Comparing Alternative Service Delivery Modes: Municipal Enterprises Require Special Consideration

:An increasingly constrained fiscal environment and unrelenting citizen demands for services have cities searching for new ways to provide many needed services. Municipal enterprises require special consideration because they provide many advantages for cities. However, because they are separate municipal funds, an understanding of commonly used fund transfer mechanisms, such as payments in lieu of taxes or services in kind, is essential to making valid service provision comparisons. This study uses examples from a recent national survey of cities to explain and illustrate various means used by municipal enterprises to transfer revenue to, and from, other municipal funds. It also provides examples of how accurately accounting for the resultant revenue can significantly alter the results of the comparison process for five commonly used utility enterprises.