Financial Trends Monitoring System Report (2)
Financial Trends
Monitoring System
CIty of
. s.1hI
April 2009
TABLE OF CONTENTS
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Financial Trends Monitoring System
Page
Introduction
111
Ratings
IV
Indicators
Community Indicators
Population
Personal Income Per Capita
Employment Base
Real Property Value
Residential Development
2
3
4
5
6
Revenue Indicators
Key Revenues
Revenue Per Capita
Property Tax Revenue
Uncollected Property Taxes
Sales Tax Revenue
Intergovernmental Operating Revenue
8
9
10
11
12
13
Expenditure Indicators
Departmental Expenditures
Expenditures Per Capita
Employees Per Capita
Capital Outlay
15
16
17
18
Operating Position Indicators
Growth in Revenue vs. Growth in Expenditures
Fund Balance
Enterprise Fund Operating Margin
Liquidity
20
21
22
23
Debt Structure Indicators
Long -Term Debt
Debt Service
Debt Margin
Current Liabilities
25
26
27
28
11
\
INTRODUCTION
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Financial Trends Monitoring System
Financial Trend Monitoring System
The Financial Trend Monitoring System (FTMS) was developed by the International City/County Management
Association (ICMA) as a method for monitoring the financial condition of local governments. This system
identifies factors that effect financial condition and sets the framework for their analysis. The indicators
described in the ICMA publication, Evaluating Financial Condition. A Handbook for Local Government, are
designed to give local governments a method of monitoring financial condition using data that is easily
accessible. Using this model local government's can provide a report to policy makers, citizens, employees,
bond rating agencies, and anyone else who may be interested in the their financial wellbeing. The FTMS is
indented to be used as a management tool that can help to shape long term policy priorities.
Financial Condition
Financial condition, as defined by the FTMS, is the ability of a locality to maintain existing service levels,
withstand local and regional economic disruptions, and meet the demands of natural growth decline, and
change. These conditions are examined by looking at four areas of a localities fiscal condition as follows:
1. Cash Solvency - the ability to pay the bills over the next 30 or 60 days
2. Budgetary Solvency - the ability to cover expenditures with revenues and other resources over the
normal budget period
3. Long-Run Solvency - the ability to meet expenditures as they come due in the future
4. Service Level Solvency - the ability to provide services at the level and quality that are required for the
health, safety, and welfare of the community and that the citizens desire and expect.
Financial Indicators
ICMA provides a list of over 40 indicators that can serve as a litmus test for the financial condition of a locality.
These indicators are broken down into specific categories for further analysis. For this report 21 indicators were
chosen from 5 categories that best fit the City's accounting structure.
Rating Structure
There are significant variations in the way that local governments manage their finances. These variations
make it difficult to develop standards that apply from organization to organization. Therefore, there are no
defined benchmarks for many of the indicators. Benchmarks for these indicators should be set by the individual
municipality. A few of the indicators do have benchmarks that are generally set by bond rating agencies or
organizations such as the Government Finance Officers Association (GFOA). The FTMS focuses on trends
rather than defined benchmarks. For each indicator a warning trend has been defined. City staffhas evaluated
each indicator and assigned ratings according to the following rating scheme:
I Green - the trend is favorable and the indicator meets any policy or performance measure set by the City.
, Yellow - the trend is uncertain. The indicator should be watched carefully because it may move in a
direction that could have a negative impact on the City's financial health.
'Red - the warning trend has been observed. The indicator does not meet the policy or performance
measure set by the City. More information should be gathered and corrective action should be taken.
111
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RATINGS So --- y Financial Trends Monitoring System
Rating Page
Community Indicators
. Population 2
. Personal Income Per Capita 3
. Employment Base 4
. Real Property Value 5
. Residential Development 6
Revenue Indicators
. Revenue Per Capita 9
. Property Tax Revenue 10
. Uncollected Property Taxes 11
. Sales Tax Revenue 12
. Intergovernmental Operating Revenue 13
Expenditure Indicators
. Expenditures Per Capita 16
. Employees Per Capita 17
. Capital Outlay 18
Operating Position Indicators
. Growth in Revenue vs. Growth in Expenditures 20
. Fund Balance 21
. Enterprise Fund Operating Margin 22
. Liquidity 23
Debt Structure Indicators
. Long -Term Debt 25
. Debt Service 26
. Debt Margin 27
. Current Liabilities 28
IV
COMMUNITY
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Financial Trends Monitoring System
Community Needs and Resources Indicators
Community indicators encompass various economic and demographic characteristics including population,
employment, personal income, property value, and residential development. These indicators describe and
quantify a community's wealth and economic condition. They provide insight into the community's collective
ability to generate revenue relative to the community's demand for public services such as public safety, capital
improvements, and social services.
Community needs and resources are all closely interrelated and affect each other in a continuous cycle of cause
and effect. In addition, changes in these characteristics tend to be cumulative. These characteristics are the most
difficult to formulate into indicators because the data is not easy to gather. The indicators detailed in this section
represent only those for which data is reasonably available.
In addition to analyzing these indicators, the City may also want to study more subjective issues, such as
economic geography, location advantages, and land-use characteristics, as they all relate to the City's ability to
generate revenue and, therefore, provide convenient, efficient public services. Also important are the City's
plans and potential for future development. The diversification of the commercial and industrial tax base should
be considered for its revenue-generating ability, employment-generating ability, vulnerability to economic
cycles, and relationships to the larger economic region. While difficult to quantify using indicators, this
information is useful in evaluating the City's financial condition.
An examination of local economic and demographic characteristics can identify the following types of
situations:
· A declining tax base and correspondingly, the community's ability to pay for public services.
· A need to shift public service priorities because of demographic changes in the community.
· A need to shift public policies because of a loss in competitive advantage of the City's businesses to
surrounding communities or because of a surge in inflation or other changes in regional or national economic
conditions.
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Revised April 2009
COMMUNITY
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Financial Trends Monitoring System
Population
Description
Changes in population can directly affect City revenues, such as property tax collections and cost of
services. Population level indirectly relates to such issues as employment, income, and property value.
An increasing population is generally considered positive as long as the City is prepared to take on the
added service responsibilities. With respect to population, the biggest indicator of fiscal hardship is a
dramatic change. If the population increases or decreases rapidly it may be difficult to react the sudden
change.
Analysis
Over the past 17 years Salina's population has seen increases below the National and Kansas averages. Over
the17 year period Salina has seen an annual average increase of .53%. This modest increase is well below the
National average but only slighty below the Kansas average. The percent increase from both 1990 to 2000 and
2000 to 2007 were only 1 % behind the state average.
Percent Change in Population
13%
10%
8% _ 9o/J
Warning Trend:
Rapid change in population
~n
Ii
Ii<
6%
II
II
3% fl.
II
Formula:
Population
1%
2%,
1990 2000 2007
. Salina Kansas . USA
l.2.!.!!. !.2..2J!.. 2000 2007
Salina 41,843 42,303 45,679 46,458
K ansa s 2,363,679 2,477,574 2,688,418 2,764,075
USA 226,545,805 248,709,873 2 8 1 ,4 2 I , 9 06 2 9 9 ,3 9 8 ,4 8 5
Note: 2007 numbers are based on U.S. Census Bureau Estimates
Trend
The warning trend was not observed for this indicator. There have been no dramatic changes in population in
the City since the closure of Schilling Air Force Base in the 1960's. Although the City has seen yearly
population increases, it has been more slowly than both the state and national averages. In order to remain the
regional focal the City would like to observe increases at or above the state average. This indicator received a
yellow rating.
