How Do You Keep Mature City From Bankruptcy?

[Yimmy]

The three available taxes aren't enough to pay for a city''s services even when sprawl is restricted. (If I am wrong, what rates do players use to ensure adequate budget for required services?) Although land sales provide substantial capital at the beginning, eventually land sales wind down, but providing city services to those parcels remain as recurring operational costs.

Property taxes levied by local governments are a way to cover the costs of recurring city services. Special assessments are another way to handle expanding city services to neighborhoods. Has there been any discussion about providing these taxation vehicles?

[Stylesjl]

I do think there are some issues with the city budgets in the game, it can sometimes be hard to keep raising money for a city when the land sales dry up. Although in my experience bankruptcies tend to be uncommon, rather the city typically just makes drastic cuts to everything.

In general the city has the following methods of getting money:

Stable Sources
Consumer Tax
Individual Tax
Corporate Tax
Profits from Assets (Real Estate and Media).

One-Off Sources
Land Sales
Selling assets (one-off, cuts off future sources of profit)
Bonds (need to be paid back eventually though)

All are strongly dependent on the economy and business activity in the city. The first 3 tend to provide steady revenue as long as the economy is not doing badly and asset profits tend to vary but usually go up when the economy is booming.

In terms of spending a city has the following obligations:

Stable Payments
- Maintaining existing existing Civic/Sports buildings (needs ongoing taxes)
- Paying losses when assets don't make a profit.
- Funding university research (optional and usually one thing that gets cut when money is very tight). Boosts the economy if given funding (which boosts taxes).

One-Off
- Purchasing new Civic/Sports buildings (usually not a problem during a boom as the land sales can cover the purchase costs)
- Buying assets (new real estate/media)
- Refunding land that is sold (usually does not happen on a large scale unless a human player decides to buy a lot of land and then sell it all at once).
- Bond interest and repayments.

--
Okay so generally land is the main thing that can throw off the balancing act as this is a one-off infusion of cash and by far the biggest. I suppose something like a land or property tax could help balance this out a bit, making sure that all of that land helps net the city some cash to help balance out the budget. Some other things I can think of might also be allowing the city to make investments in interest bearing bank accounts to help offset inflation (right now having spare cash for a city just gets eaten away by inflation).

Personally I am also partial to the idea of a Land Value Tax where the city charges a certain percentage of the unimproved value of the land (i.e the price of the bare value of the land without any buildings on it), perhaps even a Georgism style 100% land value tax (in which case the land would be sold for free but would not pay any rent beyond direct land improvements).

[Yimmy]

Thank you for your excellent summary of city budgets. Since you didn't mention exports as a source of income for a city, I need to change my strategy.

I think I have misunderstood the value of exports. In doing so, I have also erroneously allocated too much importance to ensuing full university coverage of my business and residential neighborhoods. (I devote part of the University budget to improving product competitiveness because it improves potential exports. I did this expecting the exports to add cash income to the city's budget.) Thus my University operational costs do not provide the return I expected.
I like your comment about interest bank accounts. City inflation and bond interest are already tracked and integrated; would it be a great deal more difficult to credit interest earnings for a city's reserve funds?

I am more familiar with property taxes and special assessments than I am with land value taxes, so that is what I advocate. Nevertheless, as you mentioned, a city must devote continuing operational funds to land that has paid the city a single windfall, which helps the city initially; but each year after the purchase, the city spends money on that land in the form of maintenance services. This subsequently reduces the positive benefit of the land sale each year.

Over the course of many years, the city will eventually spend more to maintain this parcel than it received when the parcel was sold. This is why I favor some form of taxation (either property taxes, special assessments or land value taxes) to ensure the city doesn't succumb to operating cost imbalances. Interest earnings would help ameliorate the budget drain, but it would only delay the eventual loss to the city's budget.

[Stylesjl]

I like your comment about interest bank accounts. City inflation and bond interest are already tracked and integrated; would it be a great deal more difficult to credit interest earnings for a city's reserve funds?

