Annual Change in Revenues compares revenue growth to long-term inflation (historically about 2-3%) – Low revenue growth below inflation indicates a potential long-term problem keeping pace with inflationary cost increases. Declining revenues can be a symptom of the pandemic and/or weakening economic conditions.
Fiscal indicators help measure and describe prospects for fiscal health. Indicators can flag trends that warrant further evaluation and planning to avoid potential service reductions and declining reserves.
OC LAFCO’s Fiscal Indicators Program provides the user with a web-based “dashboard” depicting the financial data of Orange County’s local governments. The indicators are based on the State of California Auditor’s of cities’ fiscal risk. Using key source documents, such as agency budgets, the program is intended to depict data trends on the financial condition of cities and special districts. OC LAFCO also uses this information in conducting state-mandated municipal service reviews when evaluating an agency’s fiscal ability to provide municipal services. The Program’s indicators are updated annually to ensure that the data remains current.
Annual Change in Expenditures compares expenditure growth to long-term inflation. Expenditure growth consistently above inflation and/or above revenue growth indicates a potential structural imbalance and potential future revenue shortfalls. Excessive expenditures could require reserve drawdowns and service reductions.
Adequate Operating Reserves compares reserves that typically provide at least two months of operating funds (i.e., 16.7% of annual expenditures). Reserves are essential to manage cash flow during the year, handle contingencies and emergencies, provide a “rainy day” account for future economic downturns, and assure funding for asset repair/replacement and expansion of facilities and infrastructure. Absent reserve accounts, other metrics include unallocated fund balances or unrestricted net position as reported by agency audits. “Cash” does not always indicate unencumbered funds available for cash flow and contingencies. Additional reserves are usually required for capital improvements, pensions, and other purposes.
The fiscal indicators are intended to provide an initial review of annually reported financial data. Further in-depth analysis may be indicated to better understand the cause of financial trends and potential remedies. For example, additional research could clarify whether declining expenditures positively reflect prudent management or are the result of weak revenues. Other factors that could influence indicators include the impacts of the pandemic; the economic climate; State and Federal regulatory changes; infrastructure needs and improvements; changes in service levels and contracts; unfunded OPEB and pension obligations; development, population growth, and increased need for services.
Please select a city or special district in the drop box below to view an agency’s fiscal indicator.