Source: U.S. Census Data, Retrieved from http://www.census.gov/ , http://www.kslib.info/sdc/cities.html
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COMMUNITY
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Financial Trends Monitoring System
Warning Trend:
Decline in the level, or growth
rate, of personal income per
capita
(constant dollar)
Personal Income Per Capita
Description
Personal income is one measure of a community's ability to pay taxes. Generally, the higher the per
capita income, the more property taxes, sales taxes, income taxes, and business taxes the City can
generate. If income is distributed evenly, a higher per capita income will usually mean a lower
dependency on governmental services. A decline in per capita income results in loss of consumer
purchasing power and can provide advance notice that businesses, especially in the retail sector, will
suffer a decline that can ripple through the rest of the City's economy. Credit rating firms use per capita
income as an important measure of a City's ability to meet its financial obligations.
Analysis
The City's per capita personal income was ahead of, or nearly, even with the state until 2001. There was a
dramatic decline in 2001 due to an economic downturn and a decrease in proprietary income which includes
dividends, interest, and rental income. Since 2001 the City has seen an increase, but remains behind the
national and state averages.
Personal Income Per Capita
Tmuunds
40
35
Formula:
Personal income
(constant dollar)
Population
5.7%
5.5%
5.5%
30
25
20
15
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
_Saline County _Kansas _United States """,*",""SalineCounty% Change
Personal Incom e Per Capita
l...!!J!...1.. 2003 2004 ll..!l2. 2006
S a I in e $ 2 7 ,2 3 5 $ 2 7 ,9 56 $ 2 9 ,1 9 5 $ 30 ,5 7 7 $ 3 2 ,3 1 9
Kansas $28,980 $29,802 $30,995 $32,709 $34,799
USA $30,821 $31,504 $33,123 $34,757 $36,714
S a I in e % C h an gel .4 % . 2 .6% 4 .4 % 4 .7% 5 .7 %
K a ns as % C h an g e 0.9 % 2.8 % 4.0 % 5.5 % 6.4 %
USA % Change 0.8% 2.2% 5.1% 4.9% 5.6%
Note: Total personal income includes net earnings by place of residence; dividends, interest, and rent; and personal
current transfer receipts received by the residents of Saline County.
Trend
The warning trend for this indicator was observed from 1996 to 2001. Since 2001, the City's personal income
per capita has increased by an average of3.7 % per year with increases larger than 4% in 2004,2005, and 2006.
Although personal income per capita has increased over the last part of the evaluation period it still remains
behind the state average. In order to remain competitive in the state the City must keep up with the state
averages. An increased effort to bring in jobs with higher wages will help to increase personal income per
capita at an acceptable level. This indicator received a yellow rating.
Sources: Regional Economic Information System, Bureau of Economic Analysis Table CAI-3, Retrieved from
www.bea.gov/regional
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Revised April 2009
COMMUNITY
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Financial Trends Monitoring System
Employment Base
Description
The unemployment rate and number of jobs in the community make up the employment base. They are
considered together because they are so closely related. A growing employment base will help to
provide a cushion against economic downturn in individual business categories. A decline in the
employment base can indicate the early signs of an overall decline in economic activity and a decline in
government revenues as well.
Analysis
Salina experienced a slight decline in number of jobs in 2002 and 2003. During that same period the
unemployment rate increased. Since 2003, the number of jobs has increased and the unemployment rate has
declined. During the entire 6 year period the unemployment rate remained lower than both the state and
national averages.
Th ou sands
42
Employment Base
41
40
39
38
37
36
2000 2001 2002
_NumberofJobs
-l-Sfate Unemployment Rate
2003 2004 2005 2006
~ Saline County UnemployJ!lent Rate
~ National Unemployment Rate
2003 2004 2005 2006
38,979 39,212 39,354 39,947
4.6% 4.9% 4.4% 3.7%
~6% 5~% 5.1% 45%
5.1% 5.2% 4.8% 4.4%
-2.04% 0.60% 0.36% 1.51 %
# ofJobs
Saline County Unemployment Rate
State Unemployment Rate
National Unemployment Rate
% Change in # of Jobs
2002
39,790
4.1%
5.1%
4.2%
-0.25%
6%
SOlo
Warning Trend:
Increasing rate of local
unemployment or a decrease
in the number of jobs in the
community
4%
3%
2"10
1%
Formula:
Local unemployment rate
and the number of jobs in the
community
0"10
Trend
The warning trend was not observed for this indicator. The steady growth in number of jobs since 2003 and the
decline in Saline County unemployment rate are the opposite of the warning trend. These numbers indicate a
healthy environment for the workforce and employers in the community. This indicator received a green rating.
Source: Saline County Labor force History Report, Kansas Department of Labor, Retrieved from
www.dol.ks.gov, Full-time and Part-time Employment by Major Industry Report, Kansas Regional Economic
Analysis Project, Retrieved from www.pnreap.org
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Revised April 2009
COMMUNITY
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Financial Trends Monitoring System
Real Property Value
Analysis
Over the ten year evaluation period there has been constant growth in real propery value in residential,
commercial, and industrial property. From 1998 to 2007 there has been an increase of 17.8% in residential
property value and an increase of 26.4% in commercial property value.
Millions Property Value
Description
Real property value is an important indicator since general property taxes account for approximately
30% of the City's operating revenue. With Salina maintaining a relatively stable tax rate, higher
aggregate property values generate greater property tax revenue. This allows the City to maintain a
stable or increasing revenue stream without raising the property tax mill levy.
)~86 )( ~ Warning Trend:
)( )( )( )( $1,423 $1,448 Declining growth or drop in
)( )( )( $1,295 $1,302 $1,307 $1,307 '
$1,170 $1,184 $1,233 $1,256 the market value of
residential, commercial, or
industrial property (constant
$345 $358 $374 $377 dollars)
$305 $316 $329 $340 $331
$275 $297 )( X
)( )( )( )( )(
)( )( )( )(
Formula:
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Real Property Values
~ Residential PV (Constant) ~ Corrmercial PV (Constant) (constant dollars)
2004 20ffi 2006 2007 2008
Resi<bJtiai PV (ConltlIIt) $1,307,266,736 $1,307,187,197 $1,386,112,811 $1,422,847,430 $1,448,334,356
Cornn;rcili PV (Con.<oot) $330,642, 175 $345,122.,355 $357,658,425 $373,760,an $377,41 Q 004
% Cl1ang: Residentili 0.4% ~.01% 5.7% 26% 1.8%
%Cl1ang: Clmn:rciai -29"10 4.2% 3.5% 43% 1.(1'10
Trend
The warning trend has not been observed for this indicator. In each year of the evaluation period, with the
exception of 2004, saw increases in both residential and commercial property value. The continual increase in
real property value means that the City will receive a steady increase in property tax even if the mill levy is not
increased. This indicator received a green rating.
