The City of Albany and the Strong Towns Finance Decoder

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We wanted to find a way to view the health of the City of Albany’s finances over time and we found the Strong Towns Financial Decoder, which we will use in this article.  

If you haven’t heard of Strong Towns, we love their vision “Your community needs you to be an effective advocate for change. We can help you get there” which is something that we relate to.  Strong Towns has some great journalism and opinion pieces; we like this article as an example of a quality piece that speaks to how we measure America’s infrastructure.

Strong Towns recently released the Finance Decoder, a 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 tool is fairly straightforward: 1) you collect your city’s yearly, publicly-available audited statements, 2) wade through the audited statements to find a dozen key numbers and input them into the Decoder tool (a Google Sheet), 3) review to make sure you did the data entry correct.  What do Audited Statements look like?  This is an example from 2018 of the City of Albany’s Audited Financial Statement that we are drawing data from. 

We like the Strong Towns’ Finance Decoder for a number of reasons.  You don’t need to be a CPA to input the data, you only need some patience to find key numbers such as the City’s total liabilities, or yearly interest payments.  The tool presents the City’s data using 7 basic charts which are relatively easy for a layperson (like us!) to visualize and understand.  The story presented is high level and does not get into the weeds; having read through a number of the Audited Statements it is easy to get overwhelmed with accounting details. 

In the remainder of this article we will speak to our high level process, we will describe one of the biggest caveats when looking at the data, we will show the 7 charts with their descriptions, and lastly we will provide a more detailed account of our process for those who want to know and/or validate what we did.

For this study we used the City of Albany’s Audited Financial statements from 2014 through 2023.  This gives us 10 years of Audited data to input into the template.  We collected the Audited Financial statements from the City’s archive and the Treasurer’s site.  Note that we expect the 2024 audited statement to be available in September or October 2024.

Importantly the audited statements discuss what are generally thought of as the City’s finances and the “Component Units” of the city which include the Albany Parking Authority, the Albany Water Board, and the Albany Industrial Development Agency.  For our Strong Towns Finance Decoder we only used data for what is termed the “Primary Government” in the audited statements and we did not include data for the Component Units.  

While we have made every attempt to ensure that we have done the data entry correctly, and we believe that we have input correct information into the Finance Decoder it is possible that we have made one or more mistakes.  We appreciate readers noting any issues that they see.

Later in the document we will provide a more detailed explanation of how we are using the Audited Financial statements to drive the Finance Decoder.

Note that we are making a copy of the completed Finance Decoder available on the following link.  https://docs.google.com/spreadsheets/d/1xg2J55kztzI-1AZ40f5oQWze_Dedp0xYy2wklvwoics/edit?usp=sharing

This document is a Google Sheet and you will have read-only access to the Finance Decoder.  We recommend saving a copy (File > Make a Copy) if you want to analyze, change, recreate, etc.  

An important note when looking at Albany’s finances - the biggest surprise when inputting audited financial information was what happened in 2018’s financial statements and related data.  The Liabilities line jumped from $359 million in liabilities to $718 million between 2017 and 2018.  What happened?  

In the auditor’s narrative “Effective January 1, 2018, the City adopted GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (GASB 75)”.  GASB is the Governmental Accounting Standards Board; the board recommended a significant change to the accounting of Postemployment Benefits  “Postemployment benefits” are employee benefits other than pensions that are received after employment ends, such as medical, dental, vision and prescription drug benefits.  This was a pervasive accounting change that impacted many cities, not just Albany, and yielded lots of questions.

The net impact of GASB 75 is that any chart that uses Liabilities in the formula will show a significant change between 2017 and 2018 with the 2018 showing a more negative presentation.  Our point of view is that 2018’s data shows an increased liability that was there all along and that did not surface until the GASB accounting change.  This is not an indictment of the City of Albany, this is a reflection that the way of doing things changed for all government entities.

Let’s look at some summary charts now…

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.

What it is:

The city’s financial assets—such as cash, receivables, and other short-term holdings—divided by its total liabilities. This is a different way of presenting the Net Financial Position.

What it tells you:

This ratio shows whether the city has enough liquid financial resources to cover what it owes. A ratio below 1 means it would not be able to pay off its liabilities using only its financial assets, which is a sign of financial stress.

What the trend shows:

A rising trend means the city is improving its financial buffer. A falling trend suggests the city is becoming less able to handle its obligations without borrowing or cutting services.

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.

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.

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.

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

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.

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 2021 Statement as an example of where, specifically, we found the data. 

Recall that we are only focused on the financial data related to the “Primary Government” and not the financial data of the “Component Units”, e.g. Albany IDA.  Below we will also refer to the PDF page numbers and not the document page number.

1. Current Assets - page 21.  Primary Government column.  Total Assets - Capital Assets, Net.
2. Capital Assets - page 21.  Primary Government column.  Capital Assets, Net.
3. Deferred Outflows - page 21.  Primary Government column.  Total deferred outflows of resources.
4. Liabilities - page 21.  Primary Government column.  Total liabilities.
5. Deferred Inflows - page 21.  Primary Government column.  Total deferred inflows of resources.
6. Total Revenues - page 24.  Total Government Funds column.  Total revenues.
7. Operating Grants & Contributions - page 22.  Operating Grants and Contributions column.  Total governmental activities.  
8. Capital Grants & Contributions - page 22.  Capital Grants and Contributions.  Total governmental activities.  
9. Interest Charges - page 24.  Total Government Funds column.  Interest (under Debt service:)
10. Net Book TCA - page 42.  Note 7 - Capital Assets.  Balance December 31, 2021.  Total capital assets, net.
11. Govt assets not depreciated - page 42.  Note 7 - Capital Assets.  Balance December 31, 2021.   Capital assets not being depreciated:
12. Govt assets being depreciated - page 42.  Note 7 - Capital Assets.  Balance December 31, 2021.   Capital assets being depreciated:

A note on Revenue, point #6 above.  We are using Total Revenue for Total Government Funds which includes:

• General Revenue (property tax, sales tax and intergovernmental revenue)
• Special Revenue (we believe that this  is used to account for Workforce Investment Act and various community services programs)
• Capital Projects (“Resources used to construct or acquire capital improvements”) 
• Other Governmental Funds (we believe that this is revenue from the Albany Community Development Agency)

The point behind looking at all revenue streams is that the Finance Decoder presents three charts - “Net Debt to Total Revenues”,  “Interest to Total Revenues” and “Government Transfer to Total Revenue” which are best expressed using all revenue streams as the denominator.

Note that the Finance Decoder can also track other dimensions that may be found in an Audited Statement.  These are four additional metrics that we could not find and/or don’t apply to the way that the City of Albany conducts business:

• Govt other assets
• Bus assets not depreciated, Bus assets being depreciated,  Bus other assets -  Note “The City’s activities are all classified as governmental activities”

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.