Municipal Finance Glossary
Plain-language definitions of the terms used in city budgets, financial reports, and bond disclosures. 59 terms and counting.
Budgeting & Planning
AppropriationA legal authorization granted by the city council to spend a specific amount of money for a specific purpose during a defined time period.Balanced Budget RequirementA legal mandate (usually from state law or city charter) that requires a city to adopt a budget where projected revenues equal or exceed projected expenditures.Capital BudgetThe portion of a city budget dedicated to long-term infrastructure investments like buildings, roads, vehicles, and technology systems.Capital Improvement Plan (CIP)A multi-year planning document that schedules and prioritizes major infrastructure projects — roads, buildings, utilities, and equipment.Fiscal Health ScoreCitySpend's proprietary 0-100 composite score (graded A through F) measuring a city's overall financial health across six weighted factors.Fund BalanceThe accumulated surplus (or deficit) in a government fund — essentially a city's savings account. A healthy fund balance provides a cushion against revenue shortfalls.General FundThe primary operating fund for a city government, covering most day-to-day services like police, fire, parks, and administration.Operating BudgetThe portion of a city budget covering recurring, day-to-day expenses like salaries, utilities, supplies, and ongoing program costs.Peer GroupA set of cities grouped by population size for comparison purposes — ensuring that small cities are compared to other small cities, not mega-cities.Rainy Day FundA reserve fund set aside specifically for emergencies, revenue shortfalls, or unexpected expenses — separate from the general fund balance.Structural DeficitA persistent gap where a city's recurring expenses exceed its recurring revenue — meaning the budget is fundamentally unbalanced even in a normal economy.
Revenue & Taxes
Assessed ValueThe value assigned to a property by a government assessor for the purpose of calculating property taxes, which may differ from market value.Community Development Block Grant (CDBG)A major federal grant program administered by HUD that provides cities with funding for housing, infrastructure, and economic development in low- and moderate-income areas.Enterprise FundA self-supporting government fund that operates like a business — charging user fees to cover costs for services like water, sewer, electric, or transit.Excise TaxA tax on a specific good or activity — such as hotel rooms, rental cars, alcohol, tobacco, or fuel — rather than a broad sales tax.Federal GrantsFunding from the federal government to cities for specific purposes — housing, transportation, public health, law enforcement, and environmental protection.Intergovernmental RevenueMoney a city receives from federal or state government through grants, shared taxes, or direct transfers.Mill Rate (Millage Rate)The property tax rate expressed as dollars per $1,000 of assessed property value. One mill equals $1 of tax per $1,000 of assessed value.Property TaxA tax levied on real estate (land and buildings) based on assessed value. Property taxes are the single largest revenue source for most U.S. city governments.Revenue DiversityThe degree to which a city's revenue comes from multiple sources (property tax, sales tax, fees, grants) rather than being concentrated in a single stream.Sales TaxA consumption tax collected on retail purchases. Many cities levy a local sales tax on top of state and county rates.Tax Increment Financing (TIF)An economic development tool where the increase in property tax revenue generated by development in a designated district is captured to pay for infrastructure improvements in that district.Tax LevyThe total amount of property tax revenue a city authorizes to collect in a given year, calculated by applying the mill rate to the total assessed value of all taxable property.User Fees and ChargesPayments collected by city government from individuals who use specific services — water bills, building permits, park admission, recreation program fees.
Debt & Bonds
Credit Rating (Municipal)An assessment by a rating agency (Moody's, S&P, Fitch) of a city's ability and willingness to repay its debt obligations. Higher ratings mean lower borrowing costs.Debt LimitA legal cap on the amount of debt a city can carry, typically expressed as a percentage of assessed property value.Debt Per CapitaA city's total outstanding debt divided by its population — a key metric for comparing debt burdens across cities of different sizes.Debt ServiceThe annual cost of repaying outstanding municipal debt — including both principal payments and interest on bonds and other borrowings.General Obligation Bond (GO Bond)A municipal bond backed by the full faith, credit, and taxing power of the city — meaning the city pledges to raise taxes if necessary to repay bondholders.Municipal BondA debt security issued by a city, county, state, or other government entity to finance capital expenditures. Interest income is generally exempt from federal income tax.Pension Obligation Bond (POB)A bond issued by a city to make a lump-sum payment into its underfunded pension system, betting that investment returns will exceed the bond's interest rate.Revenue BondA municipal bond repaid from a specific revenue stream (like water fees or toll road revenue) rather than the city's general taxing power.