Sources: City of Salina Valuations provided by Saline County Clerk 1998-2007
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Revised April 2009
COMMUNITY
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Financial Trends Monitoring System
Residential Development
Description
The net cost of servicing residential development is generally higher than the net cost of servicing
commercial or industrial development because residential development usually creates more expenditure
demands than revenue receipts. The location of residential development is also important. Houses built
on the outer edges of a community can impose greater initial cost to local government than houses built
in an already developed area. The ideal condition would be to have sufficient commercial or industrial
development to offset the cost of residential development.
Analysis
Over the evaluation period there has been a slight decline in the market value of residential development as a
percentage of the market value of total development. Residential development as a percentage of total
development has ranged from a high of 80.2% in 1998 to 78.6% in 2007. The percentage has not changed
drastically in any direction during the evaluation period.
Residential Development
(as a % of Total Market Value)
Warning Trend:
Increasing market value of
residential development as a
percentage of market value of
total development
80.2% 79.0% 79.4% 79.2% 79.1% 78.7% 79.2% 78.6% 79.0% 78.6% 78.9%
::IE---- ~ )I( )I( )I( )I( )K )I( )IE )I( )I(
Formula:
Market value of residential
development
Market value of total
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 development
2004 2005 2001 2007 2008
MId Va of Res UN $1,573,885,828 $1,627,110,641 $1,781,009,195 $1, 8'i9, 899, 759 $1,969,251,945
MId va ofTrt UN $1,~6, 197,809 $2,070,611,592 $2,254,037,(99 $2,3<xl, TIS, 973 $2,495,608,888
%ofTrt Md Val 79.2'10 7&6% 79J1% 78.6% 78.9"10
Trend
The warning trend has not been observed for this indicator. The relative stability in residential development as
a percentage of total market value indicates that the City is not outpacing its ability to cover the cost of
residential development. This indicator received a green rating.
Sources: City of Salina Valuations provided by Saline County Clerk 1998-2008
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Financial Trends Monitoring System
REVENUE
Revenue
Revenue determines the capacity of the City to provide services. Important issues to consider with respect to
revenue are economic growth, diversity, reliability, flexibility, and administration. Under ideal conditions,
revenue should be growing at a rate equal to or greater than the combined effects of inflation and expenditures.
Revenue should be sufficiently unrestricted to allow for necessary adjustments to changing economic and
operational conditions. Revenue should be balanced between elastic and inelastic sources with respect to
economic base and inflation. Revenue should be diversified by source so as not to be overly dependent on
residential, commercial, or industrial land uses, or external funding sources such as Federal grants or
discretionary State aid. User fees should be regularly reevaluated to cover the full costs of services.
Analyzing the City's revenue structure will help to identify the following types of problems:
· Deterioration of revenue base.
· Internal procedures or legislative policies that may adversely affect revenue yields.
· Overdependence on obsolete or external revenue sources.
· Changes in tax burden.
· Lack of cost controls and poor revenue estimating practices.
· Inefficiency in the collection and administration of revenue.
The indicators detailed on the following pages can be used to monitor changes in revenue.
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Revised April 2009
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Financial Trends Monitoring System
REVENUE
Key Revenues 1996
Other Revenues,
16%
Property Taxes, 14%
Enterprise Fees,
35%
Vehicle Tax, 2%
Sales Taxes, 21%
.;
","- Franchise, 5%
EMS Chgs, 1 %
. Property Taxes
. EMS Chgs
. Vehicle Tax Sales Taxes
. Intergovernmental . Other Revenues
II Franchise
. Enterprise Fees
Key Revenues 2007
Other Revenues, 13%
Intergovernmental,
3%
Property Taxes, 15%
Enterprise Fees, 33%
Vehicle Tax, 2%
Sales Taxes, 24%
\
/'
--'--Franchise, 8%
. Property Taxes
. EMS Chgs
. Vehicle Tax
. Intergovernmental
Sales Taxes
. Other Revenues
. Franchise
. Enterprise Fees
Source: City of Salina Budget 1996-2007, Schedule D, Key Revenues
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Revised April 2009
REVENUE
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Financial Trends Monitoring System
Revenue Per Capita
Description
Per capita revenue illustrates revenue changes relative to population size. As population increases, it
may be expected that the need for services would increase proportionately and, therefore, the level of per
capita revenue should remain at least constant in real terms. If per capita revenue is decreasing, it would
be expected that the City would be unable to maintain existing service levels unless it were to find new
revenue sources or financial savings, assuming the cost of service correlates to population. This also
assumes that programs are funded at adequate levels.
Analysis
Salina's revenue per capita was relatively stable over the ten year period. It jumped up several times during the
period only to level back out in the following years. Revenue per capita has ranged from a low of$832 in 1997
to a high of $940 in 2006.
Millions
Revenue Per Capita
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
_Key Revenues (Constant) ~Revenue Per Capita
2003 2001 2005 2006 2007
Key Revenues $46,600,788 $48,762,867 $50,749,127 $55,748,839 $56,245,380
Key Rev (Corutant) $39,737,303 $40,502,349 $40,770,804 $43,387,861 $42,570,671
Revenue Per Capita $&>6 $881 $887 $940 $916
% Cl1an~ -3.2% 17% 0.7% 6.0% -2.6%
Note: Key Revenue's include Enterprise Fees, Property Taxes, Vehicle Tax, Sales Tax, Franchise Fees, Ems Charges,
and Intergovernmental Revenue.
Warning Trend:
Decreasing net operating
revenues per capita
( constant dollars)
Formula:
Net operating revenues
(constant dollars)
Population
Trend
The warning trend was not observed for this indicator. The stability in revenue per capita indicates that the City
has had little trouble absorbing the population increases over the last 10 years. Salina has been able to maintain
its service level without looking for new sources of revenue. This indicator received a green rating.
Source: City of Salina Budget 1996-2007, Schedule D, Key Revenues
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Revised April 2009
REVENUE
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Financial Trends Monitoring System
Property Tax Revenue
Analysis
Property tax has seen steady growth over the ten year period. Even though the mill levy has decreased from
27.1 in 1996 to 23.9 in 2007 there has been an increase in property tax revenue. This increase can be attributed
to new construction and increased valuation to existing property. In a growing community property tax revenue
is expected to increase without adjusting the mill levy.
Property Tax Revenue
Description
General property tax revenues include both current and delinquent real and personal property tax
revenue levied by the City. Property tax revenue represents the City's second largest revenue source. A
decline or diminished growth rate in property tax revenue may indicate a number of potential problems
in the City's revenue structure.
$'.30 $6.37 $..32 $6.:;' 0:.0; $,....]
Warning Trend:
Decline in property tax
revenue (constant dollars)
I"".
$6.17
$5.56
$6.05
oTI'Ii ~
3;,rto 2.4% ~ ~~Ia
. 0 1% u
1996
1997 1998 1999 2000 2001
_Property Tax (Constant)
2llli1
$7,663,899
$6,365,621
1.0%
2002
i
~. Via
2003 2004 2005 2006 2007
~ % Change (Constant)
2illl!i 2W1
$8,335,344 $8,624,642
$6,487,180 $6,5Z7, 768
2.6% 0.63%
;
.~
"
" g
0.63% 1.80%
Formula:
Property tax revenue
(constant dollars)
2008
Property Tax
Property Tax (Constant)
% Change (Crnstant)
2JlQ5.
