Revenue Manual: A Tool for Dynamic Analysis

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Revenue Manual A Tool for Dynamic Analysis
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What is a Revenue Manual?

• A comprehensive document that describes all
  revenue sources supporting local services within
  a jurisdiction.

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Why Construct a Revenue Manual?

• Recommended Practice
• Decision-making support
• Educating local officials
• Internal staff training tool
• Public conversation with taxpayers

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NACSLB Recommended Practices

• Practice 9.2 - Prepare Revenue Projections. A
  government should prepare multi-year projections
  of revenues and other resources.
• Practice 9.2a - Analyze Major Revenues. A
  government should maintain an in-depth
  understanding of its major revenues.
• Practice 9.2b - Evaluate the Effect of Changes to
  Revenue Source Rates and Bases. A government
  should evaluate and understand the effect of
  potential changes to revenue source rates and
  bases.

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NACSLB Recommended Practices

• Practice 9.2c - Analyze Tax and Fee Exemptions.
  A government should periodically estimate the
  impacts and potential foregone revenue as a
  result of policies that exempt from payment,
  provide discounts and credits, or otherwise favor
  particular categories of taxpayers or service
  users.
• Practice 9.3 - Document Revenue Sources in a
  Revenue Manual. A government should prepare and
  maintain a revenue manual that documents revenue
  sources and factors relevant to present and
  projected future levels of those revenues

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Decision-Making Support

• Informs decision-makers and public
• Documents institutional knowledge of historical
  patterns, relationship to influencing factors,
  and forecasting methods

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Information Sharing

• Collection of information within finance, budget
  and other departments

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Internal Training Tool

• Aids in staff training
• A tool for educating newly elected officials

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Who should be involved?

• Chief Finance Officer should assemble a team
• Finance Office
• Budget Office
• Fiscal/Budget Analysts housed in other Depts.
• Anyone with revenue-specific knowledge
• From this team, a project manager should be named
  for oversight and organization.

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Knowledge collection is ESSENTIAL!

• Identify people with institutional knowledge who
  can assist.
• How have specific revenue streams reacted to
  changes in legislation?
• How has local policy impacted streams?

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Facilitate Revenue Manual Ownership!

• Incorporating a variety of offices and
  departments facilitates information sharing
  across the organization.

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Constructing a Revenue Manual Requires

• Collecting significant amounts of data, internal
  and external
• Organizing each source into a consistent format
• Compiling into one document.
• Establishing a consistent process up front will
  help with manual construction.

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Steps to Construct a Revenue Manual

• Step 1 Identify Sources of Revenue
• Step 2 Document Legislative Authority and
  Limitations
• Step 3 Document Fund Type Receiving Revenues
  Purpose
• Step 4 Document Rates Exemptions to Revenue
  Stream
• Step 5 Specify the Influence Factors Revenue
  Assumptions
• Step 6 Document Forecasting Method
• Step 7 Graph Historical Revenue Yield Trend
• Step 8 Document Unique Historical Events

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and

• Review and update regularly.
• Dont let the manual become one of those reports
  on the shelf.

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Manual Process
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Introductions
Source City of Nashville, TN
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Introductions (continued)
Source Greenville County, South Carolina
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How To Reference
Source, City of Nashville, TN
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Table of Contents
Source City of Dunedin, FL
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Title and Description of Revenue Source
Source Clark County, Washington
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Title and Description (continued)
Source Orange County, FL
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Authorizing Statute
Source Orange County, FL
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Authorizing Statute (continued)
Source Weights and Measures Fee Schedule, Nassau
County, NY
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Earmarking or Revenue Dedication
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Collection Methodology
Source Orange County, FL
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Collection Methodology (continued)
Source Orange County, FL
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Definition of Revenue Base/Tax/Rate
Source Greenville County, SC
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Definition of Revenue Base/Tax/Rate (continued)
Source Orange County, FL
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Definition of Revenue Base/Tax/Rate (continued)
Source Nashville, TN
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Accounting Information
Source Longmont, CO
Source City of Orlando, FL
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Historical Information
Source City of Nashville, TN
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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Historical Trends Forecasts
Source City of Boise, ID
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Historical Trends Forecasts
Source Fairfax County, VA
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Data Organization Considerations

• Graph/chart data in a variety of ways to
  determine which best illustrates the revenue
  picture.
• Be sure to note/footnote data outliers in close
  proximity to the graph/chart.
• If using scenario analysis, be sure to fully
  define parameters.

