Estimated and Actual Urban Revenues: Exploring the Gap

The gap between estimated and actual urban revenues may have serious consequences. Misestimates may influence decisions on expansion, shift power in city hall, force rebudgeting and cuts, affect productivity, and reduce the effectiveness of the budget. Data from the 1987 Illinois Revenue Survey, which covered 133 small- to medium-size cities, are used to analyze the effects of this revenue gap. The data indicate that underestimates are as frequent as accurate estimates, while overestimates are less frequent. The only revenue source for which a majority of cities had accurate estimates was property taxes. Poor communities that were more likely to overestimate were those with broad services, high tax rates, and declining tax yields. Rich communities with fewer services, lower taxes, and more revenue growth were more likely to underestimate. The level of fiscal stress also played a significant role in the accuracy of estimates.