$7,870,785
$6,323,227
-0.7%
2illlB.
$9,127,058
$6,645,176
1.80'10
Note: Does not include Motor Vehicle Tax
Trend
The warning trend was not observed for this indicator during the ten year evaluation period. Property tax
revenue has increased at a rate greater than inflation in each year except for 2005. In most years property tax
has increased around 2% above inflation. This indicator received a green rating.
Source: City of Salina Budget 1996-2008, Schedule D, Key Revenues
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Revised April 2009
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REVENUE
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Financial Trends Monitoring System
Uncollected Property Taxes
Description
Each year, a certain percentage of property taxes are not collected because of property owners' inability
to pay, deficiencies in collection methods, policies and procedures, or a declining economy. Property
taxes are collected by the county and distributed based on the amount levied by separate taxing entities.
If the percentage of uncollected property taxes increases over time, it may indicate decline in the City's
overall economic health.
Analysis
Salina's delinquent property taxes make up less than 3.5% of total property taxes levied in each of the last 10
years. The percentage has ranged from a low of 1 %in 2006 to a high of3.5% in 2007. In most years the
delinquent property taxes have ranged between 1 % and 3 %.
Uncollected Property Tax
(as a % of net property tax levy)
Thousands
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
_Delinquent Property Tax """*""% of Net PlOeprtyTax Levy
Delinquent Property Tax
Net Property Tax Levy
% ofNet ProeprtyTaxLevy
2003
$222,822
$7,640,249
29%
2004
$212,972
$7,890,387
2.7%
2005
$Hi3,069
$8,067,300
2.0%
2006
$93,9lll
$8, m, 268
UP/O
2007
$328,568
$9,409,338
3.5%
Warning Trend:
Increasing amount of
uncollected property taxes as
a percentage of net property
tax levy
Formula:
Uncollected property taxes
Net property tax levy
Trend
The warning trend has not been observed for this indicator. The credit rating agencies consider an
uncollectible rate of2% or 3% per year normal. If the delinquency rate rises for two consecutive years or more
to 5% to 8%, it may signal potential problems in the stability of the property tax base or collection methods.
The uncollected property tax has not been larger than 3.5% during the evaluation period. This indicator
received a green rating.
Source: City of Salina Comprehensive Annual Financial Report 1996-2007, Schedule 9 Property Tax Levies
and Distributions
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Financial Trends Monitoring System
REVENUE
Sales Tax Revenue
Description
Sales tax represents the City's largest revenue source. Salina receives a portion of a 1 percent county
tax, a .5 percent general sales tax, and any voter approved special sales tax. For this indicator only the .5
percent general sales tax that goes directly to the City was used because the City has received the .5
percent consistently over the evaluation period. The county portion changes yearly based on a state
formula laid out in K.S.A. 12-824. Generally an increase at or above inflation is positive.
Analysis
Sales tax increased from 1996 to 1998 due to increased market pull from commercial development throughout
the community. Since 1998 sales tax has declined slightly. There was a large decline from 2000 to 2003 that
recovered to previous levels by 2006. Sales tax revenue for the .5 percent general tax has remained stable in
most years between $3.75 and $3.76 million.
Millions
Sales Tax Revenue Constant
$3.78 $3.76 $3.75
$3.76
$3.76 $3.76
Warning Trend:
Decline in sales tax revenue
(constant dollars)
Formula:
Sales tax revenue
(constant dollars)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
.Sales Tax Revenue Constant
Sales Tax Revenue
Sales Tax Revenue Constant
2003
$4,227,186
$3,604,595
2004
$4,528,413
$3,761,292
2005
$4,560,772
$3,664,030
2006
$4,834,368
$3,762,462
2007
$4,967,469
$3,759,749
Note: Does not include Special Sales Tax or City portion of County Sales Tax
Trend
The warning trend was observed for this indicator from 1998 to 2001 with declines appearing in 2003 and 2005
as well. For most of the evaluation period sales tax levels have been between $3.75 and $3.76 million. There
have been no significant gains since 1998. A growing community would expect to see sales tax revenues
increase over time rather than remain stagnant. This indicator received a yellow rating.
Source: City of Salina Budget 1996-2008, Schedule D, Key Revenues
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Revised April 2009
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Financial Trends Monitoring System
REVENUE
Intergovernmental Operating Revenue
Description
Intergovernmental operating revenues are received from other governmental entities. An
overdependence on intergovernmental revenues can have an adverse impact on financial condition due
to restrictions or stipulations that the other governmental entities attach to the revenue. The overriding
concern in analyzing intergovernmental revenues is to determine whether the City is controlling its use
of the revenues or whether these revenues are controlling the City.
Analysis
During the ten year period intergovernmental operating revenue has been at or below 8% of total operating
revenue. The decrease in intergovernmental operating revenue can be attributed to the loss of city-county
revenue sharing funds and the Local Ad Valorem Tax Reduction (LA VTR) program in 2002.
Millions
Intergovernmental Revenue
(as a % of gross operating revenue)
$3.6
Warning Trend:
Increasing amount of
intergovernmental operating
revenues as a percentage of
gross operating revenue
Formula:
Intergovernmental operating
revenues
Gross operating revenue
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
-Intergovernmental Revenue
~% oflotal Revenue
Intergov Op Revenue
Operating Revenue
% of Operating Revenue
2003
$2,530,970
$46,600,788
5.4%
2004
$2,703,873
$48,762,867
5.5%
2005
$2,745,103
$50,749,127
5.4%
2006
$3,232,551
$55,748,839
5.8%
2007
$2,844,843
$54,167,290
5.3%
Note: Intergovernmental Operating Revenue includes gas tax, liquor tax, federal grants, state grants, county EMS,
and donation
Trend
Over the ten year evaluation period the intergovernmental operating revenue has declined. Although it is
generally considered positive that a City is not reliant on intergovernmental revenue the decline could indicate
that the City is missing out on some funding opportunities. This indicator received a yellow rating.
Source: City of Salina Budget 1996-2007, Line Items
13
Revised April 2009
EXPENDITURES
Cltyaf
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Financial Trends Monitoring System
Expenditures
Expenditures are an approximate measure of the City's service output. Generally, the more the City spends in
constant dollars, the more service it is providing. This reasoning does not account for service delivery efficiency
and effectiveness.
The first issue to consider is the expenditure growth rate to determine whether the City is operating within its
revenues. Since the City of Salina is required to have a balanced budget, it would seem unlikely that
expenditure growth would exceed revenue growth. Nevertheless, the City may balance its annual budget yet
create a long-run imbalance in which expenditure outlays and commitments grow faster than revenues.
Some of the more common ways in which this happens are to use bond proceeds for operations, use reserve
funds, defer maintenance on streets, buildings, or other capital stock, or by deferring funding of contingent
liabilities. In each of these cases, the budget remains balanced, but the long-run budget is developing a deficit.
