"Local Fiscal Capacity".

• Position: Brief Article

Johnson, Freda S. and Roswick, Diana L.

International Journal of Public Budget, March/April 2000, pp. 9-42.

Fiscal capacity is critical for all jurisdictions. As such, it is important that governments have a clear understanding of their own capacity. During the analysis of fiscal capacity, it is important to keep a number of points in mind: local governments are subject to a number of legal constraints that dictate the available sources of revenue, governments with different roles will have differing capacities, capacity is relative even among similar types of governments, and measuring fiscal capacity is a multivariate endeavor. A government's fiscal capacity derives from two basic factors--the local economy and local tax base. The local economy needs to be understood from a variety of angles. The more conventional economic indicators such as employment, unemployment, and new construction starts are valuable for understanding regional economic patterns. Regional patterns are important because the community does not exist in a vacuum; the health of the region will affect the health of the community. Demographic sta tistics are also important as they can provide...