Metro's audited financials for FY19
Metro's audited financials -- or Comprehensive Annual Financial Report (CAFR) -- are usually done and posted online in December. I took a few minutes today looking at the CAFR for the fiscal year ending June 30, 2019. Here are a few quick notes:
The outside auditors provided a "clean" opinion. That means that they believe that Metro's financials give a fair assessment of Metro's financial results. This is good. It means that we can rely on the accuracy of the numbers in the financials.
For the second year in a row, there is no "going concern" opinion about the Hospital Authority. This is also good. As recently as FY2017, the auditors included a going concern note about the Hospital Authority. That's the accounting world's way of expressing "substantial doubt" about the ability of an entity to continue into the future. With all the other rough financial news around Metro, there is at least some good news in knowing that Metro has (for two years) figured out how to honestly and accurately fund Nashville General Hospital.
People are usually interested in the cost of economic incentives. As I mention a few details, please keep in mind that the scale of dollars that Metro needs to get back on track financially. For example, just to get off the addiction of selling one-time assets each year will require about $40 million in new revenue. And MNPS has suggested that getting a reasonable pay plan would cost an additional $100 million in new revenue. I could go on, but you get the point -- even if you wanted to kill off every economic incentive (which would be a bad idea), it wouldn't fix Metro's budget.
Spending on economic incentive job credits climbed from $500,000 in FY18 to $1.64 million in FY19. (See page B-103 of FY19 CAFR, and page B-104 of FY18 CAFR.)
Economic incentive property tax abatements climbed from $6.6 million in FY18 to $8.8 million in FY19. (See page B-110 of FY19 CAFR, and page B-112 of FY18 CAFR.)
Though it is reported separately, I'll go ahead and give the last two years of reported numbers on property tax revenue used for tax increment financing (TIF). These numbers are reported annually by MDHA. In 2016, the property tax revenue used for TIF loans was $23.3 million. For 2017, it was $28.5 million. If you want to look at MDHA TIF reports, they are here.
Let me talk at more length about Metro's unfunded retiree benefit obligations, also called "OPEB." I have written about this before. See here and here and here. The first time I wrote about OPEB was in December 2015. Then, I said:
To find the fine print on the OPEB obligations, look for Note 8, which is at pages B-95 to 97 of the CAFR. You will see that the actuarial accrued liability for Metro retirees’ OPEB benefits is $2.16 billion, and there is an additional $473 million liability for MNPS retirees, for a total of $2.633 billion. This means that the expected cost to Metro to fully honor its post-retirement health, dental, and life insurance promises to retirees is $2.633 billion. This is funded at 0% — Metro has no money set aside for this obligation.
Here, I'll update the language for the FY19 CAFR:
To find the fine print on the OPEB obligations, look for Note 8, which is at pages B-89 to 92 95 to 97 of the CAFR. You will see that the actuarial accrued liability for Metro retirees’ OPEB benefits is $3.48 2.16 billion, and there is an additional $1.08 billion 473 million liability for MNPS retirees, for a total of $4.56 2.633 billion. This means that the expected cost to Metro to fully honor its post-retirement health, dental, and life insurance promises to retirees is $4.56 2.633 billion. This is funded at 0% — Metro has no money set aside for this obligation.
This means that in four fiscal years the total unfunded retiree health care obligation reported on Metro's financials went up by $1.93 billion, from $2.63 to $4.56 billion.This puts Metro's unfunded OPEB obligation higher than over half the States in the U.S. See this report about each State's unfunded OPEB.In fairness, there was a national accounting rule change between the FY17 CAFR and the FY18 CAFR that increased the reported obligation by $820 million. But even if you wanted to ignore the accounting change as confusing, there was still more than a BILLION DOLLAR increase in this liability in four years. Once the operating budget is fixed (or on its way to being fixed), this OPEB will have to be addressed.