A second issue to consider is the level of mandatory or fixed costs. This is also referred to as expenditure
flexibility, which is a measure of the City's freedom to adjust its service levels to changing economic, political,
and social conditions. A city with a growing percentage of mandatory costs will find itself proporti'Onately less
able to make adjustments. As the percentage of debt service, matching requirements, pension benefits, State and .
Federal mandates, contractual agreements, and commitments to existing capital plant increase, the flexibility to
make spending decisions decreases.
Ideally, the City will have an expenditure growth rate that does not exceed its revenue growth rate and will have
maximum spending flexibility to adjust to changing conditions. Analyzing the City's expenditure profile will
help identify the following types of problems:
· Excessive growth of overall expenditures as compared to revenue growth in community wealth.
, .
· An undesired increase in fixed costs.
· Ineffective budget controls.
· A decline in personnel productivity.
· Excessive growth in programs that create future expenditure liabilities.
The indicators detailed on the following pages can be used to monitor changes in expenditures.
14
Revised April 2009
EXPENDITURES
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Financial Trends Monitoring System
Departmental Expenditures 1996
Other
15%
Police
19%
Reserves and
Transfers
2%
Development
Services
3%
Capital Outlay
17% ~
Fire and EMS
21%
II Police
. Parks and Recreation
11'1 Reserves and Transfers
Parks and
Recreation
14%
. Development Services
. Public Works
. Other
. Fire and EMS
1- Capital Outlay
Departmental Expenditures 2007
Reserves and
Transfers ~
8% I
Capital Outlay J
3%
Other
18%
Fire and EMS
20%
II Police
. Parks and Recreation
. Reserves and Transfers
Parks and
Recreation
14%
. Development Services
. Public Works
. Other
. Fire and EMS
_ Capital Outlay
Note: Reserves and Transfers includes authorized grants and support for various community efforts (Municipal
Band, Skyfire, Economic Development, and Public Transit). The "Other" Category includes all departments
that make-up less than 2% of the total expenditures (City Commission, City Manager, Human Resources,
Human Relations, Arts and Humanities, Smokey Hill Museum)
Source: City of Salina Budget 1996 and 2007, Individual Departmental Budgets
15
Revised April 2009
1--
EXPENDITURES
CIty'"
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Financial Trends Monitoring System
Expenditures Per Capita
Description
Per capita operating expenditures reflect changes in expenditures relative to changes in population.
Increasing per capita expenditures may indicate that the cost of providing services is outstripping the
City's ability to pay, especially if spending is increasing faster than the City's property, sales, or other
relevant tax base. If the increase in spending is greater than would be expected from continued inflation
and cannot be explained by the addition of new services, it can be an indicator of declining productivity.
Analysis
Salina's expenditures per capita have increased from 1997 to 1999, remained steady from 1999 to 2004,
declined slightly from 2004 to 2006 and increased dramatically to a high of $560 in 2007. Over the ten year
period the City has added 74 positions. The addition of employees has a direct affect on expenditures because
wages make up over 40% of the total operating expenditures. Expenditures per capita will also rise as new
services are provided and current services are upgraded.
Millions
Net Operating Expenditures Per Capita
1996 1997 1998 1999 2000 2001 2002
_Net Operating Expenditures (Constatnt)
2003 ~
$29,184,451 $30,142,069
$24,886,089 $25,035,948
45865 45964
$543 $545
-0.1% 0.4%
2003 2004 2005 2006 2007
--*-Expenditures per Capita
2005 2006 2007
$30,438,180 $31,196,547 $34,377,093
$24,453,407 $24,279,455 $26,019,131
45956 46140 46458
$532 $526 $560
-2.3% -1.1% 6.4%
Net Operating Exp
Net Op Exp (Crostant)
Population
Expenditures per Capita
% Change
Note: Graph does not include Capital Outlay or Debt Service
Warning Trend:
Increasing net operating
expenditures per capita
(constant dollar)
Formula:
Net operating expenditures
(constant dollar)
Population
Trend
Over the ten year period the warning trend has not been observed. Although the expenditures per capita
remained stable from 1999 to 2006, it has increased by over 6% in 2007. This increase from 2006 to 2007 is
largely attributable to pay plan adjustments. In reaction to this increase there is a 2009 budget objective to
reduce staffing by 15 positions. If the expenditures per capita continue to increase in the coming years without
an offsetting increase in revenue the City will be faced with some difficult staffing and service decisions. This
indicator received a yellow rating.
Source: City of Salina Comprehensive Annual Report 1996-2007, Statement of Revenues, Expenditures and
Change in Fund Balance for Governmental Funds
16
Revised April 2009
EXPENDITURES
CIlyar
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Financial Trends Monitoring System
~mployees Per Capita
Description
Personnel costs are a major portion ofthe City's operating budget. Tracking changes in the number of
employees to population is a means to measure changes in expenditures. An increase in employees to
population may indicate that expenditures are rising faster than revenues, the City is becoming more
labor intensive, productivity is declining, or the City has not yet met labor needs. An increase in
employee per capita is not negative if a direct correlation can be shown to increased services.
Analysis
There has been a slight increase from a 10.28 employees per every thousand people to 11.15 over the 10 year
period. Much of this increase can be attributed to an increase in the size of the Police Department, Fire
Department and Development Services Department. These staffing increases are due to an increased
concentration on enhanced services in these functions.
Employees Per Capita
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
_ Number of Employees ~ Employees per 1000
Note: Number of Employees denotes authorized strength not full staffing.
Number of Erq>lo)res
Empbyees per 1000
%~
2003
512
11.16
0.54%
2004
513
11.16
-0.02%
2005
515
1121
0.41%
2006
517
1121
-0.01%
2007
518
11.15
-0.49%
Warning Trend:
Increasing number of
municipal employees per
capita
Formula:
Number of employees
Population
Trend
The City's employees per capita remained relatively stable over the evaluation period. The warning trend was
not observed for this indicator. The slight increase in number of employees can be directly correlated with
changes in City services. There is no indication of a decrease in productivity. This indicator received a green
~~. .
Source: City of Salina Staffing Tables 1996-2007
17
Revised April 2009
EXPENDITURES
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Financial Trends Monitoring System
Capital Outlay
Description
The expenditure for operating equipment, such as vehicles, radios, and computer and office equipment
purchased from the operating budget is referred to as capital outlay. It includes equipment that will last
longer than one year and costs more than $10,000. Capital expenditures may remain constant or even
decline in the short run as new and replacement equipment is purchased. If the decline persists over
three years, it can be an indicator that capital outlay needs are being deferred, resulting in the use of
obsolete equipment and the creation of an unfunded liability.
Analysis
The City's capital outlay as percent of net operating expenditures has varied widely during the evaluation
period. It reached a high of34% in 1997 and has declined with a few spikes ever since. The overall trend is a
decline in capital outlay spending.
