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Fiscal Condition Analysis of Maumelle, Arkansas

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Fiscal Condition Analysis of Maumelle, Arkansas

For a city or municipality’s current activities to flow efficiently, resources must be

directed toward delivering pertinent items and services. Conversely, the tax and

administrative fees levied on the businesses help generate the money the city needs to run its

operations. The money the city makes from its initiatives and other sources of income should,

in most cases, at least match the costs it incurs to maintain its operations (Mcdonald, 2018).

The revenues must, nevertheless, exceed the expenses for the town to expand and be capable

of accomplishing long-term objectives. The town must lessen its dependency on outside

funds and donations and anticipate recessions thanks to the earnings generated. As a result, a

fiscal analysis report compares regular expenses against recurrent receipts to determine the

city’s economic condition.

Revenue indicators

The amount of money the city generates closely relates to its ability to provide high-

quality essential services. Growth, diversification, dependability, adaptability, and

administrative expenses concerning the forms of income should all be displayed by a vital

revenue characteristic. The capacity to develop and extend allows for adjusting additional

service demands and viability throughout difficult economic periods, such as epidemics and

slumps (Leiser & Mills, 2019). Additionally, the income needs to be adaptable and

dependable to guarantee a steady flow of funds for ongoing service delivery and expansion.

The variety of revenue streams reduces towns’ over-dependence on land rates and real estate

taxes, frequently representing most of their income. Moreover, the expenses incurred in

managing and processing the income must be precise to maintain credibility. They must also

be less than the amount of tax procured.

Total Revenue per House Hold

Total revenue per household from 2018 to 2020

$2,120 $2,115
$2,101
$2,100

$2,080

$2,060
$2,048
$2,040

$2,020

$2,000
2018 2019 2020
Fig 1: Total

revenue in dollars per household between 2018 and 2020.

The figure above indicates a gradual decrease in household revenue over time. The

delivery of services ought to expand proportionally as a municipal’s population grows

concerning the population growth and rise of households. Therefore, the earnings should

either rise to generate positive trends, maintain a stable equilibrium in the instance of the

former, or stay intact at the very least. In Maumelle, Arkansas, service supply faces a

challenge as the number of homes grows while overall revenue declines. The Department of

pubic safety and Municipal Court increased its income in response to the adjustments. In

contrast, the federal government incentivized the city to strengthen its financial base and

resume its activities. The funding and tax hikes would temporarily fix a chronic issue even if

the grant did a superb job of keeping the municipal’s activities afloat. The decrease in

revenue per household in Maumelle, Arkansas, from 2018 to 2020 is likely due to the

economic impact of the COVID-19 pandemic.

Property Tax Revenue

Property tax revenue in dollars

$2,120 $2,115
$2,101
$2,100

$2,080

$2,060
$2,048
$2,040

$2,020

$2,000
2018 2019 2020
Fig 2: Property

tax revenue in dollars between 2018 and 2020.

The tax imposed on homes, businesses, and other real estate is another excellent and

consistent revenue stream for regional governments. These properties’ earnings are

established for a specified duration, typically two years or longer, because their earnings

are less changeable. Conversely, property tax increases swiftly as a result of a rise in both

commercial and residential holdings in an expanding population. Since all lands are subject to

computerized taxation, the management and enforcement of property taxes are

straightforward and dependable. The municipal government determines the rules concerning

the taxation on the property, making them strict for the time they are in effect, often after two

years or until they are declared null by the court. According to the data, property

taxes increased negatively by 12% in 2019 compared to the previous year and

again negatively by 4% in 2020. Due to the economic crisis brought on by COVID-19 and

the subsequent closure of several enterprises, commercial property taxes decreased

dramatically in 2019. Since the properties are valued according to their evaluated worth, their

value also decreases.

Sales Tax Revenue

Sales tax revenue as a percentage of

$2,120 $2,115
$2,101
$2,100

$2,080

$2,060
$2,048
$2,040

$2,020

$2,000
2018 2019 2020
Fig 3: Sales tax

revenue as a percentage of total revenue.

Tax revenues in the form of VAT and Import duty are Maumelle’s primary income.

