysis section, I find that the City’s economic problems result from a failure to encourage entrepreneurs and start-ups and a failure to help facilitate employment opportunities. The City’s financial reports from 2007-2010 show a decrease in total revenue, total grant money, property taxes, court taxes, state sales tax revenues, and criminal traffic division rents. Additionally, the City is reactive to new businesses and entrepreneurs, instead of proactive, and the decreasing rents are compounded by the City’s inaction.

In a Solution Analysis section, I describe and then evaluate three policy options to address the former economic problems. These options include: (1) economic agenda transformation and advertising it on an economic development webpage, (2) enactment and maintenance of an economic gardening program, and (3) a designated incubation facility for small business start-ups and entrepreneurs. The evaluation each of these options is based on the following criteria: (1) expected 15 year return on investment, (2) initial costs, excluding external financial support, (3) time to implementation and functionality, and (4) 10 year potential for job growth creation.

In a Recommendation section, I argue that the City should adopt an economic gardening program, followed by an economic development webpage, and finally, business incubation. All of the policy options, when implemented correctly, will increase municipal revenue.

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