Avoiding Punishment? Electoral Accountability for Local Fee Increases

By Katy Hansen (Duke University), Shadi Eskaf (UNC-Chapel Hill), and Megan Mullin (Duke University)

Many elected officials expect to be punished at the ballot box for increasing taxes and fees. At a recent city council meeting in Westminster, Colorado, one council member acknowledged potential retaliation for supporting a 10% water rate increase, telling a constituent, “I have to do what I think is best for the long term health of my city […] and if it costs me my job on council […], that is a consequence I’m willing to pay.” Both scholars and policy practitioners consider the fear of electoral punishment to be an important explanation for local decision making about public services.

In our UAR paper, we test this expectation by examining whether voters hold city council members accountable for increasing water rates. In contrast to electoral accountability theory and politicians’ expectations, we find no evidence that rate hikes are associated with subsequent losses in incumbent vote shares.  The type of modest water rate increase that local officials typically consider—a 3-5% increase in average rates—should not incite backlash.

We use municipal-level data on water rates and vote shares for 165 municipalities in North Carolina from 2007 to 2017 to test whether voters hold city council members accountable for rate increases. The water rates data are from annual surveys of utilities conducted by the Environmental Finance Center (EFC) at the University of North Carolina-Chapel Hill from 2006 onwards. Water rates vary by type of customer, volumetric use, and location. We use the monthly water bill charged to residential customers within the city limits for 4,000 gallons, which is close to the median residential water use across utilities in the state. Our data on the average vote share received by incumbent city council members are from county and state boards of elections.   

As shown in the top row of Figure 1, we find that an increase in water rates is associated with higher average vote shares for incumbent city council members—not lower, as electoral accountability theory would predict—but the relationship is not statistically significant. Incumbents who oversee water rate increases seem to fare no worse in an election held within the next year than incumbents in communities where water rates remained unchanged. These results are consistent across different model specifications and robustness checks. We show that even unusually large increases in water rates—the type of increase that can fill local newspapers with residents’ complaints—appear not to reduce incumbents’ prospects for reelection. Additionally, we find no evidence that increasing rates for higher water use incites electoral backlash or that city councils act strategically to avoid punishment.

Figure 1: OLS coefficient estimates of the effect of water rate changes on incumbent vote share (with 95% confidence intervals). Standard errors clustered at the municipal level.

There are several plausible explanations for the lack of punishment for local fees. Water rates might not be salient enough to affect vote choice. Even with a few more dollars tacked on, monthly water bills are a relatively low cost for many. Higher rates to invest in drinking water service might also garner support. Voters who turnout for off-cycle local elections are more informed, educated, and likely to own a home than the electorate writ large.  These types of voters may be more concerned about infrastructure maintenance than the cost. It is possible that electoral accountability for fees may differ in places with lower household incomes, where water affordability is a more widespread concern.

Local politicians must balance the burden of taxes and fees with the need to invest in public services. Ensuring access to adequate services requires sufficient revenue to invest in provision.  Local governments collect about $370 billion in charges and fees each year to finance hospitals, water and sewer systems, trash collection, and parks, among others. Fees account for nearly a quarter of local annual own-source revenue. Reluctance to collect sufficient revenue compels municipalities to scale back basic investments. Reductions in capital spending, typically a large portion of the cuts, destine infrastructure to deteriorate. The magnitude of unmet infrastructure needs is staggering: recent estimates suggest water systems alone need over $470 billion over the next 20 years to provide safe drinking water.  Inadequate investment can have drastic consequences. George McCarthy, the president of the Lincoln Institute of Land Policy, recently explained, “[t]he costs of these choices are invisible until they erupt in dramatic ways – when bridges fall into the Mississippi, or buildings explode in Harlem as a result of hundred-year-old gas lines.” Poorly maintained water systems pose significant public health risks, with disparate outcomes by race and class.

But local elected officials may not pursue infrastructure investment if they overestimate the threat of electoral punishment. The consequences could be insufficient funding for services that undergird economic development, public health, and well-being. Elected officials may be providing public services at a level lower than what they and their constituents actually prefer but will be hesitant to raise fees as long as the threat of electoral punishment lingers.

Read the UAR article here.

Photo by pan xiaozhen on Unsplash

Author Biographies

Katy Hansen is a Ph.D. candidate in the University Program in Environmental Policy at Duke University and a senior advisor at the Environmental Policy Innovation Center. Her research answers questions at the intersection of political science, public administration, and environmental policy on local public service provision in the United States.

Shadi Eskaf is the research director at the Environmental Finance Center at the University of North Carolina-Chapel Hill. He advises, trains, and conducts applied research for decision-makers at utilities, local governments, and state governments. He specializes in water/wastewater rates, utility financial performance and management, and capital planning.

Megan Mullin is associate professor of environmental politics at the Nicholas School of the Environment, Duke University. Her research focuses on how political and social processes contribute to environmental outcomes. Her main areas of research are in decentralized governance, water management, and climate change policy.