Description
For this assignment you will write an 8-10-pages (not including title page, reference page, and
any appendices). More specifically, you will need to:
1) Develop a fiscal condition analysis of Maumelle, Arkansas analyzing the most recent
three-year revenue and expenditures data of Maumelle, Arkansas.
2) Utilize Excel Tools and charts to compute and create tables to create a fiscal condition
analysis for Maumelle, Arkansas.
Your fiscal condition analysis will focus on the five (5) most important financial indicators for
local governments:
? Total Revenues
? Property Taxes
? Sales Taxes
? Operating Expenditures
? Personnel Costs
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INTRODUCTION
Financial Condition
Financial condition is defined as the ability of a local government to balance recurring expenditures with recurring
revenues, allowing cities to provide necessary services on a continuing basis. A city in good financial condition
can maintain adequate service levels during economic downturns and is able to develop resources to meet
future needs. In contrast, a city in fiscal stress struggles to balance the budget, experiences service disruptions
and has limited resources to finance future needs. Maintaining a sound financial condition requires governments
to adjust to long-term changes in community needs and develop the ability to plan.
There is no single measure that fully captures the financial condition of a governmental entity therefore it is
necessary to take a comprehensive approach that focuses on both external and internal fiscal factors.
Financial Indicators for a Fiscal Condition Analysis
There are over 40 standard indicators that can serve as an evaluation basis for the financial condition of a city.
The indicators used in this course will be as follows:
Revenues
✓ Total Revenues
✓ Total Revenues per Household
✓ Intergovernmental Revenues as a Percent of Operating Revenue
✓ Property Tax Revenues
✓ Sales & Use Tax Revenue per Household
✓ Restricted Revenues
Expenditures
✓ Total Operating Expenditures per Household
✓ Fringe benefits
✓ Fixed Costs as a Percent of Operating Expenditures
✓ Debt per Household
This fiscal condition analysis, however, will focus only on the five (5) most
important financial indictors:
Revenues
•
•
•
Total Revenues
Property Taxes
Sales Taxes
Expenditures
• Operating Expenditures
• Personnel Costs
Adjusting for Constant Dollars
Adjusting for inflation converts current dollars into constant dollars. The conversion from actual dollars to constant
dollars allows for analysts to consider the appearance of growth that may be due to inflation. When dealing with
dollars over time:
Before entering the budgeted amounts in the excel spreadsheets, you need to convert each dollar amount to constant
dollars. Due to inflation, the purchasing power of the dollar changes over time, so in order to compare dollar values
from one year to another, they need to be converted from nominal (current) dollar values to constant dollar values.
The easiest way to do that is to use an inflation calculator, such as the US Inflation Calculator found in the
assignment resources.
REVENUE INDICATORS
Revenues determine a city’s capacity to provide services. Important issues to consider relative to revenues are
growth, diversity, reliability, flexibility, and administration. Under ideal conditions revenues will grow at a rate
equal to or greater than the combined effects of inflation and expenditure pressures from new and/or expanded
services. They should be sufficiently flexible to allow necessary adjustments in response to changing
conditions. They should be diversified in their resources so as not to be overly dependent on residential,
commercial, or industrial land uses or on external funding sources such as federal grants or discretionary state
aid. User fees should be regularly evaluated and revised to cover the true cost of providing services. Analyzing
a revenue structure will aid in identifying the following types of problems:
• Deterioration in revenue base
• Internal procedures or priorities that may adversely affect revenue
• Over-dependence on obsolete or external revenue sources
• User fees that are not covering the cost of providing services
• Changes in tax burden
• Inefficiency in collection or administration of revenue
Total Revenues per Household
Description: As a city’s population grows, it is anticipated that the needs for services will increase in a direct
relationship. Therefore, the level of revenues per households should at least remain constant and at a minimum,
equal to operating expenditures per household. If operating revenues per household decrease or become lower
than operating expenditures per household, it may hamper a city’s ability to maintain the existing level of services
unless new sources of revenues or ways of trimming expenses can be found. Label as critical or caution,
Warning Trend: Decreasing total revenues per household.
