CITY OF RICHMOND RECEIVES DISTINGUISHED BUDGET PRESENTATION AWARD
The Government Finance Officers Association of the United States and Canada (GFOA) is pleased to announce that City of Richmond, Texas has received the GFOA's Distinguished Budget Presentation Award for its budget.
The award represents a significant achievement by the entity. It reflects the commitment of the governing body and staff to meeting the highest principles of governmental budgeting. In order to receive the budget award, the entity had to satisfy nationally recognized guidelines for effective budget presentation. These guidelines are designed to assess how well an entity's budget serves as:
• a policy document
• a financial plan
• an operations guide
• a communications device
Budget documents must be rated "proficient" in all four categories, and the fourteen mandatory criteria within those categories to receive the award.
When a Distinguished Budget Presentation Award is granted to an entity, a Certificate of Recognition for Budget Presentation is also presented to the individual or department designated as being primarily responsible for its having achieved the award. This has been presented to Finance Department.
For budgets including fiscal period 2010, over 1,289 entities received the Award. Award recipients have pioneered efforts to improve the quality of budgeting and provide an excellent example for other governments throughout North America.
The Government Finance Officers Association is a nonprofit professional association serving nearly 17,400 government finance professionals throughout North America. The GFOA's Distinguished Budget Presentation Awards Program is the only national awards program in governmental budgeting.
City of Richmond receives an (A-) Rating from Standards and Poor’s Rating Services
The Outlook is Stable
Standard & Poor's (S&P’s) Ratings Services affirmed its 'A-' underlying rating (SPUR) on Richmond, Texas' general obligation (GO) debt. The outlook is stable.
According to the report the rating reflects S&P’s view of the city's:
·Stable, but somewhat limited, local economic base with access to the diverse Houston metropolitan statistical area (MSA);
·Adequate wealth and income levels; and Moderate overall debt levels.
Offsetting these factors, in S&P’s opinion, are the city's:
·Thin financial position, with an adequate general fund balance; and
·Lack of formalized financial management policies, including the lack of a formal general fund balance reserve policy.
The city's limited ad valorem tax pledge secures the bonds.
The local economy has diversified and includes health care, metal, oil and gas services, and retail operations. Wealth and income indicators remain below state and national averages. Median household effective buying income is adequate, in S&P’s opinion, at 86% of the national average. Market value per capita, an indicator of wealth, is low, in S&P’s opinion, at $27,620. While county government limits and dominates the city's employment base, residents have access to a broader job market in the diverse Houston MSA.
The mostly residential property tax base has seen consistent growth over the past several years, increasing by 14% over the past five years; however, assessed value (AV) decreased by 4.8% in fiscal 2011 to $376.8 million. Leading taxpayers, led by Wal-Mart Stores Real Estate Business Trust, Wal-Mart Stores Texas LP, and Matrix Metals (an industrial company), account for a diverse 15% of total market value.
Richmond's financial performance and position are low, in S&P’s opinion. The city is in the preliminary budget writing stages for fiscal 2013, and city officials are optimistic they will pass a balanced budget. For fiscal 2012, the city ended with a $38,000 general fund drawdown. While this figure is nominally small, it represents 30% of the city's general fund reserves. Audited results for fiscal 2011 indicate the city maintained an unreserved general fund balance of $126,000, or an adequate 1.2% of operating expenditures. Officials intend to adopt a formal policy to maintain $500,000, but have not been able to build up reserves to surpass this threshold in recent years. Officials expect to continue to transfer money from water and sewer operations to help offset debt service expenses and administrative costs. Property taxes account for 45% of total general fund revenues, followed by sales tax revenues, which account for about 41% of total general fund receipts; year to date, all major revenue streams are trending inline with management's budget.
Richmond's financial management practices are considered "standard" under Standard & Poor's Financial Management Assessment methodology, indicating the finance department maintains adequate policies in most, but not all, key areas. In terms of revenue and expenditure assumptions, management prepares its budgets based on five-year historical revenue and expenditure trends. Officials monitor the budget monthly and make adjustments twice a year, but have the flexibility to make adjustments as needed. Richmond lacks policies in some areas, including a long-term financial plan, capital improvement plan, and debt management. The only formal written financial management policies exist for investments, which follow investment guidelines outlined by state statutes; management provides the governing body with informal updates at least quarterly.
After taking into account some self-support provided by the city's water and sewer operations, the overall debt burden is moderate at $2,619 per capita and moderately high at 9.5% of market value. Amortization is rapid, with 74% of principal to be retired in 10 years and all principal in 20 years. Debt service carrying charges represent a moderate 11% of fiscal 2011 expenditures. City officials indicate the city will issue additional debt in the next 18 months to address water system facility upgrades to remain in compliance with state guidelines.
The city provides pension benefits for all of its eligible employees through the Texas Municipal Retirement System (TMRS), a nontraditional statewide benefit plan. For fiscal 2011, the city met its annual required contribution of approximately $1 million.
The stable outlook reflects our expectation that management will continue to remedy its weak financial position and manage its limited capital needs. If the city continues to make draw-downs to its reserves, downward pressure may be put on the rating. Alternatively, if the city is able to build reserves up to meet the threshold set by city officials, an upward rating action could be considered. S&P does not expect a rating change within their two-year horizon.