RubinBrown Public Sector Stats 2011

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This analysis has been created in order to provide a comprehensive report of key government-wide, governmental and general fund financial statistics for the regions we serve so that cities may compare how they are doing relative to other municipal governments in their region and identify trends occurring in their communities.

Public Sector Stats

2011

A Publication of RubinBrown LLP

Executive Summary

Contents 1 Executive Summary 7 St. Louis Area 8 St. Louis Metropolitan Area – Population Less Than 20,000 9 St. Louis Metropolitan Area – Population Greater Than 20,000 10 Kansas City Area 11 Denver Front Range Area 13 Financial Ratio Interpretation 17 RubinBrown’s Public Sector Services Group

RubinBrown is pleased to present our 2011 Public Sector Statistical Analysis, our fifth annual survey of municipal statistical and financial information. This analysis has been created in order to provide a comprehensive report of key government-wide and governmental-fund statistics for the regions in which we serve our clients so that city governments may compare how they are doing relative to their peers. As was the case in the four previous editions of the survey, the study includes results for municipalities in the St. Louis and Kansas City metropolitan areas. This year, for the first time, we are pleased to include results for municipalities in the Denver Front Range area as well. All cities included in the data have populations greater than 5,000. Additionally, the cities of St. Louis, Kansas City and Denver are excluded from the study due to their size relative to the other municipalities. Finally, for purposes of this study, metropolitan St. Louis includes municipalities in both Missouri and Illinois, metropolitan Kansas City includes municipalities in both Kansas and Missouri and Denver consists of municipalities considered to be in the Front Range area. Methodology The RubinBrown Public Sector Services Group contacted the finance officers from the participating municipalities requesting financial information for the ratio calculations. Financial information was collected from the 2010 fiscal year or calendar year Comprehensive Annual Financial Report (CAFR), or from the 2010 audited financial statements if no CAFR was prepared. All municipalities included in the study prepare financial statements in accordance with U.S. generally accepted accounting principles. Key

1 | Raise Your Expectations

financial ratios were calculated in three categories: government-wide (governmental activities only), governmental funds, and general fund information. Each participant in the survey received customized financial statistics to use as an analysis tool. The chart to the right displays a breakdown of participating municipalities by region: All 34 of the St. Louis municipalities participating in this year’s survey also participated in last year’s survey. Of the 24 Kansas City municipalities participating, 22 also participated in last year’s survey. As stated previously, this is the first year Denver Front Range municipalities are included in the survey. Format of the Report

Participants

2007

2008

2009

2010

2011

St. Louis Kansas City Denver

The ratio results are presented separately for the St. Louis, Kansas City and Denver regions. Information for the St. Louis metropolitan area is further segmented by population greater than or less that 20,000. This is due primarily because of the unique demographics of the St. Louis region, which includes over 90 municipalities, many of which are small. The average population of the cities included in the St. Louis region was 22,600. Sixteen of those cities were greater than 20,000 and 18 were less than 20,000. This compares to the average population of 44,900 for cities surveyed in the Kansas City regions and 98,300 for those in the Denver Front Range region. For each ratio presented, the report presents information both by quartile and average. The computed values for each ratio were sorted from more favorable to less favorable and quartiles were determined. The quartile information is presented by displaying the ratio value that separates each quartile. For a description and interpretation of the ratios, please refer to that section of the report. The conclusions reached as to which results are more or less favorable are based upon the judgment of RubinBrown, taking into consideration what the majority of cities are likely to believe. Each statistic may be viewed differently or may be more or less meaningful based upon each city’s situation. For example, a small city may view a large amount of funding being spent on public safety as favorable, whereas our analysis places this in a less favorable quartile. In addition, per capita ratios may be adversely affected if your city has a large non resident population it serves due to a significant daily influx of workers. Analysis Average Change in Net Assets (All Cities)

10%

If there is one theme that pervades the results of this year’s survey, it is the continued weakness of the American economy. As a result of the recession and the slow economic recovery, municipal governments have faced decreased tax and grant revenue without a corresponding decrease in the demand for municipal services. This has resulted in substantially slower growth in net assets for municipal governments, as evidenced by the chart to the right:

7.9%

5.8%

4.6%

1.6%

2007

2008

2009

2010

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Unreserved General Fund Balance as a % of Revenues