TABLE AND CHART HERE
Property Tax Revenue
Description: Local property tax revenues are driven primarily by the value of residential and commercial
property, with property tax bills determined by the local government’s assessed mill levy on the value of property.
Property tax collections lag the real estate market because local assessment practices take time to catch up with
changes. As a result, current property tax bills and property tax collections typically reflect values of property from
twelve to eighteen months prior.
A decline or diminished growth rate in taxable value may result from several causes such as an overall decline
in property values, the transfer of taxable property to organizations that are exempt, or a decline in new
development.
Warning Trend: Declining or negative growth in property tax revenues
TABLE AND CHART HERE
Sales Tax Revenue as Percentage of Total Revenues
Description: Changes in economic conditions are also evident in terms of changes in sales tax collections.
When consumer confidence is high, people spend more on goods and services, and city governments benefit
through increases in sales tax collections. Prior to the recession, consumer spending was also fueled by a strong
real estate market that provided additional wealth to homeowners. The struggling economy and the declining
real estate market have reduced consumer confidence, resulting in less consumer spending and declining sales tax
revenues.
Warning Trend: Declining or negative growth in sales & use tax revenues
TABLE AND CHART HERE
EXPENDITURE INDICATORS
Expenditures are a rough measure of a city’s output effort. Generally, the more a city spends, the more service it
is providing, or it is providing higher quality service however increased expenditures can also be a sign of problems
in ineffective budget control or excessive growth, decline in personnel productivity and growth in services not
supported by revenues.
Most cities are required to have balanced budgets; however, there are a number of subtle ways to balance an annual
budget yet create long-term imbalances. Some of the more common ways are to use bond proceeds for operations,
defer maintenance, or utilize temporary cuts from year-to-year. In each case, the budget remains balanced, but in
the long-term significant deficits could be developing.
Ideally, a city will have an expenditure growth rate that does not exceed its revenue growth rate and will have
maximum spending flexibility to adjust to changing factors. A review of city expenditures can identify deficiencies
should they exist such as:
• Excessive growth of overall expenditures as compared to revenue growth
• An undesired increase in fixed costs
• Ineffective budget controls & models
• Excessive growth in programs that create future expenditure liabilities
Operating Expenditures per Household
Description: Operating expenditures per household reflect changes in expenditures relative to changes in
population. Increasing per household expenditures can indicate that the cost of providing services is increasing
at a pace beyond the city’s ability to pay. If spending is increasing faster than can be accounted for by inflation
or new programs, it may indicate that a city is spending more funds to support the same level of services or
the methods of providing the services are inefficient.
Warning Trend: Increasing operating expenditures per household.
TABLE AND CHART HERE
Personnel Costs per Household
Description: Employee wages and benefits can represent a significant cost to a city. Some benefits are
mandated such as FICA, workers compensation and unemployment. Others, such as health insurance and
retirement are discretionary.
Warning Trend: Increasing benefits as a percent of salaries & wages.
TABLE AND CHART HERE
Concluding Remarks
Excerpts from: Cody, Wyoming, 5 Year Financial Trend Report, January 2013
Page 5
RESEARCH PAPER: FISCAL CONDITION ANALYSIS ASSIGNMENT GUIDE
1) Open and save the Abridged Maumelle Budget found on the assignment page
• This contains all the information you will need to enter into your spreadsheets.
• When dealing with dollars over time:
o Before entering the budgeted amounts in the excel spreadsheets, you need
to convert each dollar amount to constant dollars. Due to inflation, the
purchasing power of the dollar changes over time, so to compare dollar
values from one year to another, they need to be converted from nominal
(current) dollar values to constant dollar values.
o The easiest way to do that is to use an inflation calculator, such as the U.S.
Inflation Calculator found in your assignment resources.
