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In October 2007, RubinBrown’s 2006 Financial Ratio Study for Municipalities was released. As auditors for many municipal governments, it was always frustrating not to have benchmarking information available to help government officials see how they were doing as compared to their peers. We often heard from our clients that they would like to see how they matched up against similar governments. The study included statistical financial results for municipalities in both the St. Louis and Kansas City metropolitan areas, focusing on cities with populations greater than 5,000. For purposes of this study, metropolitan St. Louis included municipalities in both Missouri and Illinois; metropolitan Kansas City included municipalities in both Kansas and Missouri.

Methodology

RubinBrown team members contacted the finance officers from the selected municipalities, requesting financial information for the ratio calculations. Financial information was then collected from the 2006 Comprehensive Annual Financial Report or 2006 Audited Financial Statement if no CAFR was prepared. All municipalities included in the study prepare financial statements in accordance with generally accepted accounting principles. Key financial ratios were calculated in three categories: governmentwide (governmental activities only), governmental funds and general fund information.

The following shows a breakdown of participating municipalities by location:

Format of the Report

The ratio results were presented separately for the St. Louis and Kansas City metropolitan areas. Information for the St. Louis metropolitan area was further segmented by population greater than or less than 20,000. The Kansas City information was not segmented; however, the average population of the metro Kansas City municipalities was 57,600.

For each ratio presented, the report gave information both by quartile and average. The computed values for each ratio were sorted from most favorable to least favorable, and quartiles were determined. A description and interpretation of the ratios also were provided.

Analysis

In the St. Louis area, we noted that, on average, municipalities experienced the following:

• A 13 percent increase in their government-wide net assets, representing a very healthy improvement in the financial condition of those cities.
• 90 percent of the respondents experienced an increase in net assets and experienced positive interperiod equity and, on average, revenues exceeded expenses at a clip of 1.2 times.
• An aging infrastructure exists because, on average, accumulated depreciation on assets approximated 42 percent of the cost, and cities in the region may be experiencing significant replacement cost in the future.
• Debt to assets, which shows how leveraged the cities’ capital assets are, averaged .41 times.
• Debt per capita averaged $1,093, which represents the debt burden on each citizen.
• Tax revenues per capita averaged $705, while expenses per capita averaged $842, showing the need for other types of revenue, like charges for services and grants.
• Total grants and other non-tax revenues represented an average of 12 percent of total revenues, so cities are somewhat reliant on revenues from external sources.
• Public safety expenses are always the largest functional expense and, on average, comprised 35 percent of total expenditures.
• Debt service expenditures at the fund level use an average of up to 14 percent of total revenues that potentially could be used for services.
• Also on a fund basis, capital expenditures as a percent of total expenditures averaged 16 percent, which represents the government’s commitment to adequately provide for its capital asset needs.
• On a fund basis, the unreserved fund balance amounted to, on average, a healthy 46 percent of revenues, which shows that most cities can weather a temporary shortfall in revenues.

For the Kansas City governments participating in the survey, we noted very similar averages to St Louis, as follows:

• A 7 percent increase in their government-wide net assets, also representing a very healthy improvement in the financial condition of those cities.
• 78 percent of the respondents experienced an increase in net assets and experienced positive interperiod equity in 2006 and, on average, revenues exceeded expenses at a clip of 1.2 times.
• A younger aged infrastructure exists because accumulated depreciation on assets averaged approximately 34 percent of the cost, and cities in the region currently are addressing their replacement cost.
• Debt to assets, which shows how leveraged the cities capital assets are, averaged 0.27 times.
• Debt per capita averaged $887, which represents the debt burden on each citizen.
• Tax revenues per capita averaged $608, while expenses per capita averaged $859, showing the need for other types of revenue like charges for services and grants.
• Total grants and other non-tax revenues represented an average of 24 percent of total revenues, so these cities are more reliant on revenues from external sources.
• Public safety expenses are always the largest functional expense and, on average, comprised 35 percent of total expenditures.
• Debt service expenditures at the fund level use an average of up to 15 percent of total revenues that potentially could be used for services.
• Also on a fund basis, capital expenditures as a percent of total expenditures averaged 32 percent, which represents the government’s commitment to adequately provide for its capital asset needs.
• On a fund basis, unreserved fund balance amounted to a healthy average of 39 percent of revenues, which shows that most cities can weather a temporary shortfall in revenues.

A complete copy of the statistical analysis can be found on our Web site at www.rubinbrown.com.