Fund balance of the general fund is generally a focal point of a city’s financial health, at least from a short term perspective. Surprisingly, unreserved fund balance as a percent of total revenues in the general fund has remained relatively stable since 2008. This indicates a level of disciplined financial management practices put into place to offset the effects of declining revenues. In the analysis that follows, the results for each metropolitan area are examined, with an emphasis placed on the impact of current economic conditions upon each region. St. Louis The 2010 results for the St. Louis area illuminate

60%

52.3%

51.7%

50.5%

44.1%

50%

35.4%

34.8%

33.1%

30% 40%

39.5%

20%

22.6%

10%

2007

2008

2009

2010

St. Louis Kansas City Denver

the consequences of the nation’s economic malaise. The average increase in net assets for St. Louis municipalities was a mere 1.4% in 2010, as compared with 6.9% in 2009 and 8.0% in 2008. Furthermore, ten of the 34 St. Louis municipalities (or 29%) reported a decrease in government- wide net assets in 2010, as compared with 11% in 2009. Finally, ten of the 34 St. Louis municipalities (or 29%) reported negative unrestricted net assets in 2010. This was the same for 2009. The cause of these adverse fluctuations in net assets is evident when revenue per capita and expenses per capita is examined. As indicated in the following chart, revenue per capita for St. Louis municipalities decreased from $751 in 2008, to $722 in 2009, to $701 in 2010. This is caused primarily by declining sales tax revenue due to decreased economic activity, declining property tax revenue due to a decrease in the assessed valuation of the property base, and declining grant revenue due to efforts by state and federal governments to reign in their spending.

Meanwhile, per capita expenses for St. Louis municipalities have not experienced a similar decrease, as the following chart indicates. In fact, per capita expenses increased from $895 in 2009 to $964 in 2010. Expenses for municipalities have failed to decrease in part because the primary expense for most municipalities is employee salaries. Even if the municipality foregoes salary increases for employees, health care costs and retirement benefits continue to rise.

Tax Revenues Per Capita

$760

$751

$728

$722

$696

$701

$697

$664

$632

$600

2007

2008

2009

2010

3 | Raise Your Expectations

Expenses Per Capita

An additional cost pressure for municipalities is capital maintenance. While certain types of maintenance can be deferred in times of economic hardship, repairs to streets and infrastructure and to major buildings must continue. Thus, for St. Louis municipalities, capital outlay as a percentage of total expenditures was 21.1% in 2010, the same percentage as in 2009. Since much of the capital outlay for municipalities is funded by debt issuances, debt per capita for St. Louis municipalities has remained fairly level. As indicated by the chart below, debt per capita for St. Louis municipalities increased from $1,048 in 2009 to $1,070 in 2010. Fortunately, in spite of the economic environment, St. Louis municipalities have managed to maintain sufficient liquidity to meet their ongoing financial needs. The average liquidity ratio for St. Louis municipalities in 2010 was 2.25. Although this represents a decrease from the 2009 average of 2.85, it is a positive sign that liquid assets for area municipalities are more than double their current liabilities. Indeed, 28 of the 34 participating St. Louis municipalities had a liquidity ratio of 2.0 or greater. Kansas City

$980

$952

$964

$924

$917

$896

$895

$868

$885

$840

2007

2008

2009

2010

Average Debt Per Capita

$1300

$1,100

$1,070

$1140

$1,048

$1,041

$980

$820

$660

$500

$885

2007

2008

2009

2010

The 2010 results for the Kansas City area also reflect the consequences of the current economic climate. The average increase in net assets for Kansas City municipalities was 1.2% in 2010, as compared with 2.3% in 2009 and 3.5% in 2008. Of the 24 municipalities surveyed, nine (or 38%) reported a decrease in net assets in 2010, as compared with 30% in 2009. Additionally, in both 2009 and 2010, seven of the Kansas City municipalities surveyed reported negative unrestricted net assets.

As illustrated in the tax revenue per capita chart, tax revenue for Kansas City municipalities actually increased from $660 per capita in 2009 to $668 per capita in 2010. However, this result is still less than the 2008 peak of $688 per capita. Additionally, as illustrated by the expenses per capita chart above, Kansas City area municipalities are subject to the same upward cost pressures that municipalities elsewhere are facing. Expenses per capita for Kansas City municipalities increased from $982 in 2008, to $999 in 2009, to $1,002 in 2010.

