Historically, governments with a combination of eight red or yellow indicators may experience fiscal stress within two to three years, the office has said.
Butler County government had four yellow marks and no red ones in 2018. That’s an improvement for a county government that has steadily been improving its financial state. For its 2015 budget year, it had four red marks and one yellow. Auditors do not release information about townships or villages.
The Butler County city with seemingly the best budget conditions is Trenton, which had only green marks in all of the 17 measures for 2018.
Among larger governments across Ohio, Hamilton County had among the most caution marks for its 2018 budget — six reds and 0ne yellow. Cincinnati had five red and two yellow. Akron had five red and three yellow.
The city of Lorain, meanwhile, had two red and two yellow for 2018, after having 10 red and four yellow in 2016.
Faber recently told the Journal-News the individual measures, while useful, can sometimes give false impressions. For example, if a government uses cash to pay down bonds, that can raise a red flag that year, even though the government is doing what generally would be considered a healthy thing.
Hamilton continued to receive red marks for two areas: Condition of the city’s capital assets, which Hamilton officials say because Hamilton is such an old city, and almost all its assets are fully depreciated. That’s a common red flag found in many older cities. On the other hand, the condition of Hamilton’s situation “is trending in a positive direction, which doesn’t appear to be the case with others,” said city Finance Director Dave Jones.
Another came because on a government-wide basis, expenses exceeded revenues for the year. Auditors say this factor “is important to be aware if a shortage in revenues to cover expenses exists.”
Assistant Hamilton Finance Director Matthew McKinney said one red mark in 2017 became a green area in 2018.
“We refunded some debt and that showed up as an expenditure on our financial statement, which put us in the red,” McKinney said. That factor measures debt-service expenditures as a percentage of total revenues.
The reason Hamilton’s debt spending was so large in 2017 was “when you refund debt, you record all that principal balance that you’re paying off as an expenditure in that year,” McKinney added. In that refunding, or refinancing, of debt, the city was taking advantage of lower interest rates to lower debt payments in the long run.
Jones said 2018 generally was a better financial year for Hamilton, with revenues outpacing spending more than during 2017. Meanwhile, he has called 2019 — which has not yet been examined by auditors — a banner year for the city because of healthy increases in tax revenues.