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Posted on: August 8, 2019

The City of Brea Maintains a Positive Financial Position

The City of Brea maintains a positive fiscal position with all of the indicators required of a fiscally healthy city including:  a balanced budget, healthy General Fund reserves, ability to meet all financial obligations on time and assets greater than liabilities.  This fact is important to keep in mind in light of some misleading information that reoccurs periodically regarding how to determine the fiscal health of OC cities. 

For example, the notion that a city’s financial position is determined solely by its “Unrestricted Net Position” (UNP).  This information is contained in what is called the “Comprehensive Annual Financial Report” (CAFR).  Since the UNP only considers a portion of a city’s assets and liabilities, it does not tell the whole story when taken out of context and without considering all the financial information.  It is particularly problematic when attempting to “rank” a city’s financial position by dividing the UNP divided with residential population. Following are some reasons why:

  • As previously mentioned, the UNP does not tell the entire story.  It only considers a portion of a city’s assets and liabilities.  To calculate someone’s net worth, one would include the combined value of their assets, or the things that have monetary value and subtract of your liabilities.  The UNP look at only a portion of city’s assets and liabilities.
  • Census data considers resident population only, which makes sense considering the purpose of the Census.  But, the population does not tell the whole story when used to compute a per capita number meant to “rank a city’s fiscal health.”  For example, Brea’s resident population is 43,000 + But, its daytime population is more than 100,000 due to people who work, visit and recreate in Brea.  Our level of services is higher due to this reality.
  • Trying to make comparisons with OC cities is like comparing apples to oranges as there are many variables that differ among each city. Whether a city is full service, like Brea, or a contract city, like many cities are in OC, is an important factor when comparing a city’s expenditures.  Contract cities may contract out their public safety services, and other city services such as maintenance and recreation, from outside agencies.  Contract cities do not report the pension obligations related to those contracted services in the CAFR, like full service cities do. Those related pension obligations for contract cities are in the County’s records. This fact alone makes it unfeasible to make such comparisons.
  • The City’s Fund Financial Statement on pages 24-25 of the CAFR shows the balance sheet of governmental funds. This document shows current assets and current liabilities.  Brea’s CAFR contains audited financial statements and a statistical section, as well as City management’s discussion and analysis of the fiscal year reported.  This Fund Financial Statement should be taken into account in order to complete the picture of a city’s financial health.

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