2) The number of Households in Maumelle, Arkansas are as follows:
• 2020 = 4,394
• 2019 = 4,046
• 2018 = 3,782
3) Open and save the following Research Paper: Fiscal Condition Analysis Resources:
• Revenues
o Total Revenues Per Household (2020 Dollars)
o Property Tax Revenues
o Sales Tax Revenues
•
Expenditures
o Personnel Costs Per Household
o Operating Expenditures Per Household
Use the above spreadsheets (Excel), for revenues and expenditures. They are interactive,
so when you place the appropriate figures in the spreadsheet with the data for Maumelle,
Arkansas, the data and graphs will automatically be updated to correspond with the data
you entered. You must enter both the dollars in the budget and the constant dollar
amounts (2020 Dollars)
4) Now, develop a Fiscal Condition Report. Refer to Research Paper: Fiscal Condition
Analysis Report Template as a guide. You will be conducting a partial fiscal condition
analysis, as all the components will not be analysis, just the five (5) above.
5) Analyze what the findings tell you. (In this case, what does the table and its concomitant
chart tell you about the trend. A paragraph for each set of tables and charts should
suffice. You only need one analysis for each table and its concomitant chart. For
Page 1 of 2
analysis, treat each table and its concomitant chart as one since they are measuring
identical data)
*Note: These are interactive, so when you replace the appropriate figures in the spreadsheet
with the data for Maumelle, Arkansas, the data and graphs will automatically be updated to
correspond with the data you entered. You must enter both the dollars in the budget and the
constant dollar amounts (2020 Dollars).
Page 2 of 2
Revenues Per Household
Total Revenues per Household (2020 Dollars)
Total Revenues
Total Revenues (2020 $)
Households
Total Revenues per Household (2020 $)
2018
$4,020,770
$4,151,464
3,782
$1,098
2019
$4,473,133
$4,560,400
4,046
$1,127
Estimated
2020
$4,156,147
$4,156,147
4,390
$947
Formula:
Total Revenues ( 2020 Dollars)
Households
Warning Trend:
Decreasing Total revenues
per households ( 2020 $)
Total Revenues per Household (2020 $)
$1,150
$1,100
$1,127
$1,098
$1,050
$1,000
$947
$950
$900
$850
2018
2019
2020
Summary:
The warning trends that should raise a red flag for the city are
decreasing net operating revenues per household. This
was largely because of an increase in the county property taxes collected.
Also the DPS and Municipal Court substantially increased their revenues.
And finally, the city received income from a Federal grant, which it had never
received before. The period between 2018 and 2020 shifted back to normal,
this is why you see another slight decrease.
Revenues Per Household
Property Tax Revenues
Property Tax Revenues*
Property Tax Revenue (in 2020 dollars)
2018
$800,826
$834,002
2019
$834,342
$855,529
2020
$954,121
$954,121
Warning Trends:
Decline in property tax revenues
Formula:
Property tax revenues (in constant dollars)
Property Tax Revenue (in 2020 Dollars)
2020
$954,121
2019
2018
* Real and Personal Property Taxes
$855,529
$834,002
SUMMARY:
Propety tax revenues are conditioned on ownership
of property and measured by its assessed value. The
warning trend suggests that a decline in property tax
would be harmful to a city’s operation. Maumelle’s
property tax revenues have been increasing every
year. The pattern of increasing property tax revenues
should continue in future years due to growth and
Maumelle establishing a charter school.
Property Tax Revenues
Property Tax Revenues*
Property Tax Revenue (in 2020 dollars)
2018
$800,826
$834,002
2019
$834,342
$855,529
2020
$954,121
$954,121
Warning Trends:
Decline in property tax revenues
Formula:
Property tax revenues (in constant dollars)
Property Tax Revenue (in 2020 Dollars)
2020
$954,121
2019
2018
* Real and Personal Property Taxes
$855,529
$834,002
SUMMARY:
Propety tax revenues are conditioned on ownership
of property and measured by its assessed value. The
warning trend suggests that a decline in property tax
would be harmful to a city’s operation. Maumelle’s
property tax revenues have been increasing every
year. The pattern of increasing property tax revenues
should continue in future years due to growth and
Maumelle establishing a charter school.
Operating Expenses Per Household
Operating Expenditures Per Household
2018
Operating Expenditures
Operating Expenditures (2020 Dollars)
$7,000,000
$8,000,000
Number of Households
Operating Expenditures Per Household (2020 Dollars)
2019
2020
$7,500,000 $8,000,000
$8,500,000 $9,000,000
3782
4046
4394
$2,115
$2,101
$2,048
Operating Expenditures Per Household
(2020 Dollars)
Warning Trend:
Increasing Operating Expenditures
Per Household.
