Municipal Algorithm

For more information about the Municipal Algorithm see the short video, “Municipal Algorithm”.

The fiscal indicator scoring system is an algorithm that assigns a numeric score (0-10) identifying the fiscal distress or fiscal health of a municipality. Ten factors have been identified to measure a particular area of municipal finances. A score of 1 or 0 is assigned to each of the factors. Adding the individual factor scores calculates the overall score for the municipality. In order to determine whether an individual factor is given a 1 or 0, a trigger is established for each factor.

The scores are grouped into three categories:

•    0 – 4 are municipalities in various degrees of fiscal health (color coded in shades of green)

•    5 – 6 are municipalities that are approaching fiscal distress (color coded in shades of blue)

•    7 – 10 are municipalities in various stages of fiscal distress (color coded in shades of red)

The ten individual factors used to calculate an overall score fall into four groups:

•    Population (for 2000 – 2010 measures percent change from 2000 Census or for 2011 and later 2010 Census) maximum score of 1

•    Real Taxable Value Growth (measures percent change from 2 prior years)

•    Large Real Taxable Value Growth (penalizes a municipality with a decrease in taxable value of more than 4%)

•    General Fund Expenditures as a Percent of Taxable Value -  maximum score of 1

•    General Fund Operating Deficit (measures the spending habits of the municipality over three years) maximum score of 3

•    Size of Available Fund Balance - maximum score of 1. Available Fund Balance includes Nonspendable, Assigned, and Unassigned/Unrestricted fund equity classified in the General Fund. It excludes Restricted and Committed.

•    Fund Deficits in Current or Previous Years -  maximum score of 1

•    General Long-term debt - maximum score of 1. Long-term debt should not include deferred revenue, discretely presented component unit debt, pension debt, OPEB debt, or business activity debt. It should include debt for governmental activities only and all long-term debt payable even if it is payable within one year. For purposes of the APR, some other items that would be included in long-term debt since most have elements that have been or are payable for more than one year include capital leases, operating leases with scheduled rent increases, compensated absences, claims and judgments, special termination benefits, and landfill closure and postclosure care (GASB 34, para. 81).

Some factors measure a chronic problem like General Fund Operating Deficit. In these cases the factor is measured over three years. Other factors measure the magnitude of the problem like Real Taxable Value Growth. A municipality will be penalized for having a small negative change in Real Taxable Value Growth; an additional point will be scored for a decline greater than 4%.