Charges and User Fees

Abstract

This chapter compares local fees/charges with local taxes. It lays out how they should be set and for what services. User fees or charges should be based on usage of a service. They are fair, efficient, and accountable where individual beneficiaries are identified and where non-users can be excluded. Unfortunately, their application seldom meets these criteria and, instead, is often designed to generate revenue. In particular, they should finance water, sewage, wastewater, solid waste, public transit, roads, and so on. Rates should be determined by municipal councils without regulatory restrictions unless, of course, the regulations are necessary to enhance local efficiency and accountability. Revenues should not be used to subsidize other local services. They are fair as long as they are based on benefits received