The City of Sapulpa’s 2021 fiscal year “Performeter,” a report detailing the state of a municipality’s finances for a specified fiscal year, was presented at a recent City Council meeting by Crawford & Associates, an accounting firm out of Oklahoma City.
The company says that this analysis takes a government’s financial statements and converts them into useful and understandable measures of its financial health. These “measures” consist of ratios and a methodology that ultimately generate ratings from 0-10.
The 2021 overall rating was 6.4, the same as 2020s.’ As reported by Sapulpa Times in April of last year, CPA Frank Crawford (and co-creator of the Performeter) explained that “no government will ever score a 10 across the board, nor a 0,” and said that, ideally, he’d like to see Sapulpa’s score rise just a bit, to around a 7.
The overall score averages ratings from three categories—financial position (6.7), financial performance (7.6), and financial capability (4.1)—and, according to the report, “indicates the evaluator’s opinion that Sapulpa’s overall financial health remains above satisfactory, and is relatively consistent with the scores of the prior years shown.”
The financial position ratings show a snapshot, of sorts, of the City’s financial status, solvency, and liquidity at the date of its most recent annual financial statements. The ratings are computed using standard financial analysis ratios such as Assets to Debt, the Current Ratio, and the Quick Ratio.
The financial performance ratings, on the other hand, show a “look back” at the financials, exhibiting whether or not the financial position has improved, deteriorated, or remained steady over a period of time. They determine change in net position, debt service coverage, and sales tax growth, to name a few.
Finally, the financial capability ratings are a “look forward” at the municipality’s ability to obtain revenue or financing to fund necessary services. These ratings include things like debt service load (long-term debt requirements), bonded debt per capita, and the City sales tax rate.
One highlight from the report was the debt service coverage. This compares the City’s debt service requirements on revenue bonds to the net operating cash generated by the revenue streams pledged for their payment. Typically, a DSC of 1.00 or greater (meaning that the entity generated the same amount of cash necessary to pay its debt requirements on revenue bonds and notes) indicates a satisfactory number. For the 2021 fiscal year, Sapulpa’s DSC was 1.50, a slight increase from the prior year’s.
Another notable factor involved the City’s sales tax revenue, an Oklahoma municipality’s “bread and butter,” due to their inability to levy a property tax for operations.
The report notes that sales tax growth is a measure of the state of our local economy which compares one year’s collected sales and use tax revenues to the prior year’s in terms of the change per one-cent tax. In 2021, Sapulpa saw a (significant) 12.1% or $456,720 increase in this number from the prior year, earning it a 10 out of 10 Performeter rating.
Ultimately, the Performeter concluded that the City of Sapulpa’s financial condition falls between its “satisfactory” and “excellent” ratings, which is consistent with the performance of previous years.