Financing Large Cities and Metropolitan Areas

Large cities and metropolitan areas differ from smaller urban or rural municipalities—they have much larger populations, higher concentrations of population, and populations that are more heterogeneous in terms of social and economic circumstances. Large cities are important generators of employment, wealth, and productivity growth, and serve as regional hubs for people from adjacent communities who come to work, shop, and use public services that are not available in their own communities. These characteristics have implications for the magnitude and complexity of the expenditures on municipal services that local governments in metropolitan areas are required to make, as well as their ability to pay for services. This paper explores the financing of services and infrastructure in large cities and metropolitan areas. Do large cities spend more than smaller cities? Do larger cities have greater fiscal capacity? Are large cities treated differently from other cities? What are the appropriate revenue sources for large cities?