Exploring the Linkage between Economic Base, Revenue Growth, and Revenue Stability in Large Municipal Governments

The Great Recession had far-reaching consequences for the fiscal health of municipal governments. The deeply weakened economy has undermined the capacity of local governments to meet their financial obligations. City leaders face a trifecta of shrinking tax bases and aid from federal and state governments, increasing demands for public services, and deteriorating infrastructure. Local governments increasingly find themselves as fiscal islands left to fend for themselves. Given this reality, it is essential that scholars study how local governments can build their local economies—their economic base—to more effectively guide public policy. Adding to the urgency for this inquiry is President Trump’s call for investment in rehabilitating and expanding public infrastructure as a cornerstone in his goal to rebuild America. Using data from large U.S. cities, this study explores how a city’s economic base affects its revenue growth and volatility.