Final answer:
The assertion that the key cause of municipal financial crises is tax management failure is false. Financial crises are due to complex factors such as economic conditions, fiscal responsibility, and external shocks, like the 2007 mortgage crisis.
Step-by-step explanation:
The assertion that the key cause of municipal financial crises is the failure of management to raise taxes quickly enough in response to adverse environmental factors is false. While tax policy certainly plays a role in the fiscal stability of a municipality, financial crises can be attributed to a variety of complex factors, including the structure and soundness of overall fiscal policy, economic conditions, fiscal responsibility, and external shocks such as financial downturns and recessions.
As evidenced by the mortgage crisis that began in 2007, which led to decreased property values and subsequent financial strains on local governments, other significant causes include loss in tax revenue, reduction in state aid, and challenges in collecting taxes due to economic downturns. For instance, the case of Detroit, Michigan filing for bankruptcy in 2013 illustrates the multifaceted nature of municipal financial woes.