Millioos
Capital Outlay
(as a % of Net Operating E>q:>enditures)
$4.3
$3.9
Warning Trend:
A three or more year decline
in capital outlay from
operating funds as a % of net
operating expenditures
I;
'4
$4.9
Ii;
,
Formula:
Capital outlay from operating
funds
Net operating expenditures
1996
1997 1998 1999 2000
_Capital Outlay
2003
$2,320,003
$29,184,451
7.9%
~~ ~~ ~m ~M 2~ 2~
~% c:I Net Operating Expenditures
2004 ~05 2006
$2,516,694 $3,454,921 $3,892,955
$30,142,069 $30,438,180 $31,196,547
8.3% 11.4% 12.5%
2007
Capital Outlay
Net Operating Ex~nIitures
% ofNet Operating Exp
2007
$3,297,624
$34,377,093
9.6%
Trend
The warning trend has not been observed. During the evaluation period there has not been a three year stretch
of declining capital outlay. The overall trend indicated less spending on capital outlay. This is not negative
unless the City is putting this spending on hold. The graph indicates that in each instance after a few years of
decline there was a spike in capital outlay spending. This is an indication that capital outlay spending is being
deferred. This indicator received a yellow rating. .
Source: City of Salina Comprehensive Annual Report 1996-2007, Statement of Revenues, Expenditures and
Change in Fund Balance for Governmental Funds
18
Revised April 2009
OPERATING POSITION
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salina
Financial Trends Monitoring System
Operating Position
Operating position refers to the City's ability to balance its budget on a current basis, maintain reserves for
emergencies, and maintain sufficient cash to pay its bills on a timely basis.
During a typical year, a city will usually generate either an operating surplus (when revenues exceed
expenditures) or an operating deficit (when expenditures exceed revenues). An operating surplus or deficit may
be created intentionally as a result of a conscious policy decision, or may be created unintentionally because it
is difficult to precisely forecast revenues and expenditures. When deficits occur, they are usually funded from
accumulated fund balances; when surpluses occur, they are usually dedicated to building prior years' fund
balances, paying down current debt, avoiding future debt, or to funding future years' operations.
Reserves are built through the accumulation of operating surpluses. Reserves are maintained for the purposes of
financial security in the event of loss of a revenue source, economic downturn, unanticipated expenditure
demands due to natural disasters, insurance loss, need for large-scale capital expenditures or other non-recurring
expenses, or uneven cash flow.
Sufficient cash, or liquidity, refers to the flow of cash in and out of the City treasury. The City receives many of
its revenues in large installments at infrequent intervals during the year. It is to the City's advantage to have
excess liquidity or cash reserves as security in the event of an unexpected delay in receipt of revenues, an
unexpected decline or loss of a revenue source, or an unanticipated need to make a large expenditure.
An analysis of operating position can help identify the following situations:
· Emergence of operating deficits.
· Decline in reserves.
· Ineffective revenue forecasting techniques.
· Ineffective budgetary controls.
· Inefficiencies in management of enterprise operations.
The indicators detailed on the following pages can be used to monitor changes in operating position.
19
Revised April 2009
OPERATING POSITION
Cltyar
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Financial Trends Monitoring System
Growth in Revenue vs. Growth in Expenditures
Description
Revenue vs. expenditure is the most basic measure of a localities operating position. A cities financial
well-being can be gauged by looking at how much money was spent as compared with the amount that
was brought in. If more money is spent than is brought in then the locality will have to make
adjustments in order to maintain operations. If the expenditures are outpacing revenue too quickly than
the locality will have to cut costs or decrease the level of services. The level of fund balances allows for
a cushion in times when revenues don't meet projections. If expenditures outpace revenue for 10ng
enough to bring fund balances down then the ability to pay short term liabilities will be diminished.
Analysis
The City's expenditures outpaced revenue in 1996,2000,2002, and 2007. In each case the City was able to
adjust in the following year. During the years when revenues were higher than expenditures the City was able
to increase the fund balances. These fund balances allowed the City to continue to operate even when more
money was spent than was coming in.
Millions General Fund Revenue vs. Expenditures
$27
$25
$23
$21
$19
$17
$15
1996 1997 1998 1999 2000
~ Total General Fund Revenue
2003
$22,808,898
$22,800,201
$&697
2001 2002 2003 2004 2005 2006 2007
---*- Tolal General Fund Expenditures
2005 2006 2(lf7
$22,813,723 $25,739,453 $Z5,597,Oll
$22,767,514 $24,462,295 $Z6,00l,209
$46,::!l9 $1,m,158 (~,198)
Total G:m:al RmdRe\enu:
Total G:m:al RmdBqx:nditures
SUlpJus/ (D:fx:it)
2(MU
$23,648, 957
$23,(J75,970
$572,987
Warning Trend:
Expenditures increasing at a
greater rate than revenue for
two consecutive years
Formula:
General fund revenue and
expenditures
Trend
The warning trend has not been observed for this indicator. Although expenditures have increased faster than
revenue several times during the evaluation period, the City has been able to make adjustments in the following
year to correct imbalances. The City's fund balances have been large enough to absorb any budget deficits that
occurred. The City has already implemented measures to slow the increase in expenditures by recommending a
reduction of 15 employees in the 2009 budget. This indicator received a yellow rating.
Source: City of Salina Comprehensive Financial Report 1996-2007, Statement of Revenues, Expenditures, and
Changes in Fund Balance.
20
Revised April 2009
OPERATING POSITION
Cltyar
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salina
Financial Trends Monitoring System
Fund Balance
Description
The level of unrestricted fund balances may determine the City's ability to witlJ.stand unexpected
financial emergencies that may result from natural disasters, revenue shortfalls, unexpected maintenance
costs or steep rises in inflation. Fund balances may also determine the City's ability to manage monthly
cash flows or accumulate funds for large-scale purchases without having to borrow.
Analysis
Over the ten year period the City's unrestricted fund balances as a percentage of operating revenue have been
between 39% and 44%. The drop from 43% to 39% from 2004 to 2005 can be attributable to planned spend
down of the fund balances that were above the target amount.
MIllions
Fund Balance
(as a % of net operating revenues)
$24.8
Warning Trend:
Declining unrestricted fund
balance as a percentage of net
operating revenues
$22.4
$20.2 $20.9 I
$19.4 $19.6 fl $20.0 I I
$18.8 $18.8 $18.6 C [J
$15.6 $15.9 0 0 0 0 !LO L:~
x ri'--i)l( I )I( )I(
44.3% 43.5% 41.4% 41.8% 41.8% 43.4% 43.1% 3~.5% " 43.4%
40.1% 39.7010 40.4%
Formula:
Unrestricted fund balances
Net operating revenues
1996
1997 1998 1999 2000 2001
_Food Balance (All Funds)
2003
$~, 15Q580
$46,423,888
43.4%
2002
2003 2004 2005 2006
~ % of Total Revenue
2005 3lO6
$19,971,005 $22,435,~4
$50,536,435 $55,575,746
39.5% 40.4%
2007
Fund Bame (All Funds)
Net Operating Re\ellue
% ofNet ~rating Revenue
2004
$20,930,187
$48,535,290
43.1%
2007
$24,781,005
$57,086,522
43.4%
Trend 0
The warning trend has not been observed for this indicator. The fund balance as a percentage of operating
revenue has remained stable over the evaluation period. Slight declines in the fund balance as a percentage of
operating revenue can be attributed to concerted efforts to spend down fund balances that have increased at a
rate greater than expected. The City has set target balances for several funds. In each year of the evaluation
period the City has met or exceeded the overall fund balance target of$12.4 million. Fund targets for individual
funds can be found in Schedule F, Fund Balances, located in the budget document.
