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1 RiversideCA.gov
1 RiversideCA.gov
Finance Committee
June 12, 2024
FINANCIAL HEALTH INDICATORS
Finance Department
RiversideCA.gov
2 Perform a key mission to provide Financial Health Indicators to open dialogue and provide clear and useful information.
Discuss financial condition based on 3 basic questions and 11 measures used to evaluate financial condition.
Each question evaluates Riverside’s services to its residents.
PURPOSE
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3 • FHI #1 General Fund Reserve Ratio – Indicates changes in reserves, which is useful in identifying deteriorating fund balance reserves. • FHI #2 General Fund Liquidity Ratio – Identifies changes in available cash, which is useful in identifying the City’s ability to pay bills on time.
FINANCIAL POSITION
CAN THE CITY PAY ITS BILLS NOW?
RiversideCA.gov
4 FHI #1 GENERAL FUND RESERVE RATIO
A declining fund balance reserve can be a sign of fiscal stress. This indicator is important in identifying a trend of a deteriorating fund balance reserves as well as how rapidly it is deteriorating.
A higher ratio suggests larger reserves available to address unexpected resource needs in the long run.
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5 FHI #2 GENERAL FUND LIQUIDITY RATIO
A negative ratio may indicate a city does not have sufficient cash available to meet its current obligations as they come due. This indicator is important in identifying a trend of deteriorating cash as well as how rapidly it is deteriorating. A higher ratio suggests a greater capacity for paying off short-term obligations.
RiversideCA.gov
6 • FHI # 3 General Government Growth in Net Position Ratio –C h a n g ei n Net Assets where a growth in net position indicates the City can pay its expenses with its revenue and establish appropriate reserves for future allocation.
• FHI # 4 General Government Operating Margin Ratio – Illustrates to what degree City services are self-sufficient through charges, fees, and grants. • FHI # 5 General Government Own Source Revenue Ratio – Indicates reliance on tax dollars versus the City's reliance on federal and state grants.
FINANCIAL PERFORMANCE
CAN THE CITY' S REVENUES COVER ITS EXPENSES?
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7 FHI #3 GENERAL GOVERNMENT
GROWTH IN NET POSITION RATIO
Ideally, revenues from programs should cover the expenses incurred for those programs, otherwise reserves may be required to cover the excess costs. A higher ratio suggests that annual costs are adequately funded; and an increasing ratio indicates an improving financial condition.
RiversideCA.gov
8 FHI #4 GENERAL GOVERNMENT
OPERATING MARGIN RATIO
A city charges for services and may receive grants and aid from other governments (e.g., Federal and State). A higher ratio suggests that basic government services are more self-sufficient through charges, fees, and grants and are less reliant on general tax dollars to fund program expenditures. 7 8
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9 FHI #5 GENERAL GOVERNMENT
OWN SOURCE REVENUE RATIO
Revenues from grants are used to support some City functions. Other functions, such as public safety, are mainly funded by general tax dollars. This ratio illustrates the extent to which government revenues were supported by grants. A lower ratio suggests that the City is not heavily reliant on grants and is more reliant on general tax dollars and charges for services.
RiversideCA.gov
10 • FHI # 6 General Government Near-Term Solvency Ratio –M e a s u r e s ability to pay obligations with annual revenues; the fewer number of years of annual revenue needed to pay City obligations, the stronger its financial condition.
• FHI # 7 General Government Debt, Pension Liability & Other Post- Employment Benefits (OPEB) Burden per Resident –A m o u n to f liability per resident, where lower liability per capita results in smaller debt, pension, and OPEB burden on taxpayers.
LONG-TERM SOLVENCY
CAN THE CITY PAY ITS BILLS IN THE FUTURE?
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11 FHI #6 GENERAL GOVERNMENT
NEAR-TERM SOLVENCY RATIO
This ratio demonstrates a City’s ability to pay a larger portion of its debts with annual revenues. A lower ratio indicates a stronger financial condition.
RiversideCA.gov
12 FHI #7 GENERAL GOVERNMENT
DEBT, PENSION LIABILITY & OPEB BURDEN PER
RESIDENT RATIO
Lower debts, pension liability, and other post-employment benefits (OPEB) per capita result in a smaller debt burden on taxpayers. A lower ratio indicates a stronger financial condition. 11 12
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13 • FHI # 8 Governmental Funds Coverage Ratio – A larger portion of expenses used for debt means the City is less able to spend money on services and capital improvements.
• FHI # 9 Enterprise Funds Coverage Ratio – Availability of resources for Enterprise Funds to make bond payments.
• FHI # 10 General Government Capital Asset Value Ratio – Change in value of capital assets where, if City doesn't replace or renovate its capital assets, asset value over time decreases.
• FHI # 11 Enterprise Funds Capital Asset Age Ratio – Percentage of Enterprise Funds capital assets that have been depreciated.
LONG-TERM SOLVENCY- CONTINUED
RiversideCA.gov
14 FHI #8 GOVERNMENTAL FUNDS COVERAGE RATIO
A city has principal and interest payments on debts. The lower the amount of these payments compared to all its other expenditures, the stronger its financial condition. A lower ratio indicates a stronger financial condition.
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15 FHI #9 ENTERPRISE FUNDS COVERAGE RATIO
Just as a city’s governmental services need to pay their debts (i.e., bonds) in the long-term, its enterprise funds need to do so as well. The City’s Enterprise Funds include Electric, Water, Sewer, Airport, Refuse, Special Transportation, Pub lic Parking, and Civic Entertainment Funds. A higher ratio indicates a stronger financial condition.
RiversideCA.gov
16 FHI #10 GENERAL GOVERNMENT
CAPITAL ASSET VALUE RATIO
Capital assets include land, buildings, vehicles, and public infrastructure. Most of the City’s capital assets decrease in value over time due to depreciation. A declining ratio means that the overall value of a city’s assets decreased over the year, indicating some assets may need to be renovated or replaced. A higher ratio indicates a stronger financial condition. 15 16
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17 FHI #11 ENTERPRISE FUNDS CAPITAL
ASSET AGE RATIO
Depreciable capital assets include buildings, veh icles, and public infrastructure. These assets are depreciated over their useful life as they age, resulting in a reduction in their value. A lower ratio indicates Enterprise Funds’ capital assets are newer and may not require as much replacement and/or maintenance costs compared to older capital assets.
RiversideCA.gov
18 • Indicator # 12 General Fund Public Safety Costs Ratio –C o m p a r e sa n d determines the funding level of General Fund public safety costs in relation to total General Fund expenditures and transfers out.
RESOURCE ALLOCATION
(For informational purposes only)
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19 INDICATOR #12 GENERAL FUND
PUBLIC SAFETY COSTS RATIO
This ratio compares the total costs of General Fund public safety, which includes police and fire, to the total General Fund expenditures and transfers out. A higher ratio indicates more funds are dedicated to public safety.
RiversideCA.gov
20 STRATEGIC PLAN ALIGNMENT
STRATEGIC PRIORITY 5 - HIGH PERFORMING GOVERNMENT
CROSS-CUTTING THREADS
Equity
Innovation
Community Trust
Fiscal
Responsibility
Sustainability
and Resiliency
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21 RECOMMENDATION
That the Finance Committee rece ive and provide input on the Financial Health Indicators discussed herein.
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