Financial Ratio Database

City of Norfolk

Financial Ratios Database as of June 30, 2021


Below are financial metrics that measure the City’s financial resiliency in several different categories for FY 2021.  Each of the metrics are reflected as low risk, moderate risk and high risk based on the colors green, yellow and red, respectively.   Also provided is commentary on the year-over-year changes reflected in the database.  While there is room for improvement in some of the City’s metrics, this does not reflect financial hardship for the City.  The intent of this analysis is to measure the City’s ongoing progress for each metric as the City continues to strive for sustained, long-term financial strength.

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Notes:

  1. Outstanding debt includes all outstanding General Governmental General Obligation debt.  Outstanding debt includes some self-supporting debt; therefore, this calculation does not align with the City’s debt management policies.
  2. Revenue growth benchmarks are based on inflation and Gross Domestic Product (GDP) growth over the same period.  The benchmarks for inflation & GDP growth will change from year-to-year and should be re-evaluated each fiscal year.
  3. Assumes a 7% discount rate.

Sources:

  1. The City’s financial metrics (Debt as a Percent of Assessed Value, Unassigned General Fund Reserves, General Fund Reserves, Revenue Trends, Liquidity, Long-Term Liability Burden, and the four Pension metrics) are obtained from the City’s FY 2021 Annual Comprehensive Financial Report.
  2. The Poverty Line and Median Family Income metrics are obtained from the American Community Survey, under the U.S. Census Bureau.

The metrics are intended to reflect the following:

