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Urban fiscal stress: Is i t inevitable? That younger cities also have lower private investment may be due to the fact that such investment is just building up. Therefore, to establish the relative industrial age, each city was classified on the chart according to both its recent population growth or decline and the change in manufacturing employment. Then, for each grouping of cities in the chart, the mean values for each financial variable were arrayed against the social, economic, and structural groupings. Analyzing the chart on page 16 enables the reader to determine: —What economic, social, and structural conditions are associated with cities showing fiscal strength or stress? —What cause and effect relationships might exist between variables? The chart provides a statistical base for the different financial conditions that occur under different social, economic, and structural conditions. For example, as population ceases to grow, or even declines, the demand for social services increases. Note the difference in current operating expenses between mature and young cities: the group containing Hartford and Buffalo—both mature cities —has mean expenses of $618.21, while the group containing Topeka and Little Rock—both young cities—has a mean of $416.89. As services increase, so does the municipal workforce —sometimes growing three or more times the size of that in younger cities. For example, in an older city such as New Haven, the municipal employment rate is 7 percent of the city's total employment, while that of Omaha and Grand Rapids is but 2.5 percent. To support these services, greater demands are placed on the city's financial resource base. Thus, the rise in federal and state aid. Note also the higher taxes as a percent of personal income, up to 8.5 percent for the likes of Trenton and Buffalo, compared to 3.8 percent for such younger cities as Jacksonville and Indianapolis. Moreover, as cities reach maturity in the aging process, growth in state and federal aid does not keep up with cost growth rates. Therefore, the local tax base is often raised at a rapidly increasing rate to meet rising costs. One problem in analyzing city financial status is the lack of generally accepted financial performance standards. In the private sector, there are accepted financial ratios and levels for debt, liquidity, and the like. Such standards are generally set as the normal performance for each industry. A given company can easily be measured against these norms to determine its relative strength. No such measures, however, have been established for the public sector. Therefore, the research team compiled both the average values and the highest values for the financial variables shown in the chart on page 16. These upper values provided a benchmark against which each city could be evaluated. Of course, these upper values are not static. Such factors as public attitudes and national economic conditions continually change. By analyzing the information on the chart, along with numerous other tests, researchers were able to link financial performance to changes in non-financial (social, eco- THE FOUR VARIABLES FINANCIAL VARIABLES Low value High value Revenue: Local tax effort 3.83% 8.55% Local taxes per capita $181.41 $360.00 Percent of intergovernmental revenue 30.00% 43.00% Debt: Total debt per capita $341.02 $690.38 Interest per capita $15.10 $33.88 Municipal capital spending per capita five-year average, 1971-75 $40.88 $120.09 Expense: Fire expenses per capita $17.17 $46.50 Education expenses per capita $196.79 $281.73 Health expenses per capita .. $3.57 $15.82 Welfare expenses per capita .. $60.00 $24.58 City full-time-equivalent employment/total city employment 2.27% 6.96% Average city wages $6,694.00 $9,292.00 Net operating expenses per capita $416.89 $618.21 ECONOMIC VARIABLES: Change in population Percent change in single family housing starts Manufacturing capital spending Change in manufacturing employment ratio Percent change in manufacturing capital spending Median family income SOCIAL VARIABLES: Percent minority population Percent families below low income level Unemployment rate Percent pre-1939 housing stock STRUCTURAL VARIABLE: Population density 14
Urban fiscal stress: Is it inevitable?
Stamm, Charles F.
Touche Ross. San Francisco Office
Tempo, Vol. 25, no. 1 (1979), p. 13-18
|Source||Originally published by: Touche Ross, & Co.|
|Rights||Copyright and permission to republish held by: Deloitte|
|Format||PDF page image with corrected OCR scanned at 400 dpi|
|Collection||Deloitte Digital Collection|
|Digital Publisher||University of Mississippi Library. Accounting Collection|