I suppose that might be one way to deal with it, just allow a city to automatically accumulate interest on their cash reserves without having to add it to a bank account or a national government bond.

I am more familiar with property taxes and special assessments than I am with land value taxes, so that is what I advocate. Nevertheless, as you mentioned, a city must devote continuing operational funds to land that has paid the city a single windfall, which helps the city initially; but each year after the purchase, the city spends money on that land in the form of maintenance services. This subsequently reduces the positive benefit of the land sale each year.

Over the course of many years, the city will eventually spend more to maintain this parcel than it received when the parcel was sold. This is why I favor some form of taxation (either property taxes, special assessments or land value taxes) to ensure the city doesn't succumb to operating cost imbalances. Interest earnings would help ameliorate the budget drain, but it would only delay the eventual loss to the city's budget.

Yes, I think this might be a good idea to add. I have just made a new thread and a poll on this:
viewtopic.php?p=42050

[steveguo1984]

May be my post here can help you?
viewtopic.php?t=9769

[13thscholar]

The only other thing I noticed when I drove my first city to bankruptcy was that if you keep auto manage on in the mayor screen, your adjustments on spending will just reset back to QOL priority, not reduction of spending
Untick those first, and then you will have a bit more control over costs.

The other is around the balance of those earnings. For instance If you lower the consumption tax, but raise personal and business tax, more items sell, more profit, more GDP activity, therefore more tax, but it can slow investment.

All else fails, get your company to buy something, be it land, Media, apartment or commercial firm, especially if they are unprofitable.

[Yimmy]

I don't know if a recent enhancement in the newest release -- Capitalism Lab Release version 10.0.28 -- was done to improve a city's operating budget, I hope the following change may do just that:

[size=150][b]New Community Engagement Department in Headquarters

Ongoing Civic Donations as a Percentage of Operating Profit The company's continuous donations for supporting the operational expenses of civic buildings, for which it has funded construction, represented as a percentage of its pre-tax operating profit.[/b][/size]


The ability to contribute money from the player's company to the community operating budget is a feature that I think will help me prevent city bankruptcy. In my current, pre-release game, I had billions of profits in my company, but my new city, and some of the established cities, were operating on negative budgets and heading for bankruptcy, There was not an option for me to purchase and build civic facilities in a city and assume responsibility for the operating costs. So I could do nothing to avoid the inevitable.

I think this new feature mentioned above will allow me to contribute some of my billions directly to the city budget, thereby enabling the city to expand services to areas that I already have under my control by virtue of my staff being mayor and controlling the zoning and purchasing of large sections of the city.

[Stylesjl]

I don't know if a recent enhancement in the newest release -- Capitalism Lab Release version 10.0.28 -- was done to improve a city's operating budget, I hope the following change may do just that:

New Community Engagement Department in Headquarters

Ongoing Civic Donations as a Percentage of Operating Profit The company's continuous donations for supporting the operational expenses of civic buildings, for which it has funded construction, represented as a percentage of its pre-tax operating profit.


The ability to contribute money from the player's company to the community operating budget is a feature that I think will help me prevent city bankruptcy. In my current, pre-release game, I had billions of profits in my company, but my new city, and some of the established cities, were operating on negative budgets and heading for bankruptcy, There was not an option for me to purchase and build civic facilities in a city and assume responsibility for the operating costs. So I could do nothing to avoid the inevitable.

I think this new feature mentioned above will allow me to contribute some of my billions directly to the city budget, thereby enabling the city to expand services to areas that I already have under my control by virtue of my staff being mayor and controlling the zoning and purchasing of large sections of the city.

It does help but keep in mind that the civic donations only go to the facilities your company builds, so if you do want to support the city budget then make sure you build the the Civic and Sports buildings they need then contribute via the Community Engagement slider.

If you control the city government you might even choose to demolish all of the government owned buildings and just replace them with company buildings. That way you can support 100% of their budget!

Having said that there is another thing as well: Government Spending is displaced by charitable contributions, so this will actually tend to decrease GDP if you replace all of the government spending. This might cause some economic problems if you do it on a large enough scale.