Methodologies for Forecast Modeling for Small Areas with Limited Data Availability and Unique Tax Structures

Abstract

The downturn in the real estate market and the nationwide economic recession had a significant impact on the budgets of Nevada’s local governments, including the Cities of Reno and Sparks, and Washoe County. Unable to reach revenue levels experienced in the past, local governments were forced to cut services and lay off employees. This experience helped emphasize the need for fiscal planning for local governments. However, many local governments lack access to relevant data and data that is available often lacks the long-term history necessary for planning. The purpose of this analysis is to compare methodologies available for forecast models to determine the most appropriate methodology for creating forecast models for small regions with limited data and a unique tax structure that exists in the State of Nevada. Methodologies for three types of forecasting models are compared to determine the most appropriate methodology for the Reno-Sparks region in Nevada. First, a revenue forecasting model is developed for the Cities of Reno and Sparks, and Washoe County to help forecast assessed property values and taxable sales, which generate the majority of revenues for these entities. Second, a leading economic index for the Reno MSA is created to help forecast economic performance in the region. Finally, a fiscal impact analysis model is developed for Washoe County to determine impacts of future growth on the County’s budget.