Tax Revenues Per Capita

$760

$728

$696

$688

$664

$668

$660

$632

$649

$600

2010

2007

2008

2009

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Expenses Per Capita

$1050

The results for the Kansas City area do reflect a decrease in capital outlay expenditures over the past three years, likely in an effort to control expenditures during difficult economic times. Capital outlay as a percentage of total expenditures decreased from 30.0% in 2008, to 27.2% in 2009, to 22.6% in 2010. However, as illustrated in the chart above, average debt per capita for the Kansas City municipalities has steadily increased: from $1,129 in 2008, to $1,189 in 2009, to $1,262 in 2010. To the extent these municipalities have issued debt to fund capital projects, this may signal an increase in capital outlay expenditures in future years. Finally, while the Kansas City municipalities have not maintained the same degree of liquidity as the St. Louis municipalities, that liquidity has improved in 2010. The average liquidity ratio for Kansas City municipalities increased from 1.17 in 2009 to 1.33 in 2010. Furthermore, seven of the 24 Kansas City municipalities reported a liquidity ratio of 2.0 or greater, and 17 reported a liquidity ratio of 1.0 or greater.

$1080

$1,002

$999

$966

$982

$924

$929

$882

$840

2007

2008

2009

2010

Average Debt Per Capita

$1,262

$1300

$1,189

$1,129

$1,095

$1140

$980

$820

$660

$500

2007

2008

2009

2010

Denver Front Range As this is the first year in which RubinBrown has included Denver Front Range municipalities in our survey, prior year comparative data is not available. The 2010 results for the Front Range area also indicates that area municipalities are experiencing the consequences of the poor economy, although perhaps not as acutely as municipalities in the St. Louis and Kansas City areas. The average increase in net assets for Denver municipalities in 2010 was 2.3%. Of the 22 Denver municipalities surveyed, only two (or 9%) reported a decrease in net assets in 2010. All 22 municipalities reported positive unrestricted net assets. Another impressive statistic showing the financial health of these cities is the high 42.8% average unrestricted net assets as a percent of revenues. This shows adequate resources have been accumulated to ride out any temporary declines in revenues.

5 | Raise Your Expectations

Net Assets/Fund Equity

The average per capita tax revenue for the Denver cities surveyed in 2010 was $716 and average expenses per capita were $1,010. These results are comparable to those noted for the St. Louis and Kansas City areas, and illustrate the gap between tax revenues and expenses for which municipal governments are forced to find additional sources of funding. The results for the Front Range area did indicate a lower degree of capital activity, and consequently a lower debt burden, than that observed for the St. Louis and Kansas City regions. Capital outlay as a percentage of total expenses for Denver municipalities was a relatively low 11.5% in 2010. Long-term debt to assets was also relatively low at .11 times. Another interesting statistic is the fact that accumulated depreciation as a percent of depreciable capital assets amounted to 33.6% in 2010. This is an indication that assets are newer and shows more recent investment made by the local governments. Long-term debt per capita for the Denver region amounted to $610, a significant amount less than the $1,070 noted for St. Louis and the $1,262 noted for Kansas City. In addition debt service expenditures as a percent of total revenues were also a very low 7.9% in 2010. Finally, the survey results did indicate that Front Range municipalities have maintained adequate liquidity in order to meet their immediate obligations. The liquidity ratio for the Denver region was 1.96 in 2010. Eleven of the 22 participating municipalities reported a liquidity ratio of 2.0 or greater, and only four reported a liquidity ratio of less than 1.0.

60%

40%

42.8%

20%

22.6%

2.3%

Average increase in net assets

Average unrestricted net assets as a percent of revenues

Average unreserved fund balance as a percent of revenues - general fund

Per Capita Tax Revenue & Expenses

$1200

$1000

$1,010

$800

$600

$716

$400

$200

Average per capita tax revenue

Average expenses per capita

Average Long-Term Debt Per Capita

1000 1200 1400 $1 0 $12 0 $14 0

$1,262

$1,070

0 200 400 600 800 $400 $200 0 $6 0 $8 0

$610

St. Louis St. L is

Kansas City a sas ity

Denver v r

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St. Louis Area

Financial Ratio Study for Municipalities Fiscal Years Ending in 2010

Into which quartile does your municipality fall? t More Favorable Less Favorable u First Quartile Quartile Breakpoint Second Quartile Median Third Quartile Quartile Breakpoint Fourth Quartile

2010 Average

2009 Average

Government-wide Ratios Government-wide General Ratios Change in net assets as a percent of net assets (%) Unrestricted net assets as a percent of total current year revenue (%) Accumulated depreciation as a percent of depreciable capital assets (%) Government-wide Liquidity Ratio Liquidity ratio (times) Government-wide Debt Ratios Debt to assets leverage ratio (times) Revenue coverage ratio (times)