Source: City of Salina Budget 1996-2007, Schedule F, Fund Balances
21
Revised April 2009
OPERATING POSITION
CIlyar
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Financial Trends Monitoring System
Enterprise Fund Operating Position
Description
Enterprises are supported by user fees and are intended to operate more like a business than a public
entity supported by taxes. User fees and charges are established in enterprise funds to promote
efficiency by shifting payment of costs to specific users of services and to avoid general taxation.
Moderate rate increases are included as part of the budget to offset increasing operating costs, mandated
environmental standard compliance, and pay-as-you-go capital costs attributable to repair and
replacement of infrastructure. Enterprise fund operating position is measured by examining the
enterprise working capital. Enterprise working capital equals the current assets minus current liabilities.
Analysis
Enterprise working capital has declined over the evaluation period. This decline is a result of declining assets
and stable liabilities. The current assets went from $12.39 million in 2003 to $10.49 million in 2006. In 2007
there was a slight increase in current assets to $11.13 million. The current liabilities have remained stable
around $2.0 to $2.5 million over the entire evaluation period.
Millions
Enterprise Operating Position
$11.80
$11.90
$10.49
[M;97
.I
$2.51
Warning Trend:
Reduction in working capital
(constant dollars)
Formula:
Enterprise working capital
(constant dollar)
2000 2001 2002 2003 2004 2005 2006 2007
_Current Assets (constant) _ Current Liabilities (cons1ant) --'-Working Capital (constant)
Current Assets (constant)
Current Liabilities (constant)
Working Capital (constant)
2003
$12,393,844
$2,017,526
$10,376,318
2004
$11,904,407
$2,538,752
$9,365,654
2005
$11 ,208,632
$2,395,215
$8,813,416
2006
$10,485,321
$2,511 ,225
$7,974,096
2007
$11,133,376
$2,477,730
$8,655,645
Trend
The warning trend is visible from 2003 to 2006. There was a slight increase in working capital from $7.94
million in 2006 to $8.66 million 2007. Many of the enterprise functions require large investment in
infrastructure and ongoing maintenance. As new projects arise the fund balances are spent down causing a
decrease in current assets and ultimately a decrease in working capital. If the working capital drops to a level
that hampers the operations the City will have to revaluate fee structures and maintenance schedules. This
indicator received a yellow rating.
Source: City of Salina Comprehensive Annual Report 2000-2007, Statement of Net Assets.
22
Revised April 2009
OPERATING POSITION
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salina
Financial Trends Monitoring System
Liquidity
Description
A measure of the City's short-run financial condition is its cash position. Cash position includes cash on
hand and in the bank, as well as other assets that can be easily converted to cash, such as short-term
investments. The level of this type of cash is referred to as liquidity. Liquidity measures the City's
ability to pay its short-term obligations. Low or declining liquidity can indicate that the City has
overextended itself in the long term.
Analysis
The City's liquidity increased from 1.37 in 2000 to 1.89 in 2003. From 2004 to 2005 the liquidity ratio
decreased. Since 2006 liquidity has increased. As long as the ratio remains above 1 the city will have enough
cash on hand to cover current liabilities.
Liquidity
(cash & investments as a % of current liabilities)
MUon.
$8.2
Warning Trend:
Decreasing amount of cash
and short-term investments
as a percentage of liabilities
Formula:
Cash and short-term
investments
Current Liabilities
2000 2001 2002
_Fund Balance(tax fmds)
2003 2004 2005 2006 2007
_Current Liabilities ~Ratio of Liquidity
Funl BaJan:e(tax finds)
Current Iili>i1ities
Ratio ofliquidity
JlO2
$7,2114,600
$4,<m,993
1.48
2003
$7,543,327
$3, 988,773
1.89
2004
$8,165,762
$5,051,137
1.62
3lO5
$6,711,958
$6,255,928
1.07
2006
$7,969,288
$7,096,922
1.12
2007
$7,570,903
$5,686,678
1.33
Trend
The warning trend for this indicator was observed from 2003 to 2005. Since 2005 there has been gradual
increase in the level of liquidity. In each year during the evaluation period the liquidity ratio remained above 1.
This indicates that the City has had no issue covering current liabilities. This indicator should be monitored so
that the City can adjust should the warning trend return. This indicator received a yellow rating.
Source: City of Salina Budget 2000-2008, Schedule F, Fund Balances, City of Salina Comprehensive Annual
Report 2000-2007, Statement of Net Assets.
23
Revised April 2009
Cltyuf
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salina
Financial Trends Monitoring System
DEBT STRUCTURE
Debt Structure
Debt structure is important because debt is an explicit expenditure obligation that must be satisfied when due.
Debt can be an effective tool to finance capital improvements and to smooth out short-term revenue flows;
however, its misuse can cause serious financial problems. Even a temporary inability to repay debt can result in
loss of credit rating, increased borrowing costs, and loss of autonomy to State and other regulatory bodies.
The most common forms of long-term debt are general obligation, lease purchases, special assessments, and
revenue bonds. When the City issues debt for capital projects, it must ensure that aggregate outstanding debt
does not exceed the community's ability to pay debt service as measured by the property value or personal or
business income.
Under the most favorable circumstances, the City's debt should be proportionate in size and growth to the
City's tax base; should not extend past the useful life of the facilities which it finances; should not be used to
balance the operating budget; should not require repayment schedules that put excessive burdens on operating
expenditures; and should not be so high as to jeopardize the City's credit rating.
An examination of the City's debt structure can reveal the following conditions:
· Inadequacies in cash management procedures.
· Inadequacies in expenditure controls.
· Decreases in expenditure flexibility due to increased fixed costs in the form of debt service.
· Use of short-term debt to finance current operations.
· Existence of sudden large increases or decreases in future debt service.
· The amount of additional debt that the community can absorb.
The indicators detailed on the following pages can be used to monitor changes in debt structure.
24
Revised April 2009
DEBT STRUCTURE
Cltyuf
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Financial Trends Monitoring System
Long- Term Debt
Description
A 10cality's ability to repay its debt is determined by comparing net direct 10ng term debt to assessed
valuation. Net direct debt is defined as any debt for which the City has pledged full faith and credit
minus self-supporting debt. Self-supporting debt is any debt that the City has pledged to repay from
sources other than tax dollars (user fee from enterprise operations). An increase of net direct debt as a
percentage of assessed property valuation can indicate diminishing ability to repay debt obligation. If
long-term debt were to exceed a local government's resources for paying the debt, the government may
have difficulty obtaining additional capital funds, may have to pay a higher rate of interest for them, and
may have difficulty repaying existing debt.
Analysis
The net direct debt as a percentage of assessed valuation has remained stable over the evaluation period. The
increase from 6% in 1996 to 9% in 1998 can be attributed to the Magnolia/I135 interchange project. Other
projects that have affected the net direct debt over the last ten years include the South Ohio corridor project and
the South Ninth Corridor Phase III project.
