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City CouncilJuly 2, 2024FINANCIAL HEALTH INDICATORSFinance Department RiversideCA.gov2
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 6/20/2024
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•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 availablecash, which is useful in identifying the City’s ability to pay bills on time.FINANCIAL POSITIONCAN THE CITY PAY ITS BILLS NOW? RiversideCA.gov4
FHI #1 GENERAL FUND RESERVE RATIOA declining fund balance reserve can be a sign of fiscal stress. This indicator is important inidentifying a trend of a deteriorating fund balance reserves as well as how rapidly it is deteriorating.Ahigher ratiosuggests larger reserves available to address unexpected resource needs in the longrun.
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FHI #2 GENERAL FUND LIQUIDITY RATIOA negative ratio may indicate a city does not have sufficient cash available to meet its currentobligations as they come due. This indicator is important in identifying a trend of deteriorating cashas well as how rapidly it is deteriorating. Ahigher ratiosuggests a greater capacity for paying offshort-term obligations.
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•FHI # 3 General Government Growth in Net Position Ratio– Change inNet Assets where a growth in net position indicates the City can pay itsexpenses with its revenue and establish appropriate reserves for futureallocation.•FHI # 4 General Government Operating Margin Ratio– Illustrates to whatdegree City services are self-sufficient through charges, fees, and grants.•FHI # 5 General Government Own Source Revenue Ratio– Indicatesreliance on tax dollars versus the City's reliance on federal and stategrants.FINANCIAL PERFORMANCECAN THE CITY' S REVENUES COVER ITS EXPENSES? 6/20/2024
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FHI #3 GENERAL GOVERNMENT GROWTH IN NET POSITION RATIOIdeally, revenues from programs should cover the expenses incurred for those programs, otherwisereserves may be required to cover the excess costs. Ahigher ratiosuggests that annual costs areadequately funded; and an increasing ratio indicates an improving financial condition.
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FHI #4 GENERAL GOVERNMENT OPERATING MARGIN RATIOA city charges for services and may receive grants and aid from other governments (e.g., Federaland State). Ahigher ratiosuggests that basic government services are more self-sufficient throughcharges, fees, and grants and are less reliant on general tax dollars to fund program expenditures.
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FHI #5 GENERAL GOVERNMENTOWN SOURCE REVENUE RATIORevenues 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 governmentrevenues were supported by grants. Alower ratiosuggests that the City is not heavily reliant on grantsand is more reliant on general tax dollars and charges for services.
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•FHI # 6 General Government Near-Term Solvency Ratio– Measuresability to pay obligations with annual revenues; the fewer numberof years of annual revenue needed to pay City obligations, thestronger its financial condition.•FHI # 7 General Government Debt, Pension Liability & Other Post-Employment Benefits (OPEB) Burden per Resident– Amount ofliability per resident, where lower liability per capita results insmaller debt, pension, and OPEB burden on taxpayers.LONG-TERM SOLVENCYCAN THE CITY PAY ITS BILLS IN THE FUTURE? 6/20/2024
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FHI #6 GENERAL GOVERNMENTNEAR-TERM SOLVENCY RATIOThis ratio demonstrates a City’s ability to pay a larger portion of its debts with annual revenues. Alower ratioindicates a stronger financial condition.
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FHI #7 GENERAL GOVERNMENTDEBT, PENSION LIABILITY & OPEB BURDEN PER RESIDENT RATIOLower debts, pension liability, and other post-employment benefits (OPEB) per capita result in asmaller debt burden on taxpayers. Alower ratioindicates a stronger financial condition.
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•FHI # 8 Governmental Funds Coverage Ratio– A larger portion of expensesused for debt means the City is less able to spend money on services andcapital improvements.•FHI # 9 Enterprise Funds Coverage Ratio– Availability of resources for EnterpriseFunds to make bond payments.•FHI # 10 General Government Capital Asset Value Ratio– Change in value ofcapital 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 EnterpriseFunds capital assets that have been depreciated.LONG-TERM SOLVENCY- CONTINUED RiversideCA.gov14
FHI #8 GOVERNMENTAL FUNDS COVERAGE RATIOA city has principal and interest payments on debts. The lower the amount of these paymentscompared to all its other expenditures, the stronger its financial condition. Alower ratioindicates astronger financial condition.
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FHI #9 ENTERPRISE FUNDS COVERAGE RATIOJust as a city’s governmental services need to pay their debts (i.e., bonds) in the long-term, itsenterprise funds need to do so as well. The City’s Enterprise Funds include Electric, Water, Sewer,Airport, Refuse, Special Transportation, Public Parking, and Civic Entertainment Funds. Ahigher ratioindicates a stronger financial condition.
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FHI #10 GENERAL GOVERNMENTCAPITAL ASSET VALUE RATIOCapital assets include land, buildings, vehicles, and public infrastructure. Most of the City’s capitalassets decrease in value over time due to depreciation. A declining ratio means that the overallvalue of a city’s assets decreased over the year, indicating some assets may need to be renovatedor replaced. Ahigher ratioindicates a stronger financial condition.
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FHI #11 ENTERPRISE FUNDS CAPITAL ASSET AGE RATIODepreciable capital assets include buildings, vehicles, and public infrastructure. These assets aredepreciated over their useful life as they age, resulting in a reduction in their value. Alower ratioindicates Enterprise Funds’ capital assets are newer and may not require as much replacementand/or maintenance costs compared to older capital assets.
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•Indicator # 12 General Fund Public Safety Costs Ratio– Compares anddetermines the funding level of General Fund public safety costs inrelation to total General Fund expenditures and transfers out.RESOURCE ALLOCATION(For informational purposes only) 6/20/2024
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INDICATOR #12 GENERAL FUND PUBLIC SAFETY COSTS RATIOThis ratio compares the total costs of General Fund public safety, which includes police and fire, tothe total General Fund expenditures and transfers out. Ahigher ratioindicates more funds arededicated to public safety.
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STRATEGIC PLAN ALIGNMENT
STRATEGIC PRIORITY 5 - HIGH PERFORMING GOVERNMENTCROSS-CUTTING THREADS Equity
Innovation
Community Trust
Fiscal Responsibility
Sustainability and Resiliency
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RECOMMENDATIONThat the City Council receive the Financial Health Indicatorsdiscussed herein.