the City of Albany Vs. Albany County’s Financial Position

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In May we released a story about the financial health of the City of Albany where we used an assessment tool called the Strong Towns Finance Decoder.  We presented 7 basic charts, each with a key metric shown over the past 10 years.  We received positive feedback and also comments of “help me understand what this means” and “give me some more context.”  We thought that the best way to provide context on the City of Albany would be to run the same financial analysis on Albany County, and then compare and contrast.

In this article we’ll do a quick review of the Finance Decoder, mention an important accounting consideration, describe our process for analyzing Albany County, and then get to the comparison of the City of Albany (hereafter “the City” to save us some typing) and Albany County (“the County”, ditto) 

Our three biggest findings below include:

1. The City and County’s financial positions over the last 10 years frequently mirror each other, although in a manner that does not suggest a strong financial position for either.
2. The City’s debt far exceeds (and is more concerning than) the County’s debt.
3. The maintenance, liabilities and interest associated with both the City’s and County’s infrastructure are both concerning, with the County in a slightly better (but not good) position.  

 For a longer description of the Finance Decoder please read the prior article.  The short story is:

• Strong Towns is a nonprofit that advocates “to replace America’s post-war pattern of development, the Suburban Experiment, with a pattern of development that is financially strong and resilient.”
• Strong Towns released the Finance Decoder tool to “visualize your city’s financial trajectory, and understand whether your city is on track to keep its development, service and growth promises.”   The Finance Decoder provides information on whether a city’s budget is on a trajectory toward stability or decline.
• The Finance Decoder uses information drawn from a city’s audited financial statements to create 7 metrics - these metrics are based on the Indicators of Financial Condition, a methodology developed by the Public Sector Accounting Board (PSAB) in Canada
• As Strong Towns says - “none of the analysis is really new. This information is already available to municipal financial officers and accountants, yet it's rarely utilized to its full potential. Our goal is to bring it to the forefront so that decision-makers and citizens alike can develop a clearer understanding of their local government’s financial health.”'

We have posted a copy of the Albany County Finance Decoder here.    The Finance Decoder is a Google sheet.

When reviewing the past 10 years of financial statements it is important to get some insight on GASB 75.  Our City of Albany article has a longer explanation of GASB 75 - here’s the short story to know when reading the City / County comparison.  

The Governmental Accounting Standards Board recommended a significant change in the accounting of Postemployment Benefits in the 2016-2018 timeframe.  “Postemployment benefits” are employee benefits other than pensions that are received after employment ends, such as medical, dental, vision and prescription drug benefits.  Governments who had previously not accounted for postemployment benefits as a liability were forced to do so.  Cities and Counties nationwide saw significant (sometimes dramatic) increases in their liabilities.  The City saw this increase in 2018 (from $373 million to $761 million in liabilities); the County saw this increase in 2017 (from $682 million to $1.109 billion in liabilities).

When you look at the graphs for the City and the County you will see several of the metrics turn toward the negative in 2018 and 2017 respectively.

We ran the Finance Decoder for the County using audited financial statements from 2014-2023, available here.

The County’s financial position was calculated as a combination of its Governmental activities and business-like activities:

• Governmental activities - most services such as public safety, health and social services, and general administration are the expenditures; property, sales and use taxes, and state and federal grants finance the activities
• Business-like activities - income and expenditures related to the health facility, recreation and sewer

Not included in the financial analysis were Albany County’s component units - the Albany County Airport Authority, the Albany County Industrial Development Agency and the Albany County Land Bank.  We believe that this provides a relatively apples-to-apples comparison; for the City of Albany analysis we did not include the City’s Albany Parking Authority, the Albany Water Board, and the Albany Industrial Development Agency.

Mention the City of Albany and Albany County and you may have some natural reactions or mental pictures about each.  We can review some basic data about the City and County using US Census Bureau data from 2020 above.

The City is 1/3rd the population of the County and is younger and less affluent.  This is not atypical to have an urban hub and a surrounding county that have these differences.  For example, across the Hudson River you have the City of Troy and Rensselaer County where Troy has a Median Household Income of $58k, and Rensselaer County’s Median Household Income is $84k.  

It’s easy, too easy, to extrapolate that the County’s government health should be significantly better than the City’s government health.  After all, the City draws on the County’s resources, the County steps in to preserve the College of St Rose, and other anecdotes suggest that the County should be healthier.  

But is it?  Let’s compare the two governments and find out.  We will review the City and the County using results from the Finance Decoder using 6 charts.  In these charts the City is displayed with an orange line, the County is displayed with a white line.

Figure 1 above:  Net Financial Position (in Thousands of Dollars).  City of Albany, orange line.  Albany County, white line.  