Formula:
Operating Expenditures
Number of Households
$2,140
$2,120
$2,115
$2,101
$2,100
Summary:
$2,080
$2,060
$2,048
$2,040
$2,020
$2,000
2018
2019
2020
From the graphic analysis pictured at the left
it is clear that the warning trend (presented in the above
box) is not present. The trend that is presented, is
exactly opposite to the warning trend. The data
presented shows that the number of municipal employees
per household is actually decreasing in Maumelle and has
been decreasing since 1996. This trend displays
an increase in effectiveness and efficiency in city service,
to operate at the same level of service, despite a decrease
in the total number of municipal employees per
household.
Property Tax Revenues
Property Tax Revenues*
Property Tax Revenue (in 2020 dollars)
2018
$800,826
$834,002
2019
$834,342
$855,529
2020
$954,121
$954,121
Warning Trends:
Decline in property tax revenues
Formula:
Property tax revenues (in constant dollars)
SUMMARY:
Propety tax revenues are conditioned on ownership
of property and measured by its assessed value. The
warning trend suggests that a decline in property tax
would be harmful to a city’s operation. Maumelle’s
property tax revenues have been increasing every
year. The pattern of increasing property tax revenues
should continue in future years due to growth and
Maumelle establishing a charter school.
* Real and Personal Property Taxes
Operating Expenses Per Household
Operating Expenditures Per Household
Operating Expenditures
Operating Expenditures (2020 Dollars)
2018
2019
2020
$7,000,000 $7,500,000 $8,000,000
$8,000,000 $8,500,000 $9,000,000
Number of Households
Operating Expenditures Per Household (2020 Dollars)
3782
4046
4394
$2,115
$2,101
$2,048
Warning Trend:
Increasing Operating Expenditures
Per Household.
Formula:
Operating Expenditures
Number of Households
Summary:
From the graphic analysis pictured at the left
it is clear that the warning trend (presented in the above
box) is not present. The trend that is presented, is
exactly opposite to the warning trend. The data
presented shows that the number of municipal employees
per household is actually decreasing in Maumelle and has
been decreasing since 1996. This trend displays
an increase in effectiveness and efficiency in city service,
to operate at the same level of service, despite a decrease
in the total number of municipal employees per
household.
Revenues Per Household
Total Revenues per Household (2020 Dollars)
Total Revenues
Total Revenues (2020 $)
Households
Total Revenues per Household (2020 $)
2018
2019
$4,020,770 $4,473,133
$4,151,464 $4,560,400
3,782
4,046
$1,098
$1,127
Estimated
2020
$4,156,147
$4,156,147
4,390
$947
Formula:
Total Revenues ( 2020 Dollars)
Households
Warning Trend:
Decreasing Total revenues
per households ( 2020 $)
Summary:
The warning trends that should raise a red flag for the city are
decreasing net operating revenues per household. This
was largely because of an increase in the county property taxes collected.
Also the DPS and Municipal Court substantially increased their revenues.
And finally, the city received income from a Federal grant, which it had never
received before. The period between 2018 and 2020 shifted back to normal,
this is why you see another slight decrease.
PADM 702
ASSIGNMENT RESOURCE: ABRIDGED MAUMELLE BUDGET
PADM 702
RESEARCH PAPER: FISCAL CONDITION ANALYSIS ASSIGNMENT
GUIDE
1) Open and save the Abridged Maumelle Budget found on the assignment page
This contains all the information you will need to enter into your spreadsheets.
When dealing with dollars over time:
o
Before entering the budgeted amounts in the excel spreadsheets, you
need to convert each dollar amount to constant dollars. Due to inflation,
the purchasing power of the dollar changes over time, so to compare
dollar values from one year to another, they need to be converted from
nominal (current) dollar values to constant dollar values.
o
U.S.
The easiest way to do that is to use an inflation calculator, such as the
Inflation Calculator found in your assignment resources.