Millions
Long-Term Debt
(as a % of assessed valuation)
1996 1997 1998
_ Net Debt
1999 2000 2001 2002
_Assessed Valuation
20m 2004
$31,172,348 $32,485,503
$363,100,444 $375,273,018
8.6% 8. 7%
2003 2004 2005 2006 2007
~ % of Assessed Valuation
2005 2006 2007
$28,774,792 $28,774,792 $35,739,543
$383,949,303 $403,375,084 $428,465,893
7.5% 7.1% 8.3%
Net Debt
Assessed Valuation
% of Assessed Valuation
Warning Trend:
Increasing net direct debt as
a percentage of assessed
valuation
Formula:
Net direct bonded long-term
debt
Assessed valuation
Trend
The warning trend for this indicator has not been observed during the evaluation period. The credit industry
indicates that net debt exceeding 10% of assessed valuation is negative. The City's net direct debt was below
10% in each year evaluated. This indicator received a green rating.
Note: Net direct debt is equal to total bonded debt minus revenue bonds, loans, and fund balance designated for
debt service.
Source: City of Salina Comprehensive Annual Financial Report 1996-2007, Schedule 6 and Schedule 15.
25
Revised April 2009
1- ---
DEBT STRUCTURE
Cltyuf
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Financial Trends Monitoring System
Debt Service
Description
Debt service is defined as the amount of principal and interest that the City must pay each year on long-
. term debt pIus the interest it must pay on direct short-term debt. As the debt service increases, it adds to
the City's obligations and reduces the City's expenditure flexibility. Debt service can be a major part of
the City's fixed costs and its increase may indicate excessive debt and fiscal strain. When debt service
reaches 20% of operating revenue it is considered a potential problem. Debt service at 10% of operating.
revenue or less is considered acceptable.
Analysis
Salina's debt services have been relatively steady over the evaluation year period ranging from 10.7% of
operating revenue to 5.7%. Each year with the exception of 1997 the debt service was below 10%. The dollar
amount of debt service has ranged from $3 million to $3.5 million.
Millions
Debt Service
(as a % of net operatin revenue)
$46.6 $48.8 $50.7
$45.1 $46.4 $47.2
$43.1 $43.4
$37.9 $40.0
7%
Warning Trend:
Increasing net direct debt
service as a percentage of net
operating revenue
Formula:
Net direct debt service
Net operating revenue
Net Operating Revenue
Debt Service
% of Net Op Revenue
1996 1997 1998 1999 2000
_Net Operating Revenue
2003
$46,600,788
$3,179,781
6.8%
2001 2002 2003
_Debt Service
200* 2005
$48,762,867 $50,749,127
$3,308,119 $3,026,314
6.8% 6.0%
2004 2005 2006 2007
........% of Net Op Revenue
~ 2007
$55,748,839 $56,245,380
$3,459,170 $3,457,680
6.2% 6.1%
Trend
The warning trend has not been observed. The relative stability of the debt service and increase in the operating
revenue indicate that the City is in a good position with respect to the amount of outstanding debt. This stability
in the amount of debt service should help the City to endure difficult economic times because the City has not
taken on extra debt during prosperous years. This indicator received a green rating.
Source: City of Salina Comprehensive Annual Report 1996-2007, Statement of Revenues, Expenditures and
Change in Fund Balance for Governmental Funds
26
Revised April 2009
1-
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Financial Trends Monitoring System
DEBT STRUCTURE
Debt Margin
Description
Under Kansas law (K.S.A. 10-308), cities can issue general obligation bonds up to an amount not
exceeding specific debt limits. General obligation bonds issued cannot exceed 30 % of assessed
valuation. The debt margin is the amount of debt that the city can legally incur. A decreasing debt
margin decreases the cities ability to incur new debt and could hamper the use of bonds for future
projects.
Analysis
The City's total applicable debt has been less then 10% of the total assessed valuation each year of the
evaluation period. The debt margin has increased from $39.4 million in 1997 to $92.8 million in 2007. In each
year from 1997 to 2007 the debt margin increased as a result of stable debt and increasing assessed valuation.
Millions
Debt Li mit
Warning Trend:
Decreasing debt margin
Formula:
Debt limit minus net debt
applicable to the debt limit
Asses&ed Valuation
De It limit
De It Margin
Tot Net Delt App to lim
% ofAssesed Valuatim
1996 1997 1998 1999 2000 2001 2002 2003 2004
_Total Net Debt Applicable to Limit _Debt Margin
2003 2004
$363,100,444 $375,273,018
$108,930,133 $112,581,905
$77,757,785 $80,096,402
$31,172,348 $32,485,503
8.6% 8.7%
2005
$383,949,303
$115,184,791
$86,409,999
$28,774,792
7.5%
2006
$402,191,655
$120,657,497
$91,882,705
$28,774,792
7.2'10
2005 2006 2007
-Debt Linit
2007
$428,465,893
$128,539,768
$92,800,225
$35,739,543
8.3%
Trend
The warning trend was not observed for this indicator over the evaluation period. The City has more than
enough room within the debt margin to incur new debt for future projects. This indicator received a green
rating.
Source: City of Salina Comprehensive Annual Financial Reports 1996-2007, Schedule 15, Legal Debt Margin
Calculation: Debt Limit is equal to 30% of assessed evaluation. Applicable debt is equal to bonded debt minus
revenue bonds, loans, and fund balance designed for Debt Services. Debt margin is the difference in the debt
limit and the total applicable debt.
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Revised April 2009
DEBT STRUCTURE
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Financial Trends Monitoring System
Current Liabilities
Description
Current liabilities are defined as the sum of all liabilities due at the end of the fiscal year. These
liabilities current portions of long-term debt, all accounts payable and accrued liabilities. An increasing
amount of debt outstanding at the end of successive years can indicate liquidity problems, deficit
spending, or both. Current liabilities are measured as a percentage of net operating revenues.
"
Analysis
The City's current liabilities as a percentage of operating revenue have remained stable over the evaluation
period. Current liabilities as a percentage of operating revenue declined from 13.9% in 2001 to 8.6% in 2003.
Current liabilities then increased for the next 3 years to a high of 12.8% before dropping back to 10.1 % in 2007.
The current liabilities ranged from 8.6% to 13.9% over the evaluation period.
Current Liabilities
(as a % of net operating revenue)
Millions
2001 2002 2003 2004 2005 2006 2007
_Current Liabilities _Net Operating Revenue """'*-% of Opp Revenue
Current Liabilities
Net Operating Revenue
% ofOp Revenue
2003
$3,988,773
$46,423,888
8.6%
2006
$7,096,922
$55,575,746
12.8"/0
2007
$5,686,678
$56,245,380
10.1%
2004
$5,051,137
$48,535,2<.x>
10.4%
201l'l
$6,255,928
$50,536,435
12.4%
Warning Trend:
Increasing current liabilities
at the end of the year as a
percentage of net operating
revenues
Formula:
Current Liabilities
Net operating revenue
Trend
The warning trend was observed during the period from 2003 to 2006. From 2006 to 2007 the trend reversed
with a drop in current liabilities as a percentage of operating revenue from 12.8% to 10.1 %. If the warning
trend reappears in the next few years the City will have to monitor current liabilities more closely. This
indicator received a yellow rating.
Source: City of Salina Budget 2000-2007, Schedule F, Fund Balances, City of Salina Comprehensive Annual
Report 2000-2007, Statement of Net Assets.
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Revised April 2009