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Fiscal Disparities <br /> ! <br /> <br />Recommenda- <br />tions <br /> <br />Recommendation 1 <br /> <br />Recommendation 2 <br /> <br />II I <br /> <br />20 <br /> <br />Replace the Fiscal Disparities program with a more equitable <br />revenue-sharing system. The program has many serious <br />faults. It is overly complex and does not address the funda- <br />mental disparities among local governments, that is, the dif- <br />ferences in their local tax requirements relative to their tax <br />bases. The goal of the existing program is limited to reducing <br />variations in* per-capita tax base. In focusing on tax base, the <br />program ignores other equally important factors that influ- <br />ence the financial welfare of governments. <br /> <br />A substitute is needed that is. more equitable, better reflects <br />the differences in the financial situations of local govern- <br />ments, and is easily understood by state and local officials <br />and taxpayers. <br /> <br />If replacing the Fiscal Disparities program as outlined above <br />is not feasible, we recommend the following changes to im- <br />prove the existing program. <br /> <br />Changes Affecting Contributions <br /> <br />Share only real, not inflationau, growth. The first objective <br />of the Fiscal Disparites program is "to provide a way for lo- <br />Cal governments to share in the resources generated by the <br />growth of the area, without removing any resources which Io- <br />calgovernments already have." When resources are measured <br />in constant dollars, inflation causes the program to reduce <br />those resources possessed by local governments in 1971. The <br />spirit of the program is being violated in its implementation. <br /> <br />Inflation has had a tremendous, and undesirable, influence <br />on the program. Over half the 1989 contributions pool was <br />due to inflated values of commercial-industrial properties al- <br />ready developed by 1971. 'Tax districts should not be re- <br />quired to reduce their tax base by sharing inflationary <br />growth on commercial-industrial property. <br /> <br />Reduce the contribution rate. This would ameliorate some <br />problems of the Fiscal Disparities program. In' keeping with <br />the first objective of the Fiscal Disparities law, communities <br />with commercial-industrial parcels fully developed before <br />1971 would share less of the inflationary growth from these <br />parcels and would be able to retain more of the resources <br />they had prior to the law's enactment. It would lessen the <br />tax burden on certain cities and their residents, particularly <br />residents with low incomes. Incentives for development <br /> <br /> <br />