2) The number of Households in Maumelle, Arkansas are as follows:
2020 = 4,394
2019 = 4,046
2018 = 3,782
3) Open and save the following Research Paper: Fiscal Condition Analysis
Resources:
Revenues
o
Total Revenues Per Household (2020 Dollars)
o
Property Tax Revenues
o
Sales Tax Revenues
Expenditures
o
Personnel Costs Per Household
o
Operating Expenditures Per Household
Page 1 of 2
PADM 702
Use the above spreadsheets (Excel), for revenues and expenditures. They are
interactive, so when you place the appropriate figures in the spreadsheet with the data
for Maumelle, Arkansas, the data and graphs will automatically be updated to
correspond with the data you entered. You must enter both the dollars in the budget
and the constant dollar amounts (2020 Dollars)
4) Now, develop a Fiscal Condition Report. Refer to Research Paper: Fiscal
Condition Analysis Report Template as a guide. You will be conducting a
partial fiscal condition analysis, as all the components will not be analysis, just the five
(5) above.
5) Analyze what the findings tell you. (In this case, what does the table and its
concomitant chart tell you about the trend. A paragraph for each set of tables and
charts should suffice. You only need one analysis for each table and its concomitant
chart. For analysis, treat each table and its concomitant chart as one since they are
measuring identical data)
*Note: These are interactive, so when you replace the appropriate figures in the spreadsheet
with the data for Maumelle, Arkansas, the data and graphs will automatically be updated to
correspond with the data you entered. You must enter both the dollars in the budget and the
constant dollar amounts (2020 Dollars).
Page 2 of 2
INTRODUCTION
Financial
Condition
Financial condition is defined as the ability of a local government to balance recurring expenditures with
recurring revenues, allowing cities to provide necessary services on a continuing basis. A city in good
financial condition can maintain adequate service levels during economic downturns and is able to
develop resources to meet future needs. In contrast, a city in fiscal stress struggles to balance the budget,
experiences service disruptions and has limited resources to finance future needs. Maintaining a sound
financial condition requires governments to adjust to long-term changes in community needs and develop
the ability to plan.
There is no single measure that fully captures the financial condition of a governmental entity therefore it is
necessary to take a comprehensive approach that focuses on both external and internal fiscal factors.
Financial Indicators for a Fiscal Condition
Analysis
There are over 40 standard indicators that can serve as an evaluation basis for the financial condition of a
city. The indicators used in this course will be as follows:
Revenues
✓ Total Revenues
✓ Total Revenues per Household
✓ Intergovernmental Revenues as a Percent of Operating Revenue
✓ Property Tax Revenues
✓ Sales & Use Tax Revenue per Household
✓ Restricted Revenues
Expenditures
✓
✓
✓
✓
Total Operating Expenditures per Household
Fringe benefits
Fixed Costs as a Percent of Operating Expenditures
Debt per Household
This fiscal condition analysis, however, will focus only on the five
(5) most important financial indictors:
Revenues
Total Revenues
Property Taxes
Sales Taxes
Expenditures
Operating Expenditures
Personnel Costs
Adjusting for Constant Dollars
Adjusting for inflation converts current dollars into constant dollars. The conversion from actual dollars to
constant dollars allows for analysts to consider the appearance of growth that may be due to inflation. When
dealing with dollars over time:
Before entering the budgeted amounts in the excel spreadsheets, you need to convert each dollar amount to
constant dollars. Due to inflation, the purchasing power of the dollar changes over time, so in order to compare
dollar values from one year to another, they need to be converted from nominal (current) dollar values to
constant dollar values.
The easiest way to do that is to use an inflation calculator, such as the US Inflation Calculator found in the
assignment resources.
