PUBPOL 522 - AUTUMN 2025
FINANCIAL STATEMENT ANALYSIS
City of Beverly Hills, CA
For this assignment, you will assume the role of a credit analyst at DJE Municipal Advisors, a small boutique firm based in Seattle, Washington. DJE Municipal Advisors has established itself as a leading municipal advisory firm in the financial services industry. You recently joined DJE as a credit analyst after graduating from the University of Washington with a Master's in Public Administration (MPA). This position is the perfect opportunity for you to put to the test the skills you acquired in the program.
In the coming weeks, you will be expected to brief Luis Navarro, Senior Vice President of Underwriting, and Sharon Kioko, Senior Vice President for Strategy at DJE, on the financial condition of the City of Beverly Hills, CA. A former DJE analyst (and a University of Washington graduate) had completed an assessment of the city's finances for FY 2020, before the COVID-19 pandemic (see Tables 1 and 2). The City seeks an independent assessment of its financial condition ahead of a new municipal bond issue. Your analysis will provide Dr. Navarro and Dr. Kioko with the relevant background information for their upcoming meeting with Nancy Hunt-Coffey, City Manager Ð City of Beverly Hills, and JeffMuir, Director of Finance Ð City of Beverly Hills.
DJE Municipal Advisors takes pride in the quality and thoroughness of its research. You will need to prepare a single-page report summarizing the government's financial condition at the end ofFY 2024 relative to its financial condition at the end ofFY 2020. Your report must provide an assessment of the government's financial position and operational performance using relevant industry metrics. To ensure clarity for all team members, it's essential to provide context for your findings, especially considering that some may not be familiar with the city's operations or finances.
Your discussion should provide an assessment of the city's
- Strengths and weaknesses. What do the FY 2024 financial statements tell us about changes in the government's liquidity, profitability, and solvency? Is the city reporting a negative unrestricted net position? How did the COVID-19 pandemic impact revenues, expenditures, and unassigned fund balance? Have there been significant changes in reserves? Has the city reported a negative unassigned fund balance in the last five years? Does the government maintain a diversified revenue portfolio? Does the government have a lot of debt, pension liabilities, or other long-term obligations?
- Resiliency to changes in the economy, policy, or environment. For example, how would lower-than-expected revenues, higher-than-expected expenditures, shifts in federal or state policy, growth in liabilities, including recent and frequent use of long-term debt, or changes in the underlying economic environment impact the government's liquidity, profitability, or solvency position?
There is no set format or outline for the report, nor a comprehensive list of analyses it must contain. This provides you with an opportunity to develop an assessment protocol, and you are eager to take on this responsibility alongside your current role at DJE.
INSTRUCTIONS
Your one-page memo (save your file as LastName_FSA.docx, no PDF documents) is due Monday, October 27th, 2025. You’ll also be expected to submit supporting documentation in a Microsoft Excel spreadsheet (save your file as LastName_ FSA.xlsx, no PDF documents).
We will grade your assignment using the following broad criteria:
– Accuracy - 40%: How accurate are your calculations of financial ratios? Did errors in the data collected or computations have a material effect on your estimates of financial condition?
– Analysis - 30%: Did you appropriately interpret ratios and other relevant financial information? Are your findings supported by facts drawn from the financial statements? Do the facts support your conclusions? Were any relevant facts omitted that could have informed your judgment?
– Presentation - 30%: Is the memo clear and easy to follow? Are the discussion and any supporting material well-organized and understandable? Are there helpful and memorable descriptions ofthe government and critical findings?
Table 1: Ten-Point Test, City of Beverly Hills, CA
|
Measure
|
Ratio
|
2020
|
|
Ratio
|
Points
|
|
Short-Run Financial
Position
|
Unassigned General Fund Balance /General Fund Revenues
|
8.10%
|
-1
|
|
Liquidity
|
General Fund Cash + General Fund Investments/(General Fund
Liabilities)
|
631.61%
|
2
|
|
Net Asset Growth
|
(Change in Governmental Activities Net Position/Beginning
Balance Governmental Activities Net Position)
|
1.96%
|
0
|
|
Operating Margin
|
(Net (Expense) Revenue for Governmental Activities/Total
Governmental Activities Revenues) X - 1
|
77.68%
|
-1
|
|
Own Sources
Revenues
|
(Primary Govt. Operating Grants and Contributions)/ Primary
Government Revenues
|
0.26%
|
2
|
|
Near-Term Solvency
|
(Primary Govt. Liabilities)/Primary Govt. Revenues
|
151.89%
|
1
|
|
Debt Burden
|
(Total Primary Govt. Debt/Population)
|
$4,428
|
-1
|
|
Coverage Ratio 1
|
Governmental Fund Debt Service/General Fund Expenditures
|
0.66%
|
2
|
|
Coverage Ratio 2
|
(Enterprise Funds Operating Revenues)/Interest Expense
|
16
|
2
|
|
Capital Asset
Condition
|
(Ending Net Value of Primary Govt. Capital Assets - Beginning
Net Value)/Beginning Net Value
|
7.44%
|
2
|
|
Ten Point Test Score
|
|
|
8
|
Table 2: Selected Financial and Demographic Data, City of Beverly Hills, CA
|
Selected Government-Wide Financial Information
|
|
2020
|
|
Total Revenues
|
$
|
421,291,590
|
|
Total Expenses
|
$
|
390,884,878
|
|
Total Liabilities
|
$
|
639,881,959
|
|
Total Debt
|
$
|
149,567,604
|
|
Net Pension Liability
|
$
|
270,746,013
|
|
OPEB Liability
|
$
|
91,457,905
|
|
Population
|
|
33,775
|
|
Unemployment
|
|
3.80%
|
|
Per Capita Income
|
$
|
85,609
|
|
Taxable Property (per capita, using Estimated Assessed Value)
|
$
|
1,083,914
|
|
Tax Revenues (% of Total Revenues)
|
|
47%
|
|
MoodyIs S&P, Fitch Ratings (Revenue Bonds)
|
|
Aa2/AA+AA+
|