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Methods of municipal fiscal evaluation

University of British Columbia

This is an analysis of methods available for municipal fiscal evaluation. The study attempts to explain the selection of factors included in evaluation tools designed to guage municipal financial condition. It also attempts to explain how these factors are interpreted as municipal fiscal strengths and weaknesses. Among the consequences which can undermine municipal financial management are dwindling revenues, increasing service demands, and increasingly complex financial administration systems. The municipal fiscal evaluation literature provides information about the technical design possibilities as well as choices expressed in tools currently used. There are inconsistencies in the measurement of fiscal indicators as well as differences in the interpretation of results. Two basic approaches, comparison and case study, are discerned within the variety of tools found in the literature. However, that literature does not provide explicit reasons for choosing a specific evaluation approach. An inherent problem in municipal fiscal evaluation design is the conflict between public service objectives such as health and welfare and corporate objectives such as financial solvency and economic efficiency. Further investigation focuses on attempts in public finance theory to reconcile public and corporate objectives. The two mainstream public finance ideologies, Social Welfare and Public Choice, are found to parallel the comparative and case study evaluation approaches. A second conclusion relates the design of a municipal fiscal evaluation to the role it is intended to serve. Financial management requirements are not uniform across cities, nor are the political objectives of agencies doing evaluations. Sponsors tend to emphasize factors which reflect their own interpretation of financial problems or management requirements. In general, case study fiscal evaluations are best suited for use by municipalities, while the comparative approach can assist senior governments in ensuring the financial security of local governments.

Text

2010-07-13

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http://hdl.handle.net/2429/26388

Planning

University of British Columbia

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