7.0%

4.1%

-0.5%

1.4% 6.9%

1.18

1.10

0.99

1.03

1.14

51.5%

22.2%

-33.5%

6.6% 8.3%

35.5%

42.3%

49.5%

44.9% 44.6%

5.17

2.78

2.28

2.25

2.85

0.12

0.30

0.52

0.31

0.27

Total debt per capita ($ per citizen)

$361.27

$984.30

$1,755.37

$1,069.89 $1,048.72

Government-wide Revenue Ratios Tax revenues per capita ($ per citizen)

$591.16

$737.89

$1,124.72

$700.69 $721.67

Total grants, contributions and intergovernmental revenues as a percent of total revenues (%)

4.5%

9.6%

15.0%

12.5% 14.0%

Government-wide Expense Ratios Total expenses per capita ($ per citizen) Total general government (administration) expenses per capita ($ per citizen) Total public safety expenses per capita ($ per citizen)

$807.80

$988.20

$1,406.04

$964.10 $895.08

$94.36

$141.19

$215.74

$143.95 $143.69

$245.26

$332.20

$588.57

$305.21 $318.47

Total interest expenses per capita ($ per citizen)

$16.89

$46.00

$92.51

$54.09 $53.70

GOVERNMENTAL FUND RATIOS General Fund Expenditure Ratios Debt service expenditures as a percent of total revenues (%)

6.8%

12.2%

16.9%

13.3% 15.4%

Capital outlay expenditures as a percent of total expenditures (%)

24.4%

14.4%

7.6%

21.1% 21.1%

GENERAL FUND RATIOS General Fund Financial Position Ratio Unreserved fund balance as a percent of total revenues (%)

71.4%

45.9%

23.8%

52.3% 51.7%

General Fund Revenue Ratios

Intergovernmental revenue as a percent of total revenue (%) Transfers in as a percent of total revenues and transfers in (%)

0.0%

2.1%

9.7%

7.4% 7.8%

0.0%

0.3%

2.3%

1.5% 1.5%

7 | Raise Your Expectations

St. Louis Metropolitan Area - Population Less Than 20,000

Financial Ratio Study for Municipalities Fiscal Years Ending in 2010

Into which quartile does your municipality fall? t More Favorable Less Favorable u First Quartile Quartile Breakpoint Second Quartile Median Third Quartile Quartile Breakpoint Fourth Quartile

2010 Average

2009 Average

10.1%

4.0%

-3.7%

-6.9% 14.4%

1.18

1.06

0.97

0.90

1.16

42.0%

12.0%

-77.4%

-25.4% -14.8%

30.0%

38.0%

48.6%

40.1% 41.2%

5.19

3.35

2.28

1.50

2.34

0.10

0.37

0.62

0.43

0.39

Total debt per capita ($ per citizen)

$361.27

$1,151.15

$3,075.35

$1,723.69 $1,538.36

Government-wide Revenue Ratios Tax revenues per capita ($ per citizen)

$702.20

$843.21

$1,441.36

$988.13 $962.9

Total grants, contributions and intergovernmental revenues as a percent of total revenues (%)

3.2%

5.2%

11.1%

5.9% 10.2%

$894.22

$1,242.22

$1,904.98

$1,471.14 $1,158.48

$94.76

$159.50

$275.64

$195.12 $166.10

$284.93

$570.08

$675.88

$486.74 $451.17

Total interest expenses per capita ($ per citizen)

$18.51

$52.68

$142.42

$88.43 $78.31

GOVERNMENTAL FUND RATIOS General Fund Expenditure Ratios Debt service expenditures as a percent of total revenues (%)

8.2%

13.2%

18.5%

16.8% 15.9%

Capital outlay expenditures as a percent of total expenditures (%)

21.4%

14.5%

7.2%

21.8% 18.1%

GENERAL FUND RATIOS General Fund Financial Position Ratio Unreserved fund balance as a percent of total revenues (%)

71.4%

30.0%

11.2%

52.5% 50.6%

General Fund Revenue Ratios

Intergovernmental revenue as a percent of total revenue (%) Transfers in as a percent of total revenues and transfers in (%)

0.0%

0.6%

9.7%

6.2% 6.4%

0.0%

2.1%

1.4% 1.3%

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St. Louis Metropolitan Area - Population Greater Than 20,000