  • Debt Percent of Assessed Value– Measures the City’s debt burden relative to its tax base.  In general, a higher debt to assessed value percentage indicates a higher debt burden on the City and a lower debt to assessed value percentage indicates a lower debt burden on the City.  The City uses this ratio to determine affordability of future debt plans.
      • Relative to FY 2020, the City showed a substantial increase in total General Fund Balance in FY 2021 due in part to the receipt of federal stimulus funds, in response to the COVID-19 pandemic.  The City received a total of $42 million in Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and $77 million in American Rescue Plan Act (ARPA) funds in FY 2021.  The City is expected to receive an additional $77 million by the end of FY 2022, as a result of the second ARPA installation payment due to the City.
  • Unassigned General Fund Reserves– Measures the City’s current Unassigned General Fund Reserve that could be used to stabilize City revenues during periods of uncertainty relative to General Fund disbursements.  In general, the greater the unassigned reserve percentage, the more financial flexibility the City will have in periods of economic downturn or uncertainty.
      • Relative to FY 2020 levels, FY 2021 Unassigned General Fund reserve levels were relatively consistent.  As a percent of General Fund disbursements, the FY 2021 ratio exceeds that of FY 2020 because General Fund disbursements were lower in FY 2021 relative to FY 2020.
  • General Fund Reserves– Measures total General Fund reserves, including the Unassigned General Fund Reserves previously referenced, the Risk Management Reserve, the Economic Downturn Reserve and the Inclusive Development Opportunity Reserve, as a percentage of General Fund disbursements.  These reserves can also be used to assist the City during periods of revenue uncertainty.  Like the Unassigned General Fund Reserves, the higher these reserve levels as a percent of General Fund disbursements, the more financial flexibility the City has.
      • Relative to FY 2020, the City showed a substantial increase in total General Fund Balance in FY 2021 due in part to the receipt of federal stimulus funds, in response to the COVID-19 pandemic.  The City received a total of $42 million in Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and $77 million in American Rescue Plan Act (ARPA) funds in FY 2021.  The City is expected to receive an additional $77 million by the end of FY 2022, as a result of the second ARPA installation payment due to the City.
  • Revenue Trends– Measures the City’s growth in General Fund revenue, which can be utilized to support City services.  In general, higher revenue growth indicates a growing economy and economic vitality in the City.
      • Relative to FY 2020, the City’s 3-year average General Fund revenue growth rate is higher in FY 2021.  This is largely due to the solid revenue growth of 2.20% in FY 2021 over FY 2020 levels.  The basis for benchmarking this trend is the growth of U.S. GDP and Consumer Price Index (CPI) over the same period.  The 3-year average growth rates for GDP and CPI were 3.98% and 2.58%, respectively.
  • Liquidity– Measures the City’s General Fund cash relative to General Fund disbursements. In general, a higher liquidity percentage indicates more flexibility of the City to respond to unexpected expenditures as they have adequate cash on-hand to fund expenditures.
      • Similar to the increase in the City’s total General Fund reserve balances, the City also saw a considerable increase in its liquidity position relative to FY 2020 due to the receipt of federal stimulus funding in FY 2021
  • Long-Term Liability Burden– Measures the City total existing General Obligation debt and pension liability against the City’s aggregate personal income.  In general, a higher long-term liability burden indicates more pressure on the City’s tax base to afford outstanding liabilities while a lower long-term liability burden indicates less pressure on the tax base.
      • The City’s long-term liabilities (debt + net pension liability)) increased in FY 2021, relative to FY 2020.  In part, this was due to the issuance of the City’s General Obligation Bonds, Series 2021 (Federally Taxable) described under “Debt Percent of Assessed Value.”  Additionally, there was an increase in the net pension liability while personal income stayed relatively stable.
  • Pension Obligation– Measures the City’s existing net pension liability relative to its annual revenues.
      • On Tuesday, June 15, 2021, the City leveraged historically low interest rates to sell $210.8 million in General Obligation Bonds, Series 2021 (Federally Taxable) to increase the funding of the already healthy Norfolk Employees’ Retirement System (NERS).  As a result of this transaction, the City’s net pension liability will likely decrease as pension funding increases.
  • Pension Funding (Total) – Measures the health of the Norfolk Employees’ Retirement System and the Virginia Retirement System with 80% typically view as financially strong.
  • Pension Funding (NERS Only)– Measures the health of the Norfolk Employees’ Retirement System with 80% typically view as financially strong.
      • The City used a portion of the bond proceeds of its General Obligation Bonds, Series 2021 (Federally Taxable) to immediately improve the pension funded ratio of NERS from 77% to approximately 91%.  Since pension reporting lags the audited financial statements by one year, the impact of the Series 2021 Bonds is not reflected in the FY 2021 Annual Comprehensive Financial Report.  In addition to directly improving the pension funding ratio, a portion of bond proceeds were also used to fund the newly created Pension Funding Trust, which provides the City with a tool to help offset potential pension contribution volatility.
  • Pension Cost– Measures how much the City’s annual pension cost comprises of the City’s annual revenue.  In general, a lower percentage indicates a lower impact of the pension costs on the total annual revenues, leaving additional revenues for other City uses.
      • Relative to FY 2020, pension costs as a percent of annual revenue is down slightly, reflecting a lower overall pension cost burden to the City.  The increase is driven by the fact that the growth of City revenues outpaced the growth in its pension costs.
  • Poverty Line– Shows what percentage of the City population below the poverty line.
      • Relative to FY 2020, poverty levels in FY 2021 were relatively consistent, which the City seeks to improve.  As a result of the ongoing COVID-19 pandemic, the City’s Department of Housing and Community Development is part of the ongoing effort to connect communities, deconcentrate poverty, and strengthen neighborhoods.  The City’s current St. Paul’s Revitalization project will help provide the infrastructure required to transform the St. Paul's area into a multi-use, mixed-income development in order to deconcentrate poverty and enact place-based initiatives.
  • Median Family Income– Measures the City’s median family income in comparison to the United States.
      • Relative to FY 2020, the City’s median family income as a percentage of U.S. median family income is up slightly, indicating that the City’s median family income grew at a faster rate than the U.S.
  •  For information on the calculation of each metrics please see the following chart:


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For additional information or questions, please reach out to the City’s Department of Finance at FinancialRatiosDatabase@norfolk.gov.