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Achieving environmental standards with efficient and cost-effective economic systems is a subject whose importance is increasing in conjunction with growing technological innovation and urbanization. This project contributes to the subject's literature by empirically examining the effects of a voluntary taxation mechanism on the water quality of designated lakes in Orange County, Florida. One of two taxing district types is voluntarily formed by lakefront or near-lakefront property owners: a Municipal Service Taxing District (MSTU), wherein participants pay an ad valorem tax based on property values, or a Municipal Service Benefit Unit (MSBU), wherein participants pay an equal flat rate tax independent of property value. The taxing districts' purpose is to allocate specific funds for water management and water quality improvement, so the fixed effects econometric analyses examine the efficacy of the mechanisms using publicly available water quality data on Trophic State Index (TSI) ratings, Secchi disk depth measurements, phosphorus levels, and nitrogen levels. The empirical results show that MSTU/MSBU taxing districts are moderately effective at reducing phosphorus and nitrogen levels and that MSTU designation is weakly superior to MSBU designation. Moreover, certain taxing district characteristics are shown to be important for mechanism effectiveness.
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