Strathmore’s finances in good shape: auditor

By Sean Feagan, Local Journalism Initiative Reporter

Despite the Town of Strathmore gaining almost $4 million of financial debt last year, officials say the town’s financial foundation is in robust shape to help weather the ongoing storm of COVID-19.
The town’s 2019 independent financial audit, presented to council on April 15, showed that overall financial assets increased slightly from about $22.2 million in 2018 to around $22.3 million in 2019. As of 2019, the town had approximately $3.5 million in cash reserves, compared to about $2.2 million in 2018.
The extra liquidity was from the town moving some investments to cash, according to Darren Adamson, chartered accountant with Avail Chartered Professional Accountants which performed the financial audit. Total investments declined from about $17.7 million in 2018 to just over $16 million in 2019. There were also slight increases from taxes and grants (by about $56,000) and trades and other receivables (by about $329,000) from 2018 to 2019.
Liabilities, meaning funds the town owes, increased from about $20.6 million in 2018 to about $26.3 million in 2019, a trend driven by an increase of long-term debt for capital and future capital by almost $8 million, despite declines in accounts payable and accrued liabilities (by about $1.2 million), deferred revenue (by about $930,000), employee benefit obligations (by about $91,000) and deposits (by about $32,000).
Town expenses (about $34.1 million) exceeded revenue (about $28.6 million) by about $5.5 million. However, about $7.5 million in additional revenue from government transfers for capital and contributed assets resulted in a surplus of about $1.9 million in total revenue.
From 2018 to 2019, town expenses increased by about $2.5 million, driven by increased salary and wages, and increased “contract forces” (including a two per cent cost-of-living adjustment), while revenue increased by about $1.2 million, from more utility charges and increased franchise fees, according to Adamson.
The value of its non-financial assets, including prepaid expenses and tangible capital assets, such as infrastructure, buildings and equipment, increased from about $199.3 million in 2018 to about $206.5 million in 2019.
“(Strathmore has) taken some of (its) financial asset positions and moved it into non-financial assets,” said Anderson. “Some of the bigger projects were the town hall and Strathmore Commons, and a host of smaller projects including many engineered structures.”
Contributed assets represented about $3.7 million, the biggest portion of which was $3.2 million allocated toward the Lakewood Meadows sanitary lift station.
The town has amortized about $67 million of its approximately $273 million in tangible capital assets, meaning the town owns 75 per cent of the value of its capital asset pool.
“That’s a really good position compared to most of the municipalities that I see,” said Adamson. “The town has invested a lot in this capital asset pool over the last number of years.”
The town had $9.3 million allocated to reserves in 2019, which are funds set aside for specific purposes, including capital costs such as roads, sewer and water infrastructure, and various operating costs, including snow control, RCMP and garbage, a decrease from $11.5 million in 2018. The main change in reserves was a reduction in the financial stabilization operating reserve, which declined from about $2.4 million in 2019 to about $230,000 in 2019, which was drawn down for capital projects and transfers back to unallocated surplus.
The town remains well below its provincially mandated debt limit of almost $43 million, with total debt equaling just under $19 million, meaning the town has almost $24 million of unused debt capacity.
“Based on the amount of revenue that the town has, we calculate the debt limit (the town) is allowed to borrow up to that maximum without getting additional approval from the minister,” said Adamson. “We’re not anywhere near the limits there, so that’s good.”
Within the report, Avail provided key performance indicators (KPI) to compare Strathmore’s financial state with other municipalities in Alberta, including a group of four other towns (Canmore, High River, Sylvan Lake and Whitecourt) with comparable populations (75 to 125 per cent of Strathmore).
In terms of asset-to-liability ratio KPI, which indicates that a government has an accumulated surplus and assets greater than debt, Strathmore performed better than average for comparable towns, although the ratio shows an overall decreasing trend.
The report shows that as of 2019, Strathmore has a financial asset-to-liability KPI below one, meaning past transactions will need to be paid with future revenue. This result was below other comparable municipalities.
Adamson said this result is not alarming. “When you look at the financial statements and the statement of financial position, even though we’re in a small net debt position, I consider that similar to a mortgage on a home.
“That’s basically the position (the town is) in – you have a $4 million mortgage on a $202 million home or asset base. So, it’s a very small amount – to me, it’s not concerning.”