Financial Ratio Study for Municipalities Fiscal Years Ending in 2010

Into which quartile does your municipality fall? t More Favorable Less Favorable u First Quartile Quartile Breakpoint Second Quartile Median Third Quartile Quartile Breakpoint Fourth Quartile

2010 Average

2009 Average

6.8%

5.7%

2.6%

4.2% 4.6%

1.21

1.12

1.07

1.12

1.14

52.9%

31.7%

23.6%

23.4% 20.3%

37.3%

45.1%

46.4%

46.8% 45.9%

5.17

2.77

2.43

3.18

3.17

0.12

0.19

0.30

0.26

0.23

Total debt per capita ($ per citizen)

$285.97

$699.99

$1,176.79

$841.02 $878.04

Government-wide Revenue Ratios Tax revenues per capita ($ per citizen)

$457.49

$624.60

$738.42

$600.06 $637.58

Total grants, contributions and intergovernmental revenues as a percent of total revenues (%)

9.6%

12.3%

18.4%

16.0% 16.0%

$600.46

$851.85

$1,058.27

$786.60 $803.26

$87.21

$122.43

$166.93

$126.04 $135.88

$176.82

$294.59

$330.93

$241.66 $272.21

Total interest expenses per capita ($ per citizen)

$16.44

$37.40

$60.07

$42.07 $45.12

GOVERNMENTAL FUND RATIOS General Fund Expenditure Ratios Debt service expenditures as a percent of total revenues (%)

5.0%

11.6%

15.2%

11.3% 15.3%

Capital outlay expenditures as a percent of total expenditures (%)

32.7%

12.1%

8.4%

20.8% 22.7%

GENERAL FUND RATIOS General Fund Financial Position Ratio Unreserved fund balance as a percent of total revenues (%)

73.1%

59.6%

41.2%

52.2% 52.3%

General Fund Revenue Ratios

Intergovernmental revenue as a percent of total revenue (%) Transfers in as a percent of total revenues and transfers in (%)

0.1%

2.1%

7.8%

8.1% 8.5%

0.02%

1.07%

2.31%

1.6% 1.6%

9 | Raise Your Expectations

Kansas City Area

Financial Ratio Study for Municipalities Fiscal Years Ending in 2010

Into which quartile does your municipality fall? t More Favorable Less Favorable u First Quartile Quartile Breakpoint Second Quartile Median Third Quartile Quartile Breakpoint Fourth Quartile

2010 Average

2009 Average

5.0%

1.6%

-1.5%

1.2% 2.30%

1.20

1.05

0.90

1.03

1.08

43.7%

26.9%

-8.7%

20.5% 23.8%

30.6%

36.3%

44.4%

36.5% 35.5%

0.82

1.15

2.54

1.33

1.17

0.14

0.29

0.44

0.21

0.20

Total debt per capita ($ per citizen)

$822.89

$1,259.25

$2,053.36

$1,262.18 $1,188.82

Government-wide Revenue Ratios Tax revenues per capita ($ per citizen)

$547.21

$647.87

$744.83

$668.05 $659.90

Total grants, contributions and intergovernmental revenues as a percent of total revenues (%)

5.6%

9.6%

17.2%

15.9% 17.5%

$863.63

$989.99

$1,148.94

$1,001.50 $998.58

$113.21

$152.59

$192.55

$167.65 $166.06

$267.38

$326.90

$404.55

$337.96 $331.08

Total interest expenses per capita ($ per citizen)

$32.10

$60.37

$88.10

$53.26 $51.75

GOVERNMENTAL FUND RATIOS General Fund Expenditure Ratios Debt service expenditures as a percent of total revenues (%)

10.6%

15.9%

23.9%

19.5% 19.6%

Capital outlay expenditures as a percent of total expenditures (%)

32.6%

21.6%

15.6%

22.6% 27.2%

GENERAL FUND RATIOS General Fund Financial Position Ratio Unreserved fund balance as a percent of total revenues (%)

47.4%

36.8%

21.1%

33.1% 34.8%

General Fund Revenue Ratios

Intergovernmental revenue as a percent of total revenue (%) Transfers in as a percent of total revenues and transfers in (%)

0.3%

1.4%

9.2%

4.9% 5.0%

0.4%

2.6%

5.3%

5.1% 4.5%

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Denver Front Range Area

Financial Ratio Study for Municipalities Fiscal Years Ending in 2010

Into which quartile does your municipality fall? t More Favorable Less Favorable u First Quartile Quartile Breakpoint Second Quartile Median Third Quartile Quartile Breakpoint Fourth Quartile