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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Equity Impacts

• The Seven Dimensions of Tax Equity and Fairness
• The AICPA reiterates its position that equity and
  fairness is an essential attribute of a good tax
  system, and recommends that equity and fairness
  be given due consideration in both the making and
  administration of tax laws.
• Dimensions in determining tax equity and
  fairness
• Exchange Equity and Fairness Over the long run
  taxpayers receive appropriate value for the taxes
  they pay.
• Process Equity and Fairness Taxpayers have a
  voice in the tax system, are given due process
  and are treated with respect by tax
  administrators.
• Horizontal Equity and Fairness Similarly
  situated taxpayers are taxed similarly.
• Vertical Equity and Fairness Taxes are based on
  the ability to pay.
• Time-Related Equity and Fairness Taxes are not
  unduly distorted when income or wealth levels
  fluctuate over time.
• Inter-Group Equity and Fairness No group of
  taxpayers is favored to the detriment of another
  without good cause.
• Compliance Equity and Fairness All taxpayers
  pay what they owe on a timely basis.
• Source American Institute of Certified Public
  Accountants

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Revenue Manual Checklist

• Title and Description of Revenue Source
• Statute Section Providing Authorization and
  Limitations
• Identification of Dedication or Earmarking of
  Revenue
• Collection Methodology
• Definition of Revenue Base Tax or Rate
  Structure
• Accounting Information, account/fund numbers
• Historical information-legislative history,
  impact of other laws, rate changes, exemptions,
  etc.
• Historical Revenue Levels (trends) and projected
  Future Levels
• Equity Impacts on Taxpayers or Rate-Payers
• Effects of changes in economic circumstance or
  other external factors
• Source Revenue Analysis and Forecasting, GFOA,
  2001

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Impacts from Economic Circumstance
Source Clark County, WA
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Impacts from Economic Circumstance (continued)
Source City of Boise, ID
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Impacts from Economic Circumstance (continued)
Source City of Boise, ID
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Impacts from Economic Circumstance (continued)

• Identifying economic influence factors arms you
  in advance of the headlines.

Source MSNBC, November 13, 2007
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Revenue Forecasting is FUN!

• GFOA offers revenue forecasting classes several
  times a year come join in the fun!
• Courses (including advanced) to be offered Fall
  2008

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Revenue Forecasting Checklist

• Organize for effective revenue forecasting.
• Select revenues for special analysis.
• Determine an allowable variance for selected key
  revenues.
• Consistently follow forecasting process.
• Apply analytical techniques.
• Establish on-going process for reporting revenue
  performance.

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Select Revenues for Special Analysis

• A small number of revenues typically account for
  an overwhelming percentage of total revenue.
• Some revenues have a history of large swings from
  one year to the next.
• Some revenues are known to be affected by special
  events or the business climate.
• Some revenues deserve attention simply due to
  their size.

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Consistently Follow Forecasting Process

• Step 1 Prepare data.
• Step 2 Identify historic revenue patterns.
• Step 3 Identify factors affecting patterns.
• Step 4 Specify assumptions about factors.
• Step 5 Choose/apply forecasting method.
• Step 6 Gauge accuracy of the forecast.
• Step 7 Monitor actual relative to forecast.
• Step 8 Update forecast at set intervals.
• Source Revenue Analysis and Forecasting, GFOA
  2001

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Establish On-going Process for Reporting
Performance

• Monitor actual revenue collections with forecasts
  periodically throughout the year.
• Provide reports about revenue performance at
  consistent time intervals to decision-makers,
  press, and public.

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Organize for Effective Revenue Forecasting

• Establish a central revenue clearinghouse
  function.
• Provide technical training to develop technical
  expertise.
• Develop professional methods for making
  projections.
• Document everything.

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Communicating Manual via Website
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Communicating Manual via Website
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Communicating Manual via Website
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Amy Zachary Reynolds

• Economist
• Government Finance Officers Association
• areynolds_at_gfoa.org