Managing the Fiscal Metropolis During

Recessions

Has anything really changed?

FINANCIAL CONDITION

Balance is measured by looking at financial characteristics relative to each other within governments (and between governments)

Financial condition has dimensions that are not easily compared• Cash solvency• Budget solvency• Service Level• Long-term solvency

Financial Condition is static; Fiscal Stress is dynamic (change in financial condition)

How to Measure Financial Condition?

Measurement of Financial Condition

Fiscal Threats and Opportunities

Delaying: Artful budget manipulation, creative financial management, one-time solutions (buy time)

Stretching and resisting: Strategic, innovative, and selective revenue and spending changes (protect priorities)

Cutting and smoothing: Visible and/or dramatic cuts in services and revenue increases

Extreme survival: Unrealistic, escapist, and radical measures to function at minimum level

Management of Fiscal Stress

Options for Handing Fiscal Stress, I

Options for Handing Fiscal Stress, II

Options for Handing Fiscal Stress, III

Options for Handing Fiscal Stress, IV

Growth initiation: a sleepy town is awakened to residential developers knocking at their door

Rapid growth: adding residents and commerce (later on) at a high rate through development of existing land and annexation

Built out: growth rate declines and anticipating the day when no growth

Redevelopment: population stagnant or declining

Important Threat and Opportunity

Institutional Context

Fiscal capacity is one of most important factors in financial condition

Consistent choice of sound fiscal policies and good financial management (professional heuristics)

Limit conflict among government officials (transaction costs)

Take long-term perspective on growth, development, and capital maintenance

There is more than one path to good financial condition

Policies and Practices that affect Financial Condition