Municipal Service Pricing

Do pricing policies for municipal services have an important impact on a city's fiscal position? This report examines seven alternative pricing policies and evaluates them in terms of equity, efficiency, and administrative feasibility. Focus is primarily on the pricing of services to new residential development. The impact of pricing on municipal services is measured by two indixes of fiscal position: (1) distribution of cost between old and new residents; and (2) the efficiency of each policy in the resource allocation process. Quantitative estimates of the impact of pricing policy are made in two case studies conducted in San Jose and Gilroy, California. Important findings are: (1) The choice of a pricing policy can seriously affect the distribution of costs of growth across the new and existing community. (2) Certain pricing policies can act to restrain forces for municipal budget expansion. (3) Pricing policy should be an integral part of a city's growth management plan in order to ensure a sound fiscal position and to discourage costly patterns of residential development. (See also R-1878/1, R-1878/3, R-1878/4.)