Revenue Systems, Governance Structures and Fiscal Health: A Critical Review of U.S. Municipal Finance in Large Cities

Abstract

This review critically examines the complex interplay between revenue systems, governance structures, and fiscal health in large U.S. cities. It addresses two primary research questions: (1) Does a diversified mixture of revenue streams in large cities enhance fiscal conditions and improve service delivery? The review explores whether cities that rely on a broader array of revenue sources—such as taxes, fees, and transfers—are better equipped to manage economic shocks, maintain budgetary balance, and fund essential public services equitably. It further considers how revenue diversity may affect long-term fiscal stability and reduce dependence on volatile or regressive funding mechanisms. (2) Do cities with a council-manager form of government exhibit better fiscal health compared to other governance structures? This question probes the influence of professionalized administration, separation of powers, and managerial accountability on budgetary outcomes. It evaluates whether such governance arrangements are more likely to implement sound fiscal practices, avoid deficits, and ensure transparency in financial decision-making.
By synthesizing existing literature and empirical evidence, the review aims to elucidate the relationships between revenue generation strategies, institutional governance models, and fiscal outcomes. It explores how cities rely on property taxes, sales taxes, user fees, and intergovernmental transfers, and how these are influenced by political, economic, and institutional factors. The analysis further interrogates the impact of governance frameworks—particularly the distinctions between council-manager and mayor-council systems—on fiscal performance. The findings contribute to a nuanced understanding of municipal fiscal health and provide insights to inform policy discussions on sustainable and effective urban financial management.