OLR Backgrounder: Indicators Of Municipal Fiscal Stress

Source: Rute Pinho, OLR Research Report, 2010-R-0484, November 30, 2010

Causes Of Fiscal Stress
Towns bear a significant responsibility for providing public services, most notably education, fire protection, police, and public road maintenance. Their ability to deliver these services depends on their fiscal capacity, that is, their ability to generate the revenue needed to pay for them. A town’s fiscal capacity depends on its (1) property wealth, (2) demand for services, and (3) residents’ income. The interplay between these three factors affects a town’s ability to meet the needs of its residents….This report looks at municipal fiscal conditions by examining six indicators that measure different aspects of municipal fiscal capacity. As a whole, the indicators are a barometer of fiscal health and can be used to identify the most fiscally distressed towns. The indicators show each town’s (1) equalized net grand list (ENGL) per capita, (2) education cost sharing town wealth rank, (3) ratio of debt to ENGL, (4) ratio of intergovernmental aid to total revenues, (5) bond rating, and (6) unemployment rate. Using these indicators, the report identifies the towns experiencing the most distress.

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