The municipal’s sales tax revenue was $ 1,284,083, $ 4,473,133, and $4,156,147 for 2018,

2019, and 2020 respectively. These figures represented 31.9%, 30.6%, and 32.5% of the total

revenues for the three years, respectively. Sales taxes are imposed on consumer goods in

varying categories with a hefty charge on the luxuries. Due to reduced sales revenue in 2019,

resulting from the COVID-19 epidemic, the sales tax percentage dropped. This amount,

however, increased again in 2020 due to the economic recovery and the resumption of several

commercial activities.

Expenditure Indicators

Expenditure is the cost attached to the financial resources offered to the populace in

terms of dependable and accessible services. For instance, in the quest to provide a clean

water source to the populace of Maumelle, the city administrators must incur additional

electricity and pipeline maintenance charges (Maher, Ebdon & Bartle, 2020). The quality of

the service and its viability are typically determined by all of these expenditures, which are

alluded to as expenses. However, sometimes expenditure increase is attributed to

misappropriation of funds or poor planning. A massive increase in spending without a

matching rise in income demonstrates poor budget constraints, which should be severely

tightened. Additionally, it could indicate unwelcome increases in fixed operating costs and

sizable future expansion plans with no immediate beneficial effects. This section will explore

the operating costs per household and labor costs.

Operating Expenditure per Household

Operati ng expenditure per household

$2,120 $2,115
$2,101
$2,100

$2,080

$2,060
$2,048
$2,040

$2,020

$2,000
2018 2019 2020
Fig 4: Operating

expenditure per household in dollars between 2018 and 2020.

The total operating expenditure cost was $ 8,000,000, $ 8,500,000, and $9,000,000 in

2018, 2019, and 2020 respectively. However, the operating expenditure per household

decreased, as shown. This aspect implies a possible burden on the funds allocated for service

provision. There is a clear correlation between household quantity and the operational

expense per household. Costs associated with the service provision, such as those measured

by the per-household spending, may rise if the household quantity also rises. Instead, the

service cost will decrease if operational spending per home is reduced. Due to the

increasing household numbers, any effort to reduce operational expenses per family would

need a shift in approach or administrative technique but would significantly impact overall

expenditures. On the contrary, the municipality may have been forced to stretch its resources
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to accommodate the expanding population with limited funds, resulting in a decline in service

quality.

Personnel Costs per Household

Personnel costs per household from

$2,120 $2,115
$2,101
$2,100

$2,080

$2,060
$2,048
$2,040

$2,020

$2,000
2018 2019 2020
Fig 5: Personnel

costs per household in dollars between 2018 and 2019.

Similar to how operational expenditure per home has steadily decreased from 2018

through 2020, personnel expenditures have done the same, demonstrating a considerable

improvement in the method utilized to manage revenues and spending. The expenses

decreased progressively over the three years, as demonstrated. A new approach to collecting

and managing expenses, downsizing municipal staff, and decreasing perks and incentives are

all possible explanations for the decline (Gorina & Maher, 2018). Additionally, there is a

chance that older municipal employees will retire, hence a total decrease in pay expenditures.

Spending less is a healthy signal, but it may also signify a recession or contraction in the

economy.
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References

Gorina, E., & Maher, C. (2018). Measuring and Modeling Determinants of Fiscal Stress in Us

Municipalities. SSRN Electronic Journal. https://doi/10.2139/ssrn.3211662

Leiser, S., & Mills, S. (2019). Local Government Fiscal Health: Comparing Self‐Assessments

to Conventional Measures. Published by Blackwell Publishers for Public Financial

Publications. https://doi.org/10.1177/0160323X18765919

Maher, C. S., Ebdon, C., & Bartle, J. R. (2020). Financial condition analysis: A key tool in

the MPA curriculum. Journal of Public Affairs Education, 26(1), 4-10.

https://doi/10.1080/15236803.2020.1717321

Mcdonald, B. D. (2018). Local Governance and the Issue of Fiscal Health. State and Local

Government Review, 50(1), 46-55. https://doi/10.1177/0160323x18765919

Appendices

1. Sales Tax Revenues

Warning trend: A Decrease in the sales revenues as a percentage of total revenues.

2. Personnel costs per household

Warning trend: Rise in personnel costs per household.

3. Operating costs per household

Warning trend: A gradual rise in operating costs per household.