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<br />....�..�..... __. ___..._.. a.. _. a. ___✓�.� ��J..✓ Say SG. ._.. �.J .�+:J,._v ..v
<br />_0V..-.- tom. _ .JJi'. .,a1cs icv`o:!
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<br />�1t7 _Is ta.,3., are Very r.;oresS:J ,
<br />rnuc i Al,:av_ y o__ low iacon.e gro
<br />thw _ t1e wealthy ones. __ is entirely possible that
<br />the p3or i ay bct er of Paying fees for services
<br />received than iixreased property taxes. Second, even
<br />if there are so._e iow i_ Coire individuals whose use o
<br />5ervices sho- °d "-e su ;sid Zed, it may be better to -provide
<br />so _e fre: LIC_; S t0 i `�_ i ner ti.ari olier:r!s the
<br />services to all a_ no cost rc ardless of their i..co cs. A
<br />final re Iy tL this O"D ecr_on is that the poor may be
<br />be:--er o'i if Lacy are charged users' fees and given +Ll e
<br />opL-iori of not participating in the service and therefore
<br />avoiding -che fee rather than being forced to pay taxes for
<br />services they do not want.
<br />_ last eC -_OMiC f,:nctiail w ._ch 'as IS' _ees can
<br />pei v:"11, and w :Icii ta: ,_-s cannot, 3S L-o adc
<br />{ _
<br />LO.i.,r as S p,"...,�.id'!y i:CL_?tn,�, �O Ln8
<br />co— G, v --d CoU.l :o
<br />ii'__?: .�� (:w< noL ra.-c to cov,_
<br />C ,. 's Of C:. ` .1_; rn Cans
<br />s::o.t_.._ would, to be Financed o,._ of tie
<br />r3w-- _:es aril t :osc de: _..:Lc_: g the servV wo::G
<br />.u__ Co,_.,.
<br />=.. sccc aid t1he one w`�ic_ is
<br />prob_.bly ra or ac eatablo to c t; lathers, is that of
<br />average cost pricing. Tiffs met:od is sometimes called
<br />full cost pricing and is widely used in the regulation of
<br />Public utilities. Sere the price is set to cover the full'
<br />costs associated with the production of the good and
<br />service. ._;y full costs i _e following should be included:
<br />operating costs, maintenance, interest, insu aace,
<br />depreciation and the loss of tax revenues arising from
<br />the tax exempt r_ut:lre of municipal enterprise.
<br />Dcprecia :o_h is one of the more generally
<br />overlooked costs. Business realizes that depreciation,
<br />setting aside enough to replace deteriorated equipment
<br />and plant, is a cost which must be covered. Yet not all
<br />cities inc'uJc the costs of re_ lacing equipment and
<br />capital ::: t :cir calC:ilations of users' fees.
<br />Sim:.ui to local 'OJ.,:_.: _.,_._.; as to SerVIC:;S
<br />be expa._;_•cC!. f the fee is set to cover ai costs, an i
<br />� 15 ge _orally Ct reConniZCd who users' fees are
<br />income from t1no service is in excess of those costs, ti:en
<br />set that there is a 'Loss of tax base to the community
<br />it is a signal that either the fee should be raised or the
<br />from the provision of the service. A city operating its
<br />service expanded. If neither of these alternatives is
<br />own utility plant foregoes the tax revenue it could have
<br />followed then the service will be over -used and the
<br />earned if power were furnished by a private company.
<br />indirect cost of waiting and congestion will be passed to
<br />Since a public enterprise consumes municipal services
<br />the users. Instead of a direct outlay, he pays by delays
<br />in much the same fashion as does a private one, the
<br />in using the service or by having to contend with
<br />costs -of the services provided must result in a`higher tax
<br />overcrowding.
<br />load on the community..
<br />Two pricing principles
<br />There. are , conditions under' which a municipality
<br />The first question which -may arise <is how; users';
<br />may wish to charge less :than the full cost of the service
<br />_.
<br />fees . should be established.. --;.The_: question ' can . be :.
<br />...
<br />The first of these is when a service consumed by one
<br />:' "answered by applying' one of ;two pricing principles: ,person yields `benefits" to another ;::These "external
<br />The `first of these is the principle of -marginal cost
<br />benefits" mean that the' primaryrecipient pays the total
<br />pricing. ` The fee is set to cover .the costs associated'
<br />cost which covers benefits received by others. Education
<br />with the last unit of the good ..or service. used. in
<br />is the .most frequently - cited,-' example , where � the
<br />economic analysis marginal cost is the change in total
<br />> individual benefits from _a,.higher- income ' : and • others
<br />cost which results from supplying one more unit :of the
<br />benefit from more intelligent . voting, an ;,improved
<br />.
<br />good or service. For example; it is possible to determine :
<br />cultural climate, and a larger tax base. '. t w
<br />the extra cost involved in running a sewer line `#o one'r
<br />f ; r`
<br />- more dwelling. The fee should be equal to the installation . The second instance in „whicha city`may seek to f,
<br />;cost only, if the fee was set equal to marginal cost. price below cost is : when it wishes .; to:"encourage'; the§W _ ;
<br />consumption or use of some felt to be socially
<br />IV_Targinal cost pricing is the principal; of fee 'setting '
<br />.service,
<br />desirable. = It may deem t better to,have, children
<br />most widely accepted -by. economists..,-:,,- -But.following
<br />city recreation °facilities thanroaming the streets
<br />marginal cost pricing may mean that full costs are not
<br />,. r
<br />In all cases when atcity does price so that full costs
<br />
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