2010 Average

5.3%

2.3%

0.5%

2.3%

1.14

1.08

1.02

1.07

75.6%

38.3%

27.3%

42.8%

37.6%

41.6%

51.0%

33.6%

3.46

1.91

1.03

1.96

0.05

0.12

0.29

0.11

Total debt per capita ($ per citizen)

$274.60

$579.89

$1,724.23

$609.52

Government-wide Revenue Ratios Tax revenues per capita ($ per citizen)

$648.45

$762.59

$1,343.45

$715.54

Total grants, contributions and intergovernmental revenues as a percent of total revenues (%)

9.0%

14.6%

18.3%

17.7%

$905.97

$1,132.62

$1,632.28

$1,010.14

$120.05

$218.08

$335.96

$172.66

$320.86

$375.69

$509.82

$367.97

Total interest expenses per capita ($ per citizen)

$10.40

$21.13

$71.38

$29.31

GOVERNMENTAL FUND RATIOS General Fund Expenditure Ratios Debt service expenditures as a percent of total revenues (%)

3.9%

7.4%

12.6%

7.9%

Capital outlay expenditures as a percent of total expenditures (%)

18.3%

12.8%

5.3%

11.5%

GENERAL FUND RATIOS General Fund Financial Position Ratio Unreserved fund balance as a percent of total revenues (%)

36.1%

25.0%

9.7%

22.6%

General Fund Revenue Ratios

Intergovernmental revenue as a percent of total revenue (%) Transfers in as a percent of total revenues and transfers in (%)

3.3%

6.1%

12.2%

7.5%

0.2%

1.8%

5.4%

9.4%

11 | Raise Your Expectations

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Financial Ratio Interpretation

Key financial ratios are calculated for three major categories: government- wide (governmental activities only), governmental funds, and general fund. Government-Wide Governmental Activities Government-wide financial statements report information on all of the nonfiduciary activity of the government and its component units. The study focuses on governmental activities that are normally supported by taxes and intergovernmental revenues. The government- wide financial statements utilize the economic measurement flow and accrual basis of accounting. The measurement and timing of recognition is similar to that of a business entity. Government-Wide General Ratios Change in net assets as a percent of net assets Formula: Increase (decrease) in governmental activities net assets Governmental activities net assets, beginning of year Interpretation: The ratio measures the change in the municipality’s financial condition for the year. A positive ratio indicates that the financial condition has improved; a negative ratio indicates a deteriorating financial condition. Revenue coverage ratio Formula: Governmental activities current year revenue* Governmental activities current year expense * Current revenue includes both program and general revenue but excludes gains, losses, contributions, special and extraordinary gains or losses and transfers. Interpretation: The ratio measures interperiod equity – whether current year revenue covers the cost including depreciation of providing current

year services. A ratio greater than 1.00 indicates positive interperiod equity; current year taxpayers are providing adequately for current year services. When the ratio falls below 1.00, either prior year revenues were used to fund a portion of current year services or future citizens are being burdened with some of the cost for providing services consumed currently. A higher value for the ratio is usually considered favorable. However, an extremely high ratio may indicate that the municipality is not providing services commensurate with the current revenues being generated from its tax base. Unrestricted net assets as a percent of current year revenue Formula: Governmental activities unrestricted net assets Governmental activities current year revenue* * Current revenue includes both program and general revenue but excludes gains, losses, contributions, special and extraordinary gains or losses and transfers Interpretation: The ratio measures the ability of the municipality to operate if its normal revenue stream is temporarily interrupted or significantly impaired. The ratio is the measure of the cushion that the municipality has for bad years. Municipalities may set a target minimum value for this ratio. A higher ratio is usually considered favorable. However, an extremely high ratio may indicate that the municipality is not providing appropriate current services for its constituents based on its recurring revenue stream. Accumulated depreciation as a percent of depreciable capital assets Formula: Governmental activities accumulated depreciation, end of year Governmental activities depreciable capital assets, end of year

13 | Raise Your Expectations

Interpretation: The ratio is a measure of the relative age of depreciable capital assets compared to the assets’ economic lives. Lower ratios are considered to be more favorable; the municipality will not face significant replacement cost in the near future.

* Total long-term liabilities excluding operating liabilities such as accrued compensated absences, claims and judgments payable, and pension obligations. Interpretation: The ratio is a measure of the debt burden to citizens. A lower ratio is considered favorable indicating that the citizens are less heavily burdened. The municipality has the ability to issue future debt at a lower cost.

