José Luis Zafra-Gómez

Developing a Model to Measure Financial Condition in Local Government: Evaluating Service Quality and Minimizing the Effects of the Socioeconomic Environment: An Application to Spanish Municipalities

Various studies have sought to obtain a measure of the financial health of local authorities, via the concept of financial condition. However, in measuring this latter concept, two serious problems need to be addressed: The first concerns the inclusion or otherwise of socioeconomic variables in the proposed evaluation models, and the second, the difficulty of measuring the solvency in the level of services provided. Therefore, the authors have created a methodology to measure the financial condition of a local authority, including a variable to measure the quality of the services received by the population, and present a new treatment for the variables of the socioeconomic environment so that the financial and socioeconomic factors can be integrated. The application of this method to a sample of Spanish local authorities reveals its capability of minimizing the effects of the socioeconomic environment and maximizing the value of benchmarking, making comparisons between local authorities simpler and more effective.

Developing an alert system for local governments in financial crisis

This article presents a new model which will show whether a local authority is heading for financial trouble. The model is simple for national audit bodies to use and provides an early warning of financial tensions allowing corrective action to be taken before there is a crisis.

Evaluating financial performance in local government: maximizing the benchmarking value

One of the main problems in evaluating financial performance arises in carrying out comparisons between municipalities, as no account is taken of the impact of certain factors of the social and economic environment on the indicators in question. In this study, the concept of financial condition is applied, revealing the influence of such factors, and a methodology is proposed to minimize their effects on the results of the evaluation. The results of applying these to a sample of municipalities in Spain reveal that the model is useful for reinforcing the value of benchmarking between municipalities with similar characteristics. Points for practitioners The use of indicators for evaluating financial performance has advanced considerably in recent years. However, many criticisms have been made by public sector managers concerning the application of such indicators. One of these is that, in many cases, the values measured by different authorities are not comparable, as the services they provide differ significantly. If local authorities were grouped according to the social and economic factors influencing their provision of public services, the evaluations made would be much more effective, facilitating decision-making by supervisory bodies and by municipal managers.

Overcoming cost-inefficiencies within small municipalities: improve financial condition or reduce the quality of public services?

A common finding of studies evaluating cost-efficiency in the provision of local public services is the existence of economies of scale in the production of such services. How can smaller, less efficient local authorities overcome this position of disadvantage? According to economic theory, they should either obtain supplementary funding or otherwise reduce the quality levels of the services provided. The aim of the present study is to evaluate the relations among different dimensions of municipal performance. The above concepts are analysed in a sample composed of 923 local authorities in Spain, each with fewer than 20 000 in habitants, using a data envelopment analysis model adapted for the particular characteristics of the local environment and repeating the analysis for two different periods, 2000 and 2005, in order to increase the consistency of the results obtained. Empirical analysis shows that the financial management and the productive efficiency of small local authorities are not interrelated, with the more cost-efficient bodies (especially for quality-related costs) being the least efficient as regards their financial condition. Moreover, our analysis of cost-efficiency for the smaller municipalities shows that revenues must be increased in order to obtain a similar level of quality to that of larger authorities.

Alternative management structures for municipal waste collection services: The influence of economic and political factors

Identifying and characterising the factors that determine why a local authority opts for a particular way of managing its waste collection service is an important issue, warranting research interest in the field of municipal solid waste (MSW) management. This paper presents empirical evidence spanning a broad time horizon (2002–2010) showing that economic and political factors impact in different ways on the provision of waste management services. We examine five alternatives in this area, including public and private service delivery formulas and, within each field, individual and joint options. Our findings highlight the importance of the service cost and that of the various indicators of fiscal stress as determinant factors of management decisions regarding the provision of MSW management services. 2014 Elsevier Ltd. All rights reserved.Identifying and characterising the factors that determine why a local authority opts for a particular way of managing its waste collection service is an important issue, warranting research interest in the field of municipal solid waste (MSW) management. This paper presents empirical evidence spanning a broad time horizon (2002-2010) showing that economic and political factors impact in different ways on the provision of waste management services. We examine five alternatives in this area, including public and private service delivery formulas and, within each field, individual and joint options. Our findings highlight the importance of the service cost and that of the various indicators of fiscal stress as determinant factors of management decisions regarding the provision of MSW management services.

