How High Should They Jump? An Empirical Method for Setting Municipal Financial Ratio Performance Benchmarks

Title
How High Should They Jump? An Empirical Method for Setting Municipal Financial Ratio Performance Benchmarks
Publication Date
2016
Author(s)
Drew, Joseph
( author )
OrcID: https://orcid.org/0000-0003-3579-5758
Email: jdrew2@une.edu.au
UNE Id une-id:jdrew2
Dollery, Brian E
Type of document
Journal Article
Language
en
Entity Type
Publication
Publisher
John Wiley & Sons, Inc
Place of publication
Australia
DOI
10.1111/1467-8500.12152
UNE publication id
une:18910
Abstract
Heightened concerns regarding the financial sustainability of local councils have resulted in an increasing reliance by municipal regulators on financial ratio performance benchmarking. However, these benchmarks are often assigned without explicit justification and despite a paucity of empirical evidence. Furthermore, regulators typically allocate a single performance benchmark across an entire local government system despite the fact that individual councils may face entirely different operating environments. Failure to take account of the environmental challenges facing councils can result in inappropriate or unattainable performance benchmarks that may give rise to unintended consequences, such as the well-documented threshold effects. To address this problem, we develop an empirical method for allocating performance benchmarks with respect to the current level of performance and environmental constraints facing individual local authorities. We demonstrate this technique in a case study using data drawn from New South Wales local authority operating ratios.
Link
Citation
Australian Journal of Public Administration, 75(1), p. 53-64
ISSN
1467-8500
0313-6647
Start page
53
End page
64

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