Question
A headline in The New York Times on August 16, 2017 read: Hartford (Connecticut), With Finances in Disarray, Veers Toward Bankruptcy. The article said, among
A headline in The New York Times on August 16, 2017 read: Hartford (Connecticut), With Finances in Disarray, Veers Toward Bankruptcy. The article said, among other things: "Hartford, which has one of the highest property tax rates in the state, still cannot raise enough money to pay for basic government operations. Assume the following economic, demographic, and financial data was taken from Census Bureau QuickFacts (accessed August, 2017) and from Hartfords June 30, 2016 CAFR. (The financial statements, expressed in thousands of dollars), have been condensed.
Economic and demographic data | |||
---|---|---|---|
Hartford | Connecticut | United States | |
Population, 2010 census | 124,775 | 3,574,097 | 308,745,538 |
Population, 2016 estimate | 123,243 | 3,576,452 | 323,127,513 |
Percent, high school grad. or higher | 70.6% | 89.9% | 86.7% |
Median household income | $30,630 | $70,331 | $53,889 |
Per capita income | $17,311 | $38,803 | $28,930 |
Individuals living below poverty line | 4.0% | 10.5% | 13.5% |
2016 unemployment rate (source: CAFR) | 10.3% | 5.5% | 5.3% |
CITY OF HARTFORD | ||
---|---|---|
General Fund | ||
Balance Sheet | ||
June 30, 2016 | ||
Assets: | ||
Cash and cash equivalents | $60,524 | |
Receivables (mostly taxes) | 84,332 | |
Total assets | $144,856 | |
Liabilities | $55,007 | |
Deferred inflows of resources | 75,718 | |
Fund balance: | ||
Assigned | $8,663 | |
Unassigned | 5,468 | |
Total fund balance | 14,131 | |
Total liabilities, deferred inflows | ||
of resources, and fund balance | $144,856 |
CITY OF HARTFORD | ||
---|---|---|
General Fund | ||
Statement of Revenues, Expenditures, | ||
and Changes in Fund Balance | ||
For the Year Ended June 30, 2016 | ||
Total revenues | $565,580 | |
Total expenditures | 565,754 | |
Excess (deficiency) of revenues over expenditures | -174 | |
Other financing sources (uses): | ||
Transfers in | $5,438 | |
Transfers out | -13,059 | |
Total other financing sources (uses) | -7,621 | |
Net change in fund balance | -7,795 | |
Fund balance, beginning of year | 21,926 | |
Fund balance, end of year | $14,131 |
Other comments a. The Debt Service Fund had a beginning fund balance of $97,174 thousand. The Debt Service Fund statement of revenues, expenditures, and changes in fund balances for fiscal year 2016 shows $72,734 thousand of debt service expenditures, zero revenues, and $9,302 thousand of transfers in. It also shows significant inflows from refunding existing debt and the issuance of new debt. The same general pattern occurred in fiscal year 2015. Hence, it is reasonable to assume that most of the years debt service expenditures was financed, not by tax revenues, but rather by rolling over existing debt issuing new debt or drawing down the fund balance. b. Hartfords outstanding general obligation debt increased from $512.9 million at the beginning of fiscal year 2016 to $683.2 million at the end of the year. The CAFR reports thatthe assessed value of taxable property was $3,623,072,000 and the actual value of taxable property was$6,664,914,000. (You can calculate Hartfords personal income by multiplying the population by the per capita income.) Calculate the following ratios: Quick Ratio Answer
Days' cash on hand Answer
Budgetary cushion Answer
% Operating margin Answer
% Debt burden (using value of property) Answer
% Debt burden (using personal income) Answer
% Round all ratios to one decimal place.
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