Effects of the crisis in Spanish municipalities' financial condition: an empirical evidence (2005-2008)

Administrative decentralisation in Spain has been a continuous process since the restoration of democracy. However, while significant transfers of powers and funding have taken place between the central and regional governments, this is not the case with respect to local authorities. This situation, coupled with borrowing constraints and the budgetary balance required of Spanish councils under Spanish law, as well as the present economic crisis, is causing financial difficulties in municipal accounts. In this paper, we examine a sample of 2,364 local authorities, stratified by population size, for the period 2005-2008, with the aim of analysing the finances of Spanish local councils and observing the effects of the crisis on their financial condition.

Do local authorities use NPM delivery forms to overcome problems of fiscal stress

Finding solutions to the unfavourable economic and financial situation that the local authorities are currently facing is of crucial importance. One such solution is to adopt mechanisms for restructuring local public services, through new management approaches to reduce costs and thereby reduce fiscal stress. The aim of this article is to determine the probability of a city council changing the way it manages services, selecting from different options, in response to situations of fiscal stress. To address this issue, we studied a sample of 1572 Spanish municipalities for the period 2002–2009, using a random-effects panel multinomial logit model. The results obtained show that outsourcing and inter-municipal cooperation are the management formulas that councils are most likely to choose in response to a financial crisis, especially the ones arising from insufficient transfers, negative cash flow, debt or budget deficit.

Contrasting New Public Management (NPM) Versus Post-NPM Through Financial Performance: A Cross-Sectional Analysis of Spanish Local Governments

Financial reports under New Public Management (NPM) programs can provide an incomplete picture of government finances. Post-NPM reforms could help overcome this weakness through the use of aggregate financial measures. This article focuses on the effects of the agencification process analyzing the differences between individual and aggregate measures of government financial performance in the Spanish local government. In general, the results show there is greater compliance with post-NPM postulates, although this does not mean that NPM and post-NPM management models cannot coexist. The use of aggregate performance measures could help bring about this improvement in controlling public agencies and, therefore, make public sector entities more efficient.

Cost efficiency in municipal solid waste service delivery. Alternative management forms in relation to local population size

Considerable research has been devoted to the analysis of efficiency and of management forms for municipal waste collection, but widely varying results have been reported. In this paper, the metafrontier approach, by means of order-m frontiers, is used to analyse the efficiency of different ways of managing waste collection services, in order to determine which form is more appropriate. We compare the results obtained with this approach against those of previous theories. The advantage of applying this methodology is that unlike traditional nonparametric frontier analysis, we can compare the efficiency of different groups of municipalities according to their population size and to the management form adopted to supply the service. The results obtained suggest that, in general, cooperation formulas are the most suitable for the waste collection service. Thus, intermunicipal cooperation performs best in smaller municipalities (up to 20,000 inhabitants). However, we find that contracting out the service is associated with higher levels of efficiency in municipalities with more than 20,000 inhabitants.

Privatisation of waste collection services in response to fiscal stress in times of crisis

According to the conventional theoretical framework, fiscal stress is an explanatory factor of privatisation, since the latter can provide economies of scale and cost savings, as indicated by the theory of public choice. However, urban planning theories suggest that public choice does not take into account the collective needs of those receiving public services. The present study aims to clarify two major issues. Firstly, in the presence of fiscal stress, do public managers really privatise? And secondly, does privatisation harm the public interest? To investigate these questions, we constructed and analysed a discrete-time survival model, which was applied to the period 2000–2010, to reflect the effects of the current global financial crisis on the fiscal stress–privatisation relationship with respect to urban waste collection services. The results obtained indicate that when certain aspects of financial condition worsen, the likelihood of public services being privatised increases. This was the case during the Great Recession of 2008–2010, especially when a neighbouring municipality had previously privatised its services. After privatisation, service quality did not vary significantly, and so we conclude that public choice does not prejudice the public interest.