REVENUE INDICATORS
Revenues determine a city’s capacity to provide services. Important issues to consider relative to revenues
are growth, diversity, reliability, flexibility, and administration. Under ideal conditions revenues will grow at
a rate equal to or greater than the combined effects of inflation and expenditure pressures from new and/or
expanded services. They should be sufficiently flexible to allow necessary adjustments in response to
changing conditions. They should be diversified in their resources so as not to be overly dependent on
residential, commercial, or industrial land uses or on external funding sources such as federal grants or
discretionary state aid. User fees should be regularly evaluated and revised to cover the true cost of
providing services. Analyzing a revenue structure will aid in identifying the following types of problems:
• Deterioration in revenue base
• Internal procedures or priorities that may adversely affect revenue
• Over-dependence on obsolete or external revenue sources
• User fees that are not covering the cost of providing services
• Changes in tax burden
• Inefficiency in collection or administration of revenue
Total Revenues per Household
Description: As a city’s population grows, it is anticipated that the needs for services will increase in a
direct relationship. Therefore, the level of revenues per households should at least remain constant and
at a minimum, equal to operating expenditures per household. If operating revenues per household
decrease or become lower than operating expenditures per household, it may hamper a city’s ability to
maintain the existing level of services unless new sources of revenues or ways of trimming expenses can be
found. Label as critical or caution,
Warning Trend: Decreasing total revenues per household.
TABLE AND CHART HERE
Property Tax Revenue
Description: Local property tax revenues are driven primarily by the value of residential and
commercial property, with property tax bills determined by the local government’s assessed mill levy on the
value of property. Property tax collections lag the real estate market because local assessment practices
take time to catch up with changes. As a result, current property tax bills and property tax collections
typically reflect values of property from twelve to eighteen months prior.
A decline or diminished growth rate in taxable value may result from several causes such as an overall
decline in property values, the transfer of taxable property to organizations that are exempt, or a decline in
new development.
Warning Trend: Declining or negative growth in property tax revenues
TABLE AND CHART HERE
Sales Tax Revenue as Percentage of Total Revenues
Description: Changes in economic conditions are also evident in terms of changes in sales tax
collections. When consumer confidence is high, people spend more on goods and services, and city
governments benefit through increases in sales tax collections. Prior to the recession, consumer spending
was also fueled by a strong real estate market that provided additional wealth to homeowners. The
struggling economy and the declining real estate market have reduced consumer confidence, resulting in
less consumer spending and declining sales tax revenues.
Warning Trend: Declining or negative growth in sales & use tax revenues
TABLE AND CHART HERE
EXPENDITURE INDICATORS
Expenditures are a rough measure of a city’s output effort. Generally, the more a city spends, the more
service it is providing, or it is providing higher quality service however increased expenditures can also be a
sign of problems in ineffective budget control or excessive growth, decline in personnel productivity and
growth in services not supported by revenues.
Most cities are required to have balanced budgets; however, there are a number of subtle ways to balance an
annual budget yet create long-term imbalances. Some of the more common ways are to use bond proceeds
for operations, defer maintenance, or utilize temporary cuts from year-to-year. In each case, the budget
remains balanced, but in the long-term significant deficits could be developing.
Ideally, a city will have an expenditure growth rate that does not exceed its revenue growth rate and will
have maximum spending flexibility to adjust to changing factors. A review of city expenditures can identify
deficiencies should they exist such as:
• Excessive growth of overall expenditures as compared to revenue growth
• An undesired increase in fixed costs
• Ineffective budget controls & models
• Excessive growth in programs that create future expenditure liabilities
Operating Expenditures per Household
Description: Operating expenditures per household reflect changes in expenditures relative to changes
in population. Increasing per household expenditures can indicate that the cost of providing services is
increasing at a pace beyond the city’s ability to pay. If spending is increasing faster than can be accounted
for by inflation or new programs, it may indicate that a city is spending more funds to support the same
level of services or the methods of providing the services are inefficient.
Warning Trend: Increasing operating expenditures per household.
TABLE AND CHART HERE
Personnel Costs per Household
Description: Employee wages and benefits can represent a significant cost to a city. Some benefits
are mandated such as FICA, workers compensation and unemployment. Others, such as health insurance
and retirement are discretionary.
Warning Trend: Increasing benefits as a percent of salaries &
wages.
TABLE AND CHART HERE
Concluding Remarks
Excerpts from: Cody, Wyoming, 5 Year Financial Trend Report, January 2013
Page 6
Purchase answer to see full
attachment
Explanation & Answer:
8 Pages
Tags:
Fiscal condition
Property Taxes
Personnel Costs
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