Financial Health Indicators….the red, yellow, green for cities and counties

Updated:  12/3/18 8:50 pm

Thanks to our Lobbyist from Portage County for letting us know about these important financial metrics made easy for the average taxpayer to understand.

The Ohio Auditor, Dave Yost, has developed a financial tool for taxpayers and elected officials to determine the financial health of their respective counties and cities. Unfortunately, they do not have the same program for townships or villages just yet.

Here is a website that explains about the Financial Health Indicators [FHI]

https://ohioauditor.gov/FHI/default.html

Rather than requiring the taxpayers, or the politicians to read through reams of financial information, they have automated a system that is akin to the ‘stop lights’ that we all see on the roads while driving.  They use the color red to designate “critical indicators” (not financially sound), yellow for “cautionary indicators” (there is trouble brewing), and green for “positive” (all is financially sound for now) in your city or county.

Here is a link to their page for the 2018 report for the fiscal year ended 2017:

Click to access fhi%20update%202018%20FINAL.pdf

When reading the report summary, we were looking for the results for Lake County and the cities within the county. Here are some excerpts that mention Lake County’s Wickliffe, and the County’s finances.

“….. six cities (Bedford, Euclid, Lima, Mount Vernon, Reading and Springdale) are showing early signs of stress, meaning they are two to three years away from fiscal stress. And five cities (Lakewood, Maple Heights, New Philadelphia, Olmsted Falls and Wickliffe) are one indicator away from showing early signs of stress.  Indicators for Ohio counties found none reaching enough “critical” indicators to indicate they were facing fiscal stress through Sept. 30, although one (Highland) is an indicator away from fiscal stress.”

“The 15 counties that have had progressively worse indicators in 2016 and 2017 include: Clinton, Defiance, Delaware, Hamilton, Lake, Licking, Lucas, Marion, Medina, Pike, Preble, Ross, Sandusky, Trumbull and Wyandot.  With the exception of Hamilton, which is showing early signs of fiscal stress, these counties are not currently showing signs of overall fiscal stress.”

We took the time to generate the reports for each Lake County city and the County by itself.  The first link gives you the Red, Yellow, Green summary, and the second provides a detailed explanation of each financial indicator.

Mentor 2015 – 2017
Mentor report for 2017

Mentor-on-the-Lake 2015 – 2017
Mentor-on-the-Lake report for 2017

Painesville 2015 – 2017
Painesville report for 2017

Wickliffe 2015 – 2017
Wickliffe’s report for 2017

Willoughby 2015-2017
Willoughby’s report for 2017

Willoughby Hills 2015 – 2017
Willoughby Hills report for 2017

Willowick 2015 – 2017
Willowick’s report for 2017

Lake County 2015 – 2017
Lake County report for 2017

Here is a summary of all Lake County cities in one report for 2015, 2016, 2017
Summary of all Lake County cities 2015 – 2017

Here is a summary of all Ohio counties in one report for 2015, 2016, 2017
Take a look at Hamilton County results – remember in the Auditor’s summary they indicated that Hamilton is showing some signs of financial stress.  It will give you something in which to compare Lake County’s results.

All Ohio Counties Comparison of RYG indicators

What are the “Red” indicators (#1, #9, #13) for Lake County and what do they mean?
Financial Health Indicators

What can we “take away” from all of these numbers as it relates to Lake County government?  At a recent Commissioners’ meeting, we heard Commissioners Hamercheck and Cirino say that the Lake County budget is really, really “tight”. (meaning we are barely covering our daily operating expenses and capital expenditure needs)  We also heard Commissioner Troy state that since he was accused of raising the sales tax, he expects the next administration to reduce revenues and curtail the spending in each of the County’s departments. [LFC Comment:  This may have just been an example of  an acute case of “soreloseritis”. It is a severe inflammation of the posterior experienced by many losing politicians, and, hopefully, will pass with a much needed rest]

In reading the numbers, they say to me that Cirino and Hamercheck are correct and our revenues are barely covering expenses.

1. Indicator #1 – Per the auditor’s report, if an entity’s unrestricted net assets/position is declining or is negative, it leaves little or no room for unexpected expenses; and therefore, is a sign of fiscal stress.

2. Indicator #9 – This indicator is important to be aware if a shortage in revenues to cover expenses exists.

3. Indicator #13 – This indicator is important because it identifies the number of days the entity may operate using their unrestricted net assets position, unassigned fund balance, and cash and investments.

There are several concerns that LFC has relating to the County’s finances.

1. What will the new administration building do to the County’s operating expenses? It was originally sold as a huge plus for the taxpayers because of reduced expenses due to consolidation of offices, etc.  Only time will tell if that projection is true.  Thanks to Cirino and Hamercheck for reducing millions of unnecessary building costs on the project.

2. The State of Ohio may continue to issue more unfunded mandates that further increase the financial burden of the local taxpayers, or they will continue to reduce the local government funds that will continue to starve the local communities of means to pay for their mandates.

3. If the Commissioners deem it necessary to raise revenues, we will march on the administration building with “torches and pitchforks” if their answer is to increase the inside millage that was reduced when the sales tax increase was put into effect in 2012 by Commissioners Troy, Sines and Aulfudish.  Seniors and those living on fixed incomes are being priced out of their homes that they have worked all their lives to achieve.  We will fight for our seniors on ANY proposed property tax increase!

4.  Lake County taxpayers should not expect any tax decreases from any local governments. However, we are expecting expenses to be cut, drastically if need be, before there is even a hint at raising local revenues.

If anyone in the community has any other ideas that you would like us to pass on to our elected officials, please comment to this post, or email me at brian@LobbyistsforCitizens.com.

Updated: 12/4/18- 

After speaking with Mike Matas, Lake County Finance Director, he assured us that although the 2019 budget will be challenging, Lake County is not in any financial stress.  The red critical indicators issued by the State Auditor reflects the impact of the new pension rulings that requires the county to place pension liabilities, which are ultimately the responsibility of the State pension system and not the County, on the County’s balance sheet.

In addition, the red critical indicator regarding the fully depreciated capital assets of the Counties is incorrect.  Just because something is fully depreciated does not mean it needs to be replaced.

The FHI reports are generated automatically by the State’s software without any human intervention in interpreting the numbers, and can result in false indicators being presented.

Here is a summary from the Auditor’s summary of the FHI reports:

“Historical data indicate that entities with at least six “critical” indicators are in a state of fiscal stress. (For
cities and counties using a cash basis or modified cash basis of accounting, four critical indicators is the
threshold.) Historical data indicate that entities with a combination of eight critical and cautionary indicators
may experience fiscal stress in two to three years. (For cities and counties using a cash or modified cash
basis of accounting, a combination of six critical and cautionary indicators is the threshold.)

However, having a high number of indicators which suggest fiscal stress does not mean a community
will fall into fiscal caution, watch or emergency, nor does it mean local officials have failed to properly manage
their finances. It does mean, however, that barring a course correction, the finances of these entities are
such that the community is at higher risk of being declared in fiscal distress by the Auditor in the future.

It is important to note that no individual financial indicator is of use in identifying overall fiscal stress
or predicting that an entity will fail. While individual indicators do point to specific areas of concern, the
indicators should be considered together to obtain insight as to whether or not an entity is experiencing
early signs of fiscal stress.”

 



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