Government-Wide Liquidity Ratio Liquidity ratio Formula:

Government-Wide Revenue Ratios Tax revenue per capita Formula: Governmental activities tax revenue Population

Governmental activities liquid assets* Governmental activities current liabilities * Cash and short-term investments, excluding any restricted assets Interpretation: The ratio measures the municipality’s ability to meet current obligations from existing cash and short-term investment balances. A higher ratio is considered favorable indicating that the municipality will be able to pay current liabilities as they become due.

Interpretation: The ratio is a measure of the tax burden to citizens. A lower ratio is considered favorable indicating that current citizens are paying lower taxes. Therefore the municipality has greater ability to increase taxes to meet future needs. Total grants, contributions and other intergovernmental revenue as a percent of total revenue Formula:

Government-Wide Debt Ratios Debt to assets leverage ratio Formula:

Governmental activities total debt* Governmental activities total assets * Total long-term liabilities excluding operating liabilities such as accrued compensated absences, claims and judgments payable, and pension obligations. Short-term operating debt is also not included. Interpretation: The ratio is a measure of the degree to which the municipality’s total assets have been funded with debt. A lower ratio is considered favorable indicating that the government does not have significant creditor claims against its assets and has less risk of default on debt. Total debt per capita Formula: Governmental activities total debt* Population

(Governmental activities total operating grants and contributions + total capital grants and contributions + other intergovernmental revenue) Governmental activities total revenue*

* Current revenue includes both program and general revenue but excludes gains, losses, contributions, special and extraordinary gains or losses and transfers. Interpretation: The ratio measures the municipality’s reliance on grants, contributions and other intergovernmental revenue. A lower ratio is considered favorable indicating that the municipality is less reliant on external sources that are beyond its control.

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Government-Wide Expense Ratios Expense ratios measure the current-period cost of providing services to citizens or current-period financing cost. Functional expense categories include depreciation measuring the cost of using capital assets to provide current year services. Low ratios are depicted as favorable. However, the amount of expense incurred is not necessarily commensurate with the quality, efficiency or effectiveness of the service provided. Total expense per capita Formula: Government-wide total expense Population Interpretation: The ratio is a measure of the expense necessary on average to provide services to a given citizen. A lower ratio is considered favorable indicating that a municipality is providing services to citizens at a comparatively lower cost. However, when comparing the results of this ratio between two different municipalities, one must consider whether the two municipalities provide comparable levels of police, fire, waste management, parks and recreation, and similar services. In addition, the amount of expense incurred is not necessarily commensurate with the quality, efficiency or effectiveness of the services provided. Total general government (administration) expense per capita Formula: Government-wide general government (administration) expense Population

Total interest expense per capita Formula:

Government-wide interest expense Population Interpretation: The ratio is a measure of the interest expense incurred per citizen. A lower ratio is considered favorable, indicating that a municipality has minimized its debt obligations, and reduced the strain that debt service payments can place on current municipal resources. Governmental Funds Governmental funds are used to account for the basic activities of the municipality that are not supported by user charges or characterized by the municipality acting in a fiduciary capacity. Governmental funds account for operations, acquisition of capital assets related to basic operations, and the debt service requirements for related debt. Primary resources are taxes, intergovernmental revenues and capital asset acquisition long-term debt proceeds. Governmental funds report using the current financial resource measurement flow and the modified accrual basis of accounting. Expenditures are often controlled by annual budgets. Total debt service expenditures as a percent of total revenues Formula : Governmental fund debt service expenditures Governmental fund total revenues Interpretation: This ratio measures the amount of current revenue that is devoted to meeting the year’s debt service requirements. Significant debt service requirements potentially lower the amount that can be used for providing current services. A low ratio is considered favorable.

Interpretation: See previous comments. Total public safety expense per capita Formula:

Government-wide public safety expense Population

Interpretation: See previous comments.

15 | Raise Your Expectations

Capital outlay expenditures as a percent of total expenditures Formula: Governmental fund capital outlay expenditures Governmental fund total expenditures Interpretation: The ratio measures whether the municipality is adequately providing for capital asset additions and improvements. A high ratio is considered favorable indicating that the municipality is providing adequately for its capital asset needs. General Fund The general fund is the primary operating fund of a municipality. It accounts for the revenues that are not restricted for specific purposes and activities. Most of the basic operations of the municipality are accounted for in the general fund. The general fund, a governmental fund, reports using the current financial resource measurement focus and the modified accrual basis of accounting. Unreserved fund balance as a percent of total revenues Formula: General Fund unreserved fund balance* General Fund revenues * Includes both designated and undesignated unreserved fund balance. Interpretation: The ratio measures the ability of the general fund to continue operations if its revenue is temporarily interrupted or declines. This is a measure of the general fund operating cushion. Municipalities may set a target for this ratio. A higher ratio is usually considered favorable. However, an extremely high ratio may indicate that the municipality is not providing the level of services commensurate with its revenue stream.

