For city finance wonks, Christmas comes twice a year: once in August when the city budget is set and again in February when the city financial audit is published. The budget specifies the city's cash flow (its planned revenues and expenses). The financial audit details the city's assets (the value of city property, bank accounts, etc.) and its liabilities (outstanding debt, pension obligations, etc.).
For some reason, Christmas is coming late this year. The Annual Comprehensive Financial Report (ACFR) for fiscal 2022 is being published in July, not February as before. I'm sure there's a good explanation, but I don't know what it is. Fire??? The public will see it when it's presented at the July 17 City Council meeting.
Consider this a layman's adventure into the netherworld of municipal accounting, otherwise known as the Annual Comprehensive Financial Report, or ACFR. Fun fact: It used to be called the CAFR (pronounced "kaffir"), but two years ago it was renamed by GASB (the independent body that sets accounting rules) when someone helpfully pointed out that "kaffir" is an insult directed at Black South Africans, and is the most offensive term in South African English. So CAFR became ACFR. Who knew that accoutants are woke?
Another fun fact: ACFR also happens to be an acronym that stands for "Absolutely Creative False Reality." (Warning: I could be wrong. I have the same lack of expertise in acronyms as in accounting.) Read the ACFR and you'll be lured into a spider's web of terms and numbers that will bring you down and overwhelm you and smother you. Last warning: run away!
But a brief look (and I mean brief, only one table) at the City of Richardson's financial position leading up to this year's Annual Comprehensive Financial Report (ACFR) should be relatively safe.
From the most recent ACFR available on the City's website (2021):
The Statement of Net Position presents information on all of the City’s assets and liabilities, including capital assets and longterm obligations. The difference between the two is reported as net position. Over time, the increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.Source: City of Richardson.
The ACFR advises that indicators other than net position should be taken into consideration, too, and always goes into mind-numbing detail for 100-200 pages. But I'll be looking at that bottom line figure, Net Position, and how it has increased and decreased over time.
| Assets and Liabilities (in thousands) | |||||
| Year | Assets | Deferred Outflows | Deferred Inflows | Liabilities | Net Position |
| 2004 | $419,151 | n/a | n/a | $217,860 | $201,281 |
| 2005 | $434,085 | n/a | n/a | $232,701 | $201,383 |
| 2006 | $502,134 | n/a | n/a | $286,805 | $215,329 |
| 2007 | $510,162 | n/a | n/a | $289,211 | $220,951 |
| 2008 | $509,827 | n/a | n/a | $298,977 | $210,849 |
| 2009 | $505,943 | n/a | n/a | $299,970 | $204,972 |
| 2010 | $574,261 | n/a | n/a | $371,640 | $202,621 |
| 2011 | $566,295 | n/a | n/a | $376,557 | $189,737 |
| 2012 | $544,898 | $3,713 | n/a | $369,143 | $179,468 |
| 2013 | $565,531 | $3,490 | n/a | $381,158 | $187,863 |
| 2014 | $570,074 | $9,714 | n/a | $399,123 | $180,665 |
| 2015 | $582,497 | $13,642 | n/a | $407,331 | $188,695 |
| 2016 | $601,882 | $41,206 | n/a | $448,829 | $193,077 |
| 2017 | $657,694 | $33,395 | $365 | $504,008 | $186,716 |
| 2018 | $749,000 | $16,442 | $13,076 | $547,813 | $204,554 |
| 2019 | $795,846 | $41,431 | $1,050 | $620,297 | $215,929 |
| 2020 | $838,999 | $15,604 | $20,676 | $571,770 | $262,156 |
| 2021 | $898,569 | $17,345 | $20,786 | $595,627 | $299,500 |
| 2022 | TBD | TBD | TBD | TBD | TBD |
Note: Cells with "n/a" indicate years before those figures were required to be reported.
Deferred outflows and inflows seem to vary randomly, perhaps due to random timing of random expenditures and revenues with respect to the fiscal year calendar. If so, then there's nothing to see here.
After peaking in 2007 at $220,951,000, it wasn't until 2020 that Net Position again reached and then exceeded that level. Remember, the ACFR suggests that a decline in net position may serve as a useful indicator that the financial position of Richardson is deteriorating. Although it's rising again, and making big jumps, those 13 years at a stagnating level bear some explanation.
Liabilities peaked in 2019, then dropped in 2020, then rose again in 2021, though still below 2019. What will 2022 bring? How worried should we be that total liabilities have gone up 2.7x since 2004? That's significantly more than inflation. Dunno.
Should I not be too concerned with the steep rise in liabilities because of the fact that Net Position (assets minus liabilities) is going up even faster? Dunno.
"Net balance swells bright,
Yet debt's shadow lingers near,
Questions still take flight."
—h/t ChatGPT
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