Government, Effectiveness, Performance, and Local Property Values

We offer a practical measure of local government effectiveness in the provision of public services relating service expenditures to aggregate property value. Building on the work of Brueckner (1979, 1982, 1983) and Henderson (1990, 1995) we present an aggregate property value maximization model where levels of local public services are capitalized into aggregate property values. Using data for Wisconsin municipalities we demonstrate that service expenditure levels, and simultaneously corresponding taxation levels, are suboptimal and should be increased. The aggregate property value maximization test suggests that local public services in Wisconsin are consistently under-provided. By monitoring local property values officials can objectively measure if public services are being provided in an optimal manner.