What it is:

The difference between the city’s financial assets (like cash and receivables) and its liabilities (like debt and pensions). This is the cumulative surplus/deficit that the city has accumulated through successive budget cycles.

What it tells you:

A positive net financial position suggests the city has more financial assets than obligations and is in a better position to weather downturns, invest in infrastructure, or respond to emergencies without resorting to borrowing or service cuts. If this number is negative, the city has spent more than it has saved and is relying on future revenue to pay past bills. 

What the trend shows:

A downward trend means the city is growing more reliant on borrowing or deferring payments. An upward trend means it’s becoming more financially secure.

Our commentary:

The City and County are trending in a remarkably similar fashion.  Almost every city’s Net Financial Position fell off a cliff at some point between 2015 and 2018.  As noted earlier, governments were required to recognize postemployment benefits as liabilities during this time period.  The trajectory of both City and County are similar, with the County beginning to dig itself out of its negative financial position faster than the City.  However, we should recognize that neither City nor County have a great financial position.    Between City and County there is an aggregate Net Financial Position of negative $1.518 billion.   

We have examined several dozen similarly sized cities and counties and their net financial position; it is rare for cities and counties to have these magnitudes of negative net financial positions.

Figure 2 above:  Total Assets to Total Liabilities.  City of Albany, orange line.  Albany County, white line.

What it is:

The value of all the city’s assets (including infrastructure) divided by its total liabilities.

What it tells you:

A ratio above 1 means the city owns more than it owes (solvent). Below 1 means it owes more than it owns (insolvent).

What the trend shows:

A downward trend means the city is becoming less solvent. An upward trend shows improving financial resilience.

Our commentary:

Both City and County had solid, if unremarkable Asset to Liabilities ratios prior to the recasting of liabilities as a result of GASB 75.  Since then both the City and County have shown progress in bettering their respective Asset to Liability ratios.  There isn’t any secret to what a government has to do, you need to make sure your rate of growth of your assets is greater than your rate of growth of your liabilities.  Between 2018 to 2023 the County grew assets at 43% while liabilities grew at 19%; the City grew assets at 44% and liabilities grew 23%.

Figure 3 above:  Net Debt to Total Revenues.  City of Albany, orange line.  Albany County, white line. 

What it is:

The total liabilities the city owes compared to how much revenue it collects in a year.

What it tells you:

This shows how many years of income it would take to pay off all debts if every dollar went to debt repayment.

What the trend shows:

If the ratio is rising, debt is growing faster than income—this is unsustainable. If it’s falling, the city is gaining control of its obligations.

Our commentary:

Net Debt to Total Revenues is the first metric where City and County dramatically diverge.  The County’s Net Debt:Revenues ratio broke 1.0 in 2017 (likely as a function of GASB 75), rose to 1.6 in 2020 and has since declined below 1.0.  That’s good.

The City’s Net Debt:Revenues ratio is extremely concerning.  The worsening of the ratio between 2018 to 2023 is driven by City revenues that have increased by 11% while Total Liabilities have increased by 23%.  The trendline in Net Debt:Revenues between 2021 to 2023 is cause for hope, and we will be very interested to see if the trend continues with the release of the 2024 audited statements in September 2025.

Figure 4 above:  City of Dallas, TX - Net Debt to Total Revenues 

The City’s Net Debt:Revenues ratio appeared concerning enough that we wanted to identify another city that had roughly the same trajectory.  We looked through 40-50 cities and we finally found a city with the same trajectory, although a very different city from Albany:  Dallas, TX! 

Dallas TX saw the same spike in Debt:Revenue in 2015 when they recognized postemployment benefits as a liability.   Their downward trajectory suggests that it is possible to meaningfully collapse the Debt:Revenue ratio; we would want to explore this further to see if the bigger lever they used was increasing revenue, decreasing liabilities, or both. 

Figure 5 above:  Interest to Total Revenues.  City of Albany, orange line.  Albany County, white line.

What it is:

The percentage of annual revenue spent on interest payments.

What it tells you:

This shows how much of the budget is consumed by past borrowing. The higher the percentage, the less room for services, maintenance, or investment.

What the trend shows:

An increasing trend limits future choices and can crowd out basic services. A decreasing trend improves flexibility and budget health.

Our commentary:

The City spends 1% more of its revenue on interest payments compared to the County.  In 2023 the City paid $5.17 million of interest, with $244 million of revenue.  The County paid $6 million of interest, on $806 million of revenue.  A comparison of debt and interest payments for City and County are somewhat unfair, or somewhat apples and oranges; a good follow-on analysis would be to identify how the City’s debt and interest payments compare against its peers.

Figure 6:  Net Book Value to Cost of Tangible Capital Assets.  City of Albany, orange line.  Albany County, white line.

