Tax and Spending Effects of Municipal Enterprises: The Case of Florida Electric Utilities

This study tests the appropriateness of two competing hypotheses drawn from the public finance literature about the impact of municipal utility profits on local tax and spending patterns. By comparing data from cities that own their electric utilities to nonelectric cities, this research finds that neither city expenditures nor property tax rates are significantly affected by the transfer of profits. The evidence suggests that the profits are used by cities with relatively weak tax bases to obtain revenues from tax‐exempt institutions, homeowners, and nonresidents.