Pensions & Retirement
Actuarial AssumptionThe financial and demographic projections used to calculate pension costs and liabilities — including expected investment returns, employee life expectancy, and salary growth.Annual Required Contribution (ARC)The actuarially determined amount a city should contribute to its pension fund each year to keep the plan on track to full funding.Defined Benefit PensionA retirement plan where the employer guarantees a specific monthly payment for life based on years of service and final salary — the traditional government pension.Defined Contribution PlanA retirement plan where the employer and/or employee contribute a fixed amount to individual investment accounts (like a 401k or 457b), with no guaranteed benefit amount.Discount Rate (Pension)The interest rate used to calculate the present value of future pension liabilities. A lower discount rate produces higher liabilities; a higher rate produces lower liabilities.Funded RatioThe percentage of a pension plan's projected liabilities that are covered by current assets. A plan with $80 in assets for every $100 in liabilities has an 80% funded ratio.Hybrid Pension PlanA retirement plan that combines elements of a defined benefit pension (guaranteed minimum) with a defined contribution component (individual investment accounts).Unfunded LiabilityThe difference between a pension plan's projected liabilities (what it owes to current and future retirees) and its current assets. Also called the unfunded actuarial accrued liability (UAAL).Vesting (Pension)The point at which a government employee has earned the right to receive a pension benefit, even if they leave before retirement. Typically requires 5-10 years of service.
Spending & Services
Deferred MaintenanceMaintenance and repairs that are postponed to save money in the current budget year — creating a backlog of unfunded repair needs that grows over time.Economic DevelopmentCity government efforts to attract business investment, create jobs, and grow the tax base — including incentives, infrastructure, workforce programs, and marketing.InfrastructureThe physical assets that support city operations and resident quality of life — roads, bridges, water mains, sewer systems, buildings, and technology systems.Per Capita SpendingTotal city expenditure divided by population — the standard metric for comparing spending levels across cities of different sizes.Public Safety SpendingThe combined budget for police, fire, emergency medical services, courts, and corrections — typically the largest category in a city's general fund.Spending EfficiencyA measure of how effectively a city converts spending into services — comparing per-capita costs to service quality outcomes and peer benchmarks.
Governance & Structure
AnnexationThe legal process by which a city expands its boundaries to include adjacent unincorporated land, adding new residents and tax base.City CharterA city's foundational governing document — similar to a constitution — that establishes the form of government, powers, organizational structure, and key procedures.City ManagerA professional administrator hired by the city council to manage day-to-day city operations, prepare the budget, and oversee department heads.Council-Manager GovernmentA form of city government where an elected city council sets policy and a hired professional city manager runs day-to-day operations.Dillon's RuleA legal principle holding that cities have only those powers explicitly granted to them by the state legislature — the opposite of home rule.Home RuleThe authority granted by a state to its cities to govern themselves and pass local laws without needing specific state legislative approval for each action.Mayor-Council GovernmentA form of city government where an independently elected mayor serves as chief executive (like a governor or president) and an elected council serves as the legislative body.
Accounting & Reporting
Comprehensive Annual Financial Report (CAFR/ACFR)A city's official annual financial report, audited by independent accountants, containing detailed financial statements, statistical data, and management discussion.Generally Accepted Accounting Principles (GAAP)The standardized accounting rules that governments follow when preparing financial statements, as promulgated by the Governmental Accounting Standards Board (GASB).Governmental Accounting Standards Board (GASB)The independent organization that sets accounting and financial reporting standards for U.S. state and local governments.Modified Accrual AccountingThe accounting method used for governmental funds (like the general fund), where revenues are recognized when measurable and available, and expenditures are recognized when the liability is incurred.Single AuditA comprehensive annual audit required for governments that spend $750,000 or more in federal funds, ensuring compliance with federal grant requirements.