Intergovernmental revenue as a percent of total revenue Formula: General Fund intergovernmental revenue General Fund total revenue Interpretation: The ratio measures the general fund’s reliance on revenues from external sources to finance current operations. A low ratio is considered favorable indicating that the general fund is not overly reliant on revenue sources that are beyond its control. Transfers in as a percent of total revenues and transfers in Formula: General Fund transfers in General Fund total revenues and transfers in Interpretation: The ratio measures the reliance of the general fund on transfers from other funds. To the extent the transfers are from enterprise funds, the users of enterprise services may be subsidizing general fund operations. A low ratio is considered favorable indicating that the general fund is not dependent on transfers. Use of the Study Finance officers may use the study to determine how their cities compare to others of similar size and geographic area in key financial ratio measurements. Both quartile and average ratio values are provided for comparison. The finance officer may wish to share the results of the analysis with the municipality’s chief executive officer and governing body to help key officials understand the impact of decisions on the financial condition of municipality.

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RubinBrown’s Public Sector Services Group

RubinBrown is a recognized leader in providing services to public sector organizations. Through our extensive list of clients we serve as well as our involvement in associations and professional organizations at the local, regional and national levels, we understand the issues unique to the public sector. RubinBrown’s commitment to quality is demonstrated through our membership in the AICPA Governmental Audit Quality Center. This firm-based voluntary membership center is designed to help CPAs meet the challenges of performing quality audits in the unique and complex public sector industry. The Public Sector Services Group of RubinBrown provides services to a broad spectrum of government organizations, including municipal governments, institutions of higher education, local public school districts, state governments, and political districts such as; public libraries and municipal utility districts. Our public sector team includes experienced professionals all of whom are well trained in the financial reporting and audit requirements as promulgated in: • Government Accounting Standards Board • Government Audit Standards, issued by the Comptroller General of the United States, • Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, and Local Governments, and Nonprofit Organizations. Industry Involvement RubinBrown is committed to staying active within the industry, which helps us remain current on all new issues. We are active members of our regional Government Finance Officers Association (GFOA) chapters. Our staff are associate members of the national GFOA, including the Special Review Committee of the Certificate of Achievement for Excellence in Financial Reporting Program, the Association of Government Accountants, and special industry related committees of the American Institute of Certified Public Accountants.

Public Sector Specialized Services Assurance and Accounting Services • Financial Statement Audits • Single Audits of Federal Financial Assistance Under OMB Circular A-133 • GFOA Certificate of Achievement for Excellence in Financial Reporting Program Expertise • Program and Performance Audits • Agreed-Upon Procedures • Forensic Auditing Consulting Services • Internal Auditing • Operational Reviews/Efficiency Analysis • Policy and Procedure Manuals • Strategic & Long-Range Planning • Capital Improvement Programs • Financial Analysis and Review • Benchmarking • Technology Analysis and Implementation RubinBrown also is equipped to help public sector clients with technology consulting; fringe benefit consulting and retirement plan administration;

bookkeeping services; and placement of temporary and permanent accounting, bookkeeping, and financial personnel.

17 | Raise Your Expectations

Notes:

Contact

Jeff Winter, CPA Partner-In-Charge

Bert Bondi, CPA - Denver Partner Public Sector Services Group bert.bondi@rubinbrown.com 303.698.1883

Public Sector Services Group jeff.winter@rubinbrown.com 314.290.3408

Kaleb Lilly, CPA - Kansas City Partner Public Sector Services Group kaleb.lilly@rubinbrown.com 913.499.4417

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Denver Office 1900 16th Street Suite 300 Denver, Colorado 80202

Kansas City Office 10975 Grandview Dr., Building 27 Suite 600 Overland Park, Kansas 66210

Saint Louis Office One North Brentwood Blvd. Saint Louis, Missouri 63105

ph: 314.290.3300 fax: 314.290.3400

ph: 303.698.1883 fax: 303.777.4458

ph: 913.491.4144 fax: 913.491.6821

For more information, visit www.rubinbrown.com

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