Local Governments
Industry Profile Report
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Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
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Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 90,000 local government entities in the US include counties, municipalities, towns and townships, as well as special purpose entities, such as special districts and independent school districts. Local governments generate revenue from taxes, intergovernmental funding, and fees for services provided. They use this revenue to fund the delivery of services for education, health, police protection, highways, public welfare, sewerage, solid waste disposal, parks and recreation, utilities, housing, and government administration.
Dependence On Property Taxes
Taxes are the largest revenue source for local governments and property taxes account for about 72% of tax revenues.
Spending Mandates
Local governments are often required to spend money to comply with federal and state mandates, even when those mandates are unfunded.
Industry size & Structure
The average local government entity employs about 160 workers and generates $26-27 million in annual revenue.
- There are about 90,000 local government entities in the US with over 14.5 million employees and $2.4 trillion in annual revenue.
- Local government includes counties, municipalities, towns and townships, as well as special purpose entities, such as special revenue districts and independent school districts.
- General purpose entities include 3,031 county governments, 19,495 municipal governments, and 16,253 town and township governments.
- There are 38,542 special districts in the US, such as fire protection districts, public housing authorities, and irrigation management entities.
- There are 12,754 independent school districts. These do not include school districts run by state, county, municipal, or town governments.
- The largest city governments in the US, based on population, are New York, Los Angeles, Chicago, San Jose and Washington, DC.
- The largest county governments, based on population, are: Los Angeles County, CA: Cook County, IL; Harris County, TX; Maricopa County, AZ; and San Diego County, CA.
Industry Forecast
Local Governments Industry Growth
Recent Developments
Nov 5, 2024 - Effects Of Pandemic Still Being Felt
- Local governments are still feeling the negative effects of the coronavirus pandemic, according to Tufts University researchers. Professors Samuel Gebru and Meredith McLain note that local civil employees are responsible for solving day-to-day community issues with fewer resources and lower salaries. Local governments have higher turnover rates than the federal government, McLain said. Gebru recommends a multi-pronged approach to combat high turnover and burnout among local government employees that includes civic education, higher wages, and protections for workers. He also stressed the importance of recruiting more government workers.
- Using generative AI tools opens state operations to concerns about cost, according to state technology officials who attended the National Association of State Chief Information Officers annual conference in September. Areas of concern include sustainable energy resources to power the technology, managing the increase of public records it will create, realistic procurement expenses, and unexpected legal challenges. North Carolina CIO Jim Weaver expressed frustration at not receiving a realistic picture of the true cost of generative AI. "The scalability of some of these applications could have a dramatic impact on our budgets, and we’re not quite sure what happens if we run out of money what’s going to be put at risk,” Weaver said.
- Property taxes remain by far the most important source of local revenue in the US, generating about 72% of local tax collections, according to The Tax Foundation, but state and local policymakers regularly search for other revenue sources that could potentially reduce the property tax burden. Local income taxes are authorized in 16 states and the District of Columbia. They account for more than 20% of local tax collections in Kentucky, Maryland, and Ohio. Local sales taxes are imposed by 36 states and the District of Columbia. They constitute more than 40% of local tax collections in Alabama, Arkansas, Louisiana, and New Mexico. Localities in only seven states, mostly in New England, do not impose either local income taxes or local sales taxes.
- Local government employment has rebounded from pandemic-era lows and remained above pre-pandemic levels in late-2024, according to the US Bureau of Labor Statistics. Local government revenue is forecast to grow at a 3.75% compounded annual rate from 2024 to 2028, slower than the growth of the overall economy, according to Inforum and the Interindustry Economic Research Fund, Inc. The primary revenue sources for local governments are taxes, federal and state funding, and fees charged for services.
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