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Barnwell’s financial indicators pointing up

Posted on April 26, 2017 by Taber Times

By Greg Price
Taber Times

Barnwell council received good news on its indicators of financial condition, showing they were in very good financial position compared to villages in the province of similar size.

“These indicators of financial condition are kind of like ratios of municipalities to give us an idea of trends and the direction municipalities are going in,” said James Nakashima, an auditor for the Village of Barnwell who was presenting financial statements for the year ending 2016 at the village’s council meeting on April 19.

While in the past, the indicators of financial condition have been done solely for the village, this year a comparison was done using Alberta Municipal Affairs data, pulling out information that was comparable to Barnwell such as village averages with populations plus or minus 25 per cent to Barnwell.

“It gives us a little better idea how the Village of Barnwell compares to similar municipalities. The only limitation is Alberta Municipal Affairs only has information up to 2015. The comparables only go up to 2015 while the actuals for Barnwell go to 2016,” said Nakashima.

For assets to liabilities, Barnwell had a number of 13.45 for 2016.

“That is significantly higher than you see on average with the other villages,” said Nakashima.
“The reason for that is your asset base is significantly higher than your debt base. That means the village could take on more debt if it wanted to. The averages (of other villages) is closer to eight.”

Financial assets to liabilities is cash in receivables compared to total debt. Barnwell’s ratio for 2016 was 2.35 with the Alberta village average being 1.6 to 1.7.

“Generally you like seeing that number over one because that means you are in a net financial asset position, if you are under one you are in a net financial debt position,” said Nakashima.

For operating expenses to taxable assessment, it shows the level of expenses a municipality has comparative to revenue from its tax base.

“If your expenses are going up at a rate faster than your tax base is going up, that may not be sustainable,” said Nakashima. “The village has been flat for the last five years, but has had a little bit of an increase this year up to 1.76 per cent, but that is still quite a bit lower than we are seeing for village averages and comparable averages that are closer to two and three per cent, so I don’t think you should be too concerned there.”

The jump looks like a blip on the screen as 2016 showed an increase in expenses of $300,000 compared to 2015.

But, $250,000 of that is the village’s contribution to its modernized school.

For public debt charges to revenue, it calculates how much of the village’s revenue is used to fund its debt, where Barnwell is at .03. Three per cent of the village’s revenue is used to fund its debt, where the average is between seven and eight per cent for villages in Alberta.

The age of a municipality’s assets is factored in net book value to cost of tangible assets.
Barnwell is at 0.7, with the number being relatively flat for the last five years, with the average being 0.6.

“It means the village’s assets are a little newer than other municipalities,” said Nakashima.

Home source revenues to taxable assessment saw a spike in 2014 with a big contributed asset coming in of a subdivision of $800,000 of one-time revenue.

As Nakashima looked over the comparisons, he viewed Barnwell’s operations as ‘operating conservatively’.

“All these ratios suggest Barnwell is in a better financial position than the averages suggest,” said Nakashima.

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