Comparing Central City Finances Using Fiscally Standardized Cities

Recent bankruptcies of several large central cities, most notably Detroit, have highlighted the importance of better understanding the fiscal pressures faced by American central cities. Because fiscal institutions and arrangements differ widely across U.S. cities, it has until now been very difficult to conduct comparative analysis of spending, revenues, and debt in U.S. cities. This paper describes a new city fiscal data set, called fiscally standardized cities (FiSCs) that directly addresses the varying roles of municipal governments, counties, school districts, and special districts in the financing of central cities. By taking systematic account of fiscal data for all the major units of government in large cities over a long time period (1977-2011), the FiSC data permit investigation of a wide range of important comparative policy issues for cities. We describe the methodology used to construct FiSCs, and give a number of examples to illustrate the potential uses of the FiSC data. For example, we show how spending comparisons between cities can be fundamentally misleading unless one takes account of the varying roles of overlapping governmental units. We also demonstrate how the FiSC data can be used to benchmark fiscal data for one city against comparable cities, and help reveal important patterns of fiscal stress over time.

Keywords: financial crisis, central cities, fiscal health.