Every weekday morning I receive a newsletter from the International City-County Management Association that summarizes stories from cities throughout the U.S. A recent edition caught my eye when I noticed the City of Austin, Texas, is proposing a budget of $3.5 billion this year, while Sioux Falls, South Dakota’s, budget authorizes expenditures of $471 million. Assuming the population numbers I found online are accurate, Austin is proposing to authorize spending of $3,571 per citizen this year while Sioux Falls will only authorize $2,793. Albany’s number this year is $3,669.
These comparisons may seem important and raise questions about why one city’s expenses are so much higher than another’s, but they really tell us very little. A budget authorizes expenditures from all city funds, including transfers between funds that are, in effect, counted twice. Most cities, including Albany, use internal service funds to track categories of expenditures which makes total budget numbers appear much higher than what is actually spent. Additionally, budgets are influenced by big capital projects or even things like refinancing debt. Several years ago, Albany’s budget increased by $40 million when we refinanced some water debt. The refinancing saved city ratepayers about $5 million over the life of the bonds and did not increase expenses at all. This year, our budget increased by more than $18 million when voters approved bonds for new police and fire stations.
There is a reason why city budgets are big and complicated. People can create all kinds of mischief with selective use of numbers, so organizations like the Government Accounting Standards Board (GASB) set standards for financial reporting that all governments are required to meet. Albany also submits our reports to the Government Finance Officers Association (GFOA) for review. We have received their awards of excellence for more than 20 years. Our reports are audited by an independent accounting firm to make sure we are using Generally Accepted Accounting Practices (GAAP) when we produce required reports like our annual Comprehensive Annual Financial Report (CAFR). Thanks to great effort by the people in our Finance Department, Albany’s reports are complete, accurate, and award-winning. The reward for following best accounting and financial management practices is similar to maintaining a good credit rating in our personal lives. We can borrow at lower interest rates when the need arises and our bonds are easier to sell. Additionally, cities must comply with strict federal financial reporting requirements to accept federal funding. Millions of dollars in assistance for services such as transit, the airport, housing, and roads could be jeopardized by poor accounting and management practices.
Citizens concerned about the City’s expenses are not only able to look at comprehensive financial information online; but they can also rely on the reports of independent reviewers in the form of auditors, rating agencies, and financial management organizations. The most difficult part of understanding municipal finances is figuring out how to negotiate the volume of information cities produce. Most of the reports are summarized in various places; and city staff members, including me, are available to answer questions. Basic financial principles are not hard to understand, but accountants and financial managers go through years of training to help ensure the accuracy of the city’s financial information.