What it is:

The current value of the city’s physical assets compared to their original cost.

What it tells you:

This indicates how well the city is maintaining its infrastructure. A low value means assets are aging and wearing out.

What the trend shows:

A declining trend means the city is falling behind on maintenance. A stable or rising trend suggests it is keeping up

Our commentary:

We have looked through a lot of financial statements and Finance Decoders for other cities and we have seen a trend.  Governments that saw a Net Value to Cost of tangible assets ratio around .75 to .8 in 2010 to 2015 have seen a decline below .7 to .65.  This is anecdotal, however the County appears to follow this pattern; it suggests that the County’s maintenance of assets is not as strong as 10 years ago.

The City’s ratio is consistently around .4.  A stable but low level of asset maintenance is not long-term sustainable without repercussions.  In the future we want to drill in on the City’s portfolio of assets and what is going on. 

Figure 7 above:  Government Transfers to Total Revenue.  City of Albany, orange line.  Albany County, white line.

What it is:

The share of the city’s income that comes from state or federal aid.

What it tells you:

High dependency on outside funding makes the city vulnerable to political or economic shifts beyond its control.

What the trend shows:

If the trend is rising, the city is becoming more dependent on outside help. If it’s falling, the city is strengthening its local revenue base.

Our commentary:

As a provider of services such as Medicaid, Temporary Assistance for Needy Families, and Supplemental Nutrition Program, the County utilizes a generally consistent stream of state and federal revenue.  The City’s funding from New York State and the Federal government - that comes through several funding streams - is extremely lumpy, year over year.  

As we noted in the beginning of the article our three biggest findings include:

1. The City and County’s financial positions over the last 10 years frequently mirror each other, although in a manner that does not suggest a strong financial position for either.
2. The City’s debt far exceeds (and is more concerning than) the County’s debt.
3. The maintenance, liabilities and interest associated with both the City’s and County’s infrastructure are both concerning, with the County in a slightly better (but not good) position.  

We haven’t used any baseball analogies in any of our Albany Data Stories so we’re going to try it out for the first time.  Looking at any of the above metrics in isolation is like looking at an individual baseball statistic; is new Hall of Famer Ichiro Suzuki not HoF-worthy because he only hit 117 home runs in his career?  No, we would want to look at his entire statistical profile to see the summation of his career, we might look at his Wins Above Replacement (WAR) stat, and/or we would compare his statistics against other baseball players.

Unfortunately we’re a bit limited when looking at the metrics for the City or the County - it’s challenging to aggregate these statistics in an objective manner.  There are some statistics where the City and County don't look too bad, other statistics seem concerning, others are unavoidably bad.  There also is no WAR-like statistic for governments that says whether a city or county - on the balance - is doing well or not.  When this happens it is easy (for citizens, for government officials) to point to the numbers that appear good, and to minimize the numbers that are demonstrably bad.  Or we ignore the data altogether. 

We want to change this behavior.  We want to use these statistics to understand how we got into our fiscal holes (and let's be clear - the City and the County are both in big holes) which is the first step for figuring out how to dig ourselves out.

In this section we will provide details on how and where we drew information from the Audited Financial Statements.  There are 12 data points that we gathered.  We will use the 2023 Statement as an example of where, specifically, we found the data. 

Recall that we are created the Finance Decoder for both Albany County’s Government and Business activities.  The Finance Decoder does not cover Albany County’s component units such as the Albany County Airport Authority,.  Below we will also refer to the PDF page numbers and not the document page number.

• Current Assets - page 12.  Total column. 
• Capital Assets - page 12.  Total column.  Noncurrent Assets.
• Deferred Outflows - page 12.  Total column.  Deferred outflows of resources.
• Liabilities - page 12.  Total column.  Total liabilities.
• Deferred Inflows - page 12.  Total column.  Deferred inflows of resources.
• Total Revenues - page 13.  Total column.  Total revenues.
• Operating Grants & Contributions - page 13. Governmental activities column.  Operating Grants.  
• Capital Grants & Contributions - None identified
• Interest Charges - page 13.  Governmental activities column.  Interest and fiscal changes on debt.
• Net Book TCA - pages 47 and 48, the addition of Governmental activities capital assets, net & Business-type activities capital assets, net
• Govt assets  & Business assets not depreciated - pages 47 and 48. Total capital assets not being depreciated
• Govt assets  & Business assets depreciated - pages 47 and 48. Total capital assets being depreciated

Note that between 2017 and 2021 (inclusive) we are using the restated financial information found in the subsequent year’s audited financial statements.

Have questions or comments?  Email us at albanydatastories@gmail.com

Wonder what data stories we are working on next?  See our current queue here!  We are always looking for people to suggest additional stories and people who want to assist with any data analysis and authoring.