DBPapers
DOI:10.5593/SGEM2013/BE5.V2/S21.006

ANALYSIS OF ADDITIONAL ECONOMIC PARAMETERS NECESSARY TO GRANT A LOAN TO LOCAL GOVERNMENT UNITS BASED ON REAL ESTATE MARKET ANALYSIS

J. Dabrowski, P. Parzych, J. Bydlosz
Tuesday 6 August 2013 by Libadmin2013

References: 13th SGEM GeoConference on Ecology, Economics, Education And Legislation, www.sgem.org, SGEM2013 Conference Proceedings, ISBN 978-619-7105-05-6 / ISSN 1314-2704, June 16-22, 2013, Vol. 2, 41 - 48 pp

ABSTRACT

Until recently, Local Government Units (local authorities) had a reputation of being a very good borrower. Banks were willing to grant loans to governments. There are a lot of parameters and indices for the analysis of the financial condition of local governments. For many local government units, due to statutory changes, the year 2011 was a difficult test of financial capacity. The budgets of local governments and other financial statements, however, do not provide all the relevant information about the changes occurring in the financial condition of local governments and subordinate units. Analysis of the real estate market allows for the assessment of the issues, which are often not related directly to property appraisal. Combining the facts, which are seemingly from divergent areas of reality, allows to carry out a fundamental analysis of the studied phenomenon. Increased sale of government assets, if observed during a period of at least two years, usually indicates declining credit worthiness of a municipality. Among numerous tasks to be performed for the local community, the government should deal with the environmental protection. In order to properly fulfill its mission, the local government must have adequate financial resources. Lack of financial discipline will result in expenditure of own income, and in practice it reduces the possibilities of local authorities to undertake effective actions in the field of environmental protection. Covering current expenses of constantly growing administration and mismanagement is usually reflected in the sale of property and taking out another loan. A critical point in mismanagement is debt rollover, i.e. paying off one loan with another one. According to the authors, exceeding this point completely rules out in practice a possibility of effective actions taken by a government to protect the environment.
Analyzing the real estate market and changes in the budget over the period of one year, the authors show a specific example of a space that should be especially thoroughly checked before deciding whether to grant another loan to a local government. The financial condition of a town translates directly to the level of fiscal liabilities of its residents and the protection of the environment. This paper presents a model example of the effects of rising municipal costs on economic decisions, which have a direct impact on the environment.

Keywords: global attributes, real estate market environment


PAPER DOI:10.5593/SGEM2013/BE5.V2/S21.006: ANALYSIS OF ADDITIONAL ECONOMIC PARAMETERS NECESSARY TO GRANT A LOAN TO LOCAL GOVERNMENT UNITS BASED ON REAL ESTATE MARKET ANALYSIS

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