Three steps to sound management;

              The Crisis in Municipal Finances
THREE STEPS
TO SOUND MANAGEMENT
If the family budget is being squeezed today, so are municipal
budgets in communities of every size. The numbers, however, are
much larger and the reasons more complex. Contributing to
the cities' problems are factors such as rising labor costs,
demographic change, and the energy shortage, not to mention
our seemingly inexhaustible demands for more and better public
services of every kind.
The budget squeeze exists, even though cities are taking in
more money than ever before. Figures gathered during the latest
Census of Governments, which is performed every five years by
the US Census Bureau, show that in 1971-72 all US municipalities
collected general revenues of $35 billion—up 81 percent since
1967 and 270 percent since 1962. Despite recent tax increases of
10-25 percent, however, the US Conference of Mayors reports
that a survey of 50 cities shows municipal revenues in 1975
running as much as $8 billion short of expenditures.
The result is that we can pick up any newspaper today and
read that the application of federal bankruptcy law to the public
sector is now being discussed as something of more than
theoretical interest. New York City's fiscal crisis has, indeed,
called attention to what may be in store for other communities if
present trends continue.
The following articles shed light on the critical subject of
municipal finance. Ted David provides a survey of the basic
revenue sources available to urban governments, with commen­tary
on various factors that may affect their suitability in specific
localities. An understanding of one's options is essential when
deciding the " m i x " of revenue sources that will furnish
consistent, reliable financial support. Philip Dearborn addresses
the creditworthiness of city governments, arguing that timely
payments are the most important criterion. He reviews some
indicators that can help to guide one evaluating cash manage­ment
in any city. In addition, Fred Rohn summarizes the type of
information major rating agencies use to arrive at a quality rating
for municipal general obligation bonds.
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