Audits, debt, and what the heck is a Performeter?

City of Edmond Finance Director Kathy Panas presents information on the proposed Fiscal Year 2026 budget to the Mayor and City Council

It hasn't made many waves beyond some NonDoc and Oklahoman news articles, but the Edmond City Council is devoting a significant amount of its time at meetings to reviews of the city's year-end financials - including audits, debt, and long-term financial health assessments - as it finalizes the City of Edmond's budget for Fiscal Year 2026 .

Usually, there is where eyes start to glaze over. But Edmond's budget (and specifically debt and reserve funds) were major topics during the recent mayoral election. You probably heard or saw reference to "$1 BILLION IN DEBT" many times, especially on Nextdoor.

So what is Edmond's debt situation? And what did auditors and The Performeter say?

Debt, NOT Deficit

In public affairs, debt is often conflated with deficits, with the two terms used almost interchangeably by the talking heads on cable news. Cities in Oklahoma cannot run deficits, meaning they can't budget and spend money they don't have. When the City of Edmond - or any of its peer cities - takes on debt, it's not to fund general administration, employee salaries, or regular operations because it doesn't have enough cash on hand. If revenues fall, budgets must be cut.

In Oklahoma, public debt must be issued for specific capital improvements and be backed by a dedicated revenue source. Like a home mortgage or an auto loan, debt carried by the City of Edmond is a mechanism to get the funding to buy or built now and then to pay the loan back over time.

88% of the more than $1 billion in debt carried by the City of Edmond is held through the Edmond Public Works Authority for electric, water, and sewer utility infrastructure. In short, that debt is covered by monthly payments by utility customers, and it's pretty darn reliable since customers tend to pay their bills to keep the lights on, the water running, and the toilet flushing. Also, Edmond owns its own electric utility, so the city is borrowing and spending on infrastructure that is generally taken care of by OG&E or PSO in other cities.

We'll talk more about Edmond utility bills, and the debt pitfalls that other cities in the U.S. like Chicago, New York, and Houston encounter another time.

Audits

In Oklahoma, all levels of government are required to produce financial reports and undergo regular independent audits:

• Annual Comprehensive Financial Review, which includes a report signed by an independent auditing firm

• Single Audit, which is required for any government entity that receives federal funding and performed by an independent auditing firm

• Regular audits by the Oklahoma State Auditor & Inspector of city budgets, as well as various funds, trusts, intergovernmental organizations, etc. OSAI is also empowered to initiate investigative audits of anytime.

Performeter

According to the City of Edmond, "The Performeter is a financial statement analysis using indicators of our financial health and success as presented to the City of Edmond by Crawford and Associates."

The most recent Performeter report awarded Edmond a 9.9 out of 10 for financial performance and highlighted a robust debt service coverage ratio of 7.76. The ratio means the City of Edmond has nearly 8x the resources available to pay all of its debts.

So what's the deal with debt? It seems that revulsion to any type of municipal debt has become less practical and more idealogical, which is odd considering that it should conceptually have broad political support.

• If you're on the right, running government like a business means taking advantage of the same private capital markets that corporations use to finance the big stuff that brings in revenue while preserving your cash-on-hand for city services like police and fire. It's hard to imagine a large corporation not using debt financing to build a new factory in order to expand production capacity.
  

• If you're a lefty, bonds are easily one of the best products that market capitalism has to offer because borrowing allows governments to spread out big infrastructure/capital costs over time and leave tax dollars available today for public programs and services. School bonds make possible construction of new facilities and purchase of new equipment like buses and computers in our public schools.

It's not a common or immediately popular concept, but it is possible to be so conservative with spending that you hurt your financial health - i.e. bond rating institutions begin look less favorably on your government because you're not spending enough to keep your infrastructure in decent shape. Remember, it's going to cost more to finance a complete reconstruction of a road, bridge, building, or water plant decades from now than it is to do regular upgrades and rehabilitations over time.

Just like that home renovation loan is a good deal if it means preserving your No. 1 asset and increasing its long-term value (not to mention improving your quality-of-life), it's also important that Edmond taxpayers invest adequately to improve their city's infrastructure, least we let it fall into decline and stick future generations with a higher bill.

Edmond currently has no GO Bond debt

Cody Boyd is no financial expert (just look at his bank account), but he did serve on the Edmond Capital Improvement Advisory Task Force in 2015 and holds a Master of Public Administration from the University of Oklahoma, where his final capstone project included a history of recent City of Edmond tax and bond referendums.