If you want to see the financial health, and the priorities, of a municipality, the audited financial statements are a good place to start.
The City of Estevan released its audited document on Aug. 10, about two or three months later than normal due to delays caused by COVID-19. The document, whose numbers were effective Dec. 31 of last year, before COVID was front of mind for us, checks most of the boxes for a good fiscal picture.
The city has two numbers it likes to point to: net debt and long-term debt. Net debt is the excess of liabilities over assets; fittingly much of the liabilities are tied up in long-term debt.
The net debt was down from $18.85 million to $16.82 million, a $2 million decrease, continuing a trend shown by the city for the past few years. The net debt is a number that the city, and many other municipal governments, point to when discussing their financial picture.
The long-term debt, the number which the general public wants to hear about, dropped from $28 million to $23.7 million. The city has made paying down that debt a top priority for most of the past decade; not that long ago, it was above the $40 million mark.
The city also had a surplus in its operations from 2019.
About the only downside is that cash was down by about a million dollars, from $7.1 million to $6.1 million; restricted funds remain about the same at around $3 million. But $3 million in unrestricted cash left the city in a good position entering 2020.
The financial statements also show how much the city pays in each department, giving you a snapshot of where its fiscal priorities are; recreation services, protective services (including both police and fire, transportation services and the utility are among those that account for expenses; recreation was the largest expense last year).
Obviously, the city is going to take some form of a financial hit due to COVID. While they have been able to save money on some fronts, since some facilities weren’t open, the lost revenues will definitely outweigh the savings.
In the short-term, the city will take a hit because they gave people the chance to defer property tax and utility bill payments by a couple of months without penalty. They are going to have to come collecting eventually, because they have operations to run and bills to pay, just like the rest of us. But they could take the short-term hit and not plead poverty.
The bigger repercussions in the short-term will be the lost revenues from facility passes and rentals.
In the longer-term, there will be consequences with taxes owing if people can’t pay the tax bills, or if they have to cut back on expenses such as facility passes to the Estevan Leisure Centre, or if they can’t afford to rent a facility.
It will be tough for the city to have $3 million in unrestricted cash at the end of this year.
Those who have paid attention to municipal politics remember the days when the city would need to use its overdraft to pay the bills while it waited for property taxes to come in, or enter into short-term borrowing to meet its financial obligations. Those days are mercifully over.
If the city would have been using those practices at this point in history, the consequences would have been pretty serious.
In the past, this space has been used to suggest the city might want to enter into some form of cash reserves or a rainy day fund for some of the surplus cash. It’s a comment the auditors have made when presenting the financials to the city. And given some of the challenges facing the city, a rainy day fund might make sense.
At the same time, it’s likely a good thing the city has kept all of its cash on hand, rather than using the rainy day fund. If the city sees its cash rebound for a few years, and continues to drop its long-term debt and net debt, then it might be time to look at a reserve.
While it could always be better, the city deserves a lot of credit for its management of taxpayer money. And that’s something you couldn’t say just a few years ago.
