City’s Year-End Financial Report is Strong. Why do some say otherwise?

This post is primarily about our City’s strong financial position as demonstrated by the recent year-end financial report (highlights below).  But I also want to raise the issue of how different groups and individuals, in the coming months, will likely be using financial arguments, true and false, in their efforts to advance their agendas in our city.  This is because a lot of money is at stake.

Over the next year or two, your City Council is going to be engaging, and possibly acting upon, highly significant land-use issues.  And land-use means not only the character and fabric of our city and neighborhoods, but also, for some, money.

The Council actions I’m referring to range from rewriting our Comprehensive Plan (our primary land-use planning document), fundamentally changing our citywide zoning code, adopting a citywide housing plan, and beginning the implementation of the Proprietors and Huntley Roads corridor study.  In all these cases, not only is the general well-being of our city at stake, but also significant financial and professional interests and potential profits.  Therefore, as studies are conducted, plans developed, and projects proposed, we should anticipate that those with financial interests will make a number of claims in their efforts to shape and steer public opinion. These will include arguments about the supposed financial impacts of their proposals on households and our City budget. Be aware.

Some of these arguments will be specific, for example, that office space is important because income taxes makes up the majority of City revenue (true: about 75%), or that housing helps the City budget (false: due to cost-to-serve expenses it’s a net drain—the denser the development the bigger the drain).  And some arguments will be general, for instance, the claim that the City’s finances are in duress (false: they are not).

Why would someone make this last assertion? Let me guess: if we, the public, become anxious about our city’s financial health, then we are more likely to acquiesce to proposals for building, density, demolitions, rezoning, etc., that we would normally reject as inappropriate, incompatible, and ultimately destructive to our community.  In short, it’s a scare tactic.

We’ve seen it before, and we’ll see it again.

What are we to do?  Get informed and engaged. Stay grounded in facts. Speak with friends and neighbors, and make your voice heard by your City Council and City staff. Your City government is, ideally, the essential instrument to maintaining both our shared financial health and community well-being. More on this in future posts.

Now, on to the good news!

At last week’s City Council meeting, Finance Director Scott Bartter provided us with the year end financial report for fiscal year 2023.  It was a good year.  Here are some highlights (charts and graphs are provided below):

• Income tax revenue for 2023, at ≈ $34 million, was 15% above budget. This performance was nearly 30% above 2020 income tax revenue, and 46.5% above 2014 collections.  These strong numbers have a fundamental impact on overall city finances since income taxes account for ≈ 75% of total General Fund revenue.  Importantly, we now see that work-from-home filings, in aggregate, are benefitting Worthington.  This is very good news, allaying prior concerns about how this far-reaching work-related social trend would impact our city government’s finances.
• Other revenues, including interest revenue from investments ($2 million in 2023 vs. $400k in 2022) and from Community Center memberships (recovering from Covid downturn; $2.2 million in 2023 vs. $1.6 million in 2022)), were also up substantially.  Also of note, City revenue from Sharon Township for fire services will increase by ≈ $500k in 2024, due to a long-overdue evaluation and adjustment of fees for services.
• Total General Fund Expenditures for 2023 rose to $33.7 million from $31.7 million in 2022, with the most significant increase being in Fire Operations ($9.6 million in 2023 vs. $6.9 in 2022, largely due to the transfer of $2.5 million to capital funds for the future purchase of a fire engine).
• As a result of the above, and our General Fund Cash Balance ended the year at ≈ $26 million (compared to $23.5 million just twelve months earlier, Jan. 1, 2023).  The General Fund Unencumbered (meaning “uncommitted”) Balance at year-end was ≈ $22 million, even after encumbering $2.5 million for an anticipated new fire engine.  The $22 million is roughly 68% of 2022 expenditures.

You can view the full financial report for year-end, Dec., 31, 2023, pages 118-123 (you’ll need to scroll to find it), at: https://www.worthington.org/ArchiveCenter/ViewFile/Item/5747

So it was a good year.  In many ways, a very good year.  General trends and initial indicators point toward a strong 2024 as well.  This should not be surprising given Worthington’s strong fundamentals:

• strategically superb location (inner-ring, proximate to 315/270/71),
• strong schools and other public venues (libraries, Community Center, etc.),
• historic and distinctive built environment, comprising our commercial downtown and multiple extraordinary neighborhoods (including the Historic District listed on the National Register),
• beauty of the natural environment (urban forest, ravines, parks),
• the arts (the MAC, the Worthington Chamber Orchestra, and our galleries),
• an educated and civically-minded public,
• professional and capable city government (and affiliated organizations, such as the Historical Society, and the Partnership),
• stellar credit rating (Moody’s AAA),
• abundant (over 21%) land area already zoned for commercial and industrial use (compared to ≈ 11% in Dublin and ≈ 6% in Upper Arlington) and,
• finally, our favorable reputation for an outstanding quality of life and a hard-earned civic pride. 

On top of these fundamentals, there are specific projects, for example, the Anthem property and the Wilson Bridge Road Gateway developments, that could well generate additive, positive economic activity this year. Stay tuned.

And yet, in the face of all this good news, all these good things, we will no doubt continue to hear from some quarters that the City’s finances are on edge, in trouble, and that the answer of course is to accept their ideas for building, density, rezoning, etc. Or else!

For example, during last year’s City Council campaigns, we heard one local group (aligned with the development industry) state that “we are operating at a narrowly thin margin of annual revenue compared to expenses.” We are, according to the author, in a “delicate cash flow situation.” Really?

The facts don’t bear this out. More to the point, this statement is either naive or disingenuous, and in either case it is misleading in how it portrays how local governments operate. The reality is that expenses will always track fairly closely to revenues, over the course of several years.  If revenues fall, cuts will be made (for example, during the Great Recession our city government reduced long-term capital expenditures, and then elevated them again once revenues recovered).  And if revenues increase, expenditures will follow as there are always numerous and legitimate needs and wants of a community.

For example, the 2024 City budget, passed at the end of last year, includes $450,000 for updating the City’s Comprehensive Plan (this will be the subject of an upcoming post), and $200,000 for implementing yet-to-be-determined projects related to the Visioning Report.  These are very large amounts of money that would not be allocated, because not available, were the budget tight.

So, no, we are not in a “delicate cash flow situation.”  We are in a healthy condition, prioritizing among a wide range of important projects and investments over time.

Are more revenues desirable? Of course. But only when the costs of realizing them do not exceed the benefits.  Only when the increased revenues are facilitated, incentivized, and secured wisely.  Adages come to mind: let’s make no Faustian bargain, nor kill the golden goose.

I’ll be writing about these issues in upcoming posts. Next up: How our city government can best serve BOTH the public and developers.

P.S. More about our Comprehensive Plan can be found here: https://davidrobinsonblog.com/2022/09/comprehensive-plan-update-background-and-principles-moving-forward/