The Other Ways of Doing Business: Fiscal Comparisons of Major U.S. Cities.

• Author: Picur, Ronald D.

The analytical technique of cross-sectional comparisons has historically been utilized in the public sector as a fundamental evaluation approach. For example, such comparisons are integral to bond ratings and subject to separate statistical measures, including Moody's Medians. This report, however, illustrates an evolving technique that extends such comparative analyses to the contemporary fiscal issue of structural deficits. Specifically, this report demonstrates use of a series of financial indicators as a diagnostic technique to identify fundamental causes of fiscal stress that lead to structural deficits.

While this report focuses on New York City's finances, it does identify and utilize a generic methodological approach applicable to many governments. This technique, comparative or cross-sectional analysis, can be used to address a frequently asked question posed by many a finance director. That question is: "How do we compare?"

The fundamental motivation for this report was to identify ways for New York City to cut its structural deficit and change its finances. This goal is accomplished by paying considerable attention to how other cities structure their revenues and expenses, thereby identifying budget areas where New York City is different and where a follow-up investigation is warranted. Thus, the primary objective "is to establish a sound technical approach to inter-city comparisons that makes use of readily available public data."

The fundamental value of this study is in its general methodological design. It goes beyond the common examination of tax levels or operating expenditures to include analyses of the revenue budget, capital spending, debt service and debt policies. The study developed a specialized methodology for each of the five budget areas due to limitations associated with the available data. An appendix discusses how the data were adjusted to create a common basis for cross-sectional comparisons.

The study utilized two primary data sources: Bureau of Census data encompassed in City Governmental Finances: 1989-90 (available on PC-diskettes) and audited financial statements of each government in the comparative sample. Official statements from recent bond sales and follow-up contacts with financial officials of those governments were used as secondary sources.

A notable methodological technique developed in this report addresses nonuniformity in functions and services provided by local government. For example, New...