Revenue is the income a local government needs to pay for all of the services it provides. A revenue structure describes the many sources of income a local government receives. The major sources of revenue include taxes, other revenue sources and intergovernmental transfers, which are defined below.

Since local governments are corporations of state government, local revenue structures are largely determined by state doctrine. While state governments generally aim to provide sufficient autonomy and support to local governments, there are fifty state-local revenue systems that even vary within states. In this case, autonomy refers to the amount of authority a municipality has over its ability to initiate or modify the types and amounts of revenue it receives.

A local revenue structure is influenced by a municipality’s size, geography, metro type, land use and coverage of government services. Other local determinants include numerous legal, political and economic influences, including historical precedent, national economic trends, federal mandates, state laws, intergovernmental relations, regional precedent, citizens’ preferences and the city administration’s preferences. Additionally, a municipality’s political policies towards new growth, social welfare and business competition are reflected in its revenue structure.

Revenues from Taxes

Taxes are an essential source of revenue for all levels of government. Like other parts of the revenue structure, tax revenue setting by municipalities is restricted by state governments. States are not uniform in their approach to allowing municipalities to utilize the three major sources of tax revenue – property, sales and income taxes – usually permitting some combination. In some states, municipalities receive revenue from two of these taxes, usually some combination of property and sales taxes. In addition some states assign a portion of state tax revenues to those municipalities with a substantial share of the state population (New York City, St. Louis, and Kansas City, for example). Municipalities in other states are reliant on one tax with only a limited degree of reliance on a second. And in other states, municipalities rely on only one revenue source, usually the property tax. Municipalities in this latter category are either heavily reliant on that one source (as in Connecticut), or that one source is a relatively low percentage of total general revenues (Idaho).

Revenue from Other Sources

In order to bolster revenue, there are several other revenue sources, including local option taxes, service charges, and fees levied by municipalities, counties or special district governments with state approval. These additional sources help municipalities, especially smaller cities, gain financial stability, broaden the tax base, expand the types of activities taxed and increase their independence from state and federal finances.  

Revenue from Intergovernmental Transfers

Intergovernmental transfers are transfers of funds from one level of government to another. This may be to fund general government operations or for specific purposes. The Community Development Block Grant is an example of an intergovernmental transfer.


Berman, David R. “State-Local Relations: Authority and Finances.” In The Municipal Year Book 2010. Washington, D.C.: International City/County Management Association, 2010.   

Bland, Robert L. A Revenue Guide for Local Government. Washington, D.C.: International City/County Management Association, 1989.  

Coleman, Michael. A Primer on California City Finance. Sacramento, CA: The League of California Cities, 2005.  

Government Finance Officers Association. “Issue Brief: Collection of Taxes on Purchases Made Over the Internet/Other Remote Means.” Washington, D.C.: Government Finance Officers Association, 2010.  Accessed March 8, 2011,  

Hoene, Christopher and Michael Pagano. Cities and State Fiscal Structure. Washington, D.C.: National League of Cities, 2008. 

Ingram Gregory K. and Yu-Hung Hong, eds. Municipal Revenue Options in a Time of Financial Crisis. Cambridge, MA: Lincoln Institute of Land Policy, 2009. Accessed March 8, 2011,            

Institute for Local Self Government. “Municipal Finance Quick Reference.” Institue for Local Self Government, 2004. Accessed March 8, 2011,

Krane, Dale, Platon Rigos, & Melvin B. Hill, Jr. Home Rule in America: A Fifty-State Handbook. Washington, D.C.: CQ Press, 2001.

National Conference of State Legislatures, “Budget and Tax.”   Accessed March 8, 2011.,61,161#951.    

Robyn, Mark, ed. “Facts & Figures Handbook: How Does Your State Compare?”  Washington, D.C.: The Tax Foundation, 2011. Accessed March 8, 2011,        

Summerell, Charles. Understanding the Basics of City and County Revenue. Sacramento, CA: Institute for Local Government, 2008. Accessed March 8, 2011,  

The Tax Foundation. “Change in Per Capita State and Local Property Taxes from 2000 to 2005.” Washington, D.C.: The Tax Foundation, 2007. Accessed March 8, 2011,              

U.S. Census Bureau, Governments Division. Quarterly Summary of State and Local Government Tax Revenue, June 29, 2010. Washington, D.C.: U.S. Census Bureau, 2010.  

U.S. Census Bureau, Governments Division. Table 1: National Totals of State and Local Revenue, By Type of Tax, 1988-2010. Washington, D.C.: U.S. Census Bureau, 2010.