Financial commentary (30 seconds commentary on budget and finance) Development

Hammer

Ebi-chan, when you started making a budget for 2024 last summer, did you say that the financial resources were short of about 34 billion yen (*)? How did you secure financial resources?

※The shortfall of ¥34.0 billion is expected to be temporary use of the Debt Reduction Fund of ¥15.0 billion.

Shrimp

Amid the expected increase in expenditures by 12 billion yen due to the increase in labor costs and the rise in utility costs, the annual adjustment of the financial resources used to efficiently use the budget for FY5 to generate financial resources and use it as financial resources for FY6 We decided to use 17 billion yen, 15.3 billion yen in efforts to create financial resources through “creation and conversion”, and 4 billion yen in proceeds from sales of land owned.

Hammer

That's right. It's hard to find financial resources. A lot of ingenuity has been made to make a budget, so you have to use the budget carefully.

Marinoske

What is the "Fund"?

Shrimp

To put it simply, it's like a local government savings.

Marinoske

Do you have any money? Then, if you run out of money, you can use it from there!

Shrimp

It's not easy to use because you don't have money. There are several funds, but they are accumulating and withdrawing for each purpose.

Marinoske

There's a proper rule.

Hammer

The fund is the savings of the city, isn't it? Is the financial situation in Yokohama so severe that it's hard to withdraw your savings?

Shrimp

That's right. According to the budgeting for each fiscal year, the expected income in one year alone is insufficient for the cost of providing the necessary citizen services, and there is a shortage of financial resources. That's why we are reversing the fund to make a budget. In addition, the population of Yokohama has begun to decline in the future, and the working-age population, which is the generation of paying taxes, will decrease rapidly. In addition to reducing city tax revenues, social security expenditures for medical care and welfare are increasing, and even more severe financial conditions are expected.

Hammer

It's a very difficult financial situation. In such a financial situation, is Yokohama okay in the future?

Shrimp

By increasing tax revenues through efforts to attract people and companies, and by reducing expenditures by thoroughly reviewing office work, we are examining whether we can make a budget without losing the fund.

Hammer

I have to do my best more than ever.
I'll think about any other good ideas!

Hammer

Ebi-chan, there are the "Financial Adjustment Fund" and the "Debt Reduction Fund" in the fund. Can you explain each one?

Shrimp

The Fiscal Adjustment Fund is a fund established to fund resources to fill in the financial resources when financial resources are significantly insufficient due to economic fluctuations, etc., and to finance expenses caused by disasters.
In addition, the Debt Reduction Fund is a fund established to secure the financial resources necessary for the redemption of municipal bonds.

Hammer

Each fund is set up according to the purpose.

Hammer

At the 3rd regular meeting in FY2023, there was a report on the soundness judgment ratio based on the FY2022 financial results. What is this ratio of soundness judgment?

Shrimp

This is an index on financial soundness that is to be announced by local governments based on the "Law Concerning the Financial Soundness of Local Governments" enforced in April 2009. .

Hammer

It's an index based on the law. Why did you decide to announce it?

Shrimp

More than 10 years ago, some local governments have severely deteriorated their finances. However, in the local finance system at that time, there was a problem that the situation would not be clear until the situation became serious. That's why the law was enacted to clarify the financial situation of local governments with unified indicators so that they could take prompt action when fiscal consolidation or revitalization was needed.

Hammer

It's important to disclose the ratio of soundness judgments. By the way, what was the ratio of soundness judgment in Yokohama City?

Shrimp

There are four indicators for the soundness judgment ratio. There are four types: real debt service ratio, future burden ratio, real deficit ratio, and consolidated real deficit ratio.
There is no ratio of the real deficit ratio and the consolidated deficit ratio because there is no deficit in Yokohama City.
In fiscal 2022, the real debt service ratio was 9.7%, and the future burden ratio was 129.2%.
By the way, in addition to the soundness judgment ratio, there is also a "fund shortage ratio", an index that indicates the management status of public enterprises, but there is no ratio because there is no shortage of funds in Yokohama City. .

Hammer

That's right. In this ratio, is Yokohama's finances sound?

Shrimp

If it exceeds the national standards, it is necessary to formulate a fiscal consolidation plan and improve it. The real debt service ratio is 25%, and the future burden ratio is 400%, but Yokohama City is below this standard. We will continue to work hard to realize sustainable financial management not only for current citizens but also for future citizens, and to build a society where future generations can fully play an active role.

Hammer

The financial statements for the fiscal year ended March 31, 2022 have been published. What are the financial statements?

Shrimp

It's close to the financial statements prepared by a private company. Local government accounting only looks at money in and out of money, but private companies record a wider range, for example, changes in property such as buildings and land, and as a result of one-year activity at the time of settlement of accounts. I'm reporting the financial statements to shareholders.

Hammer

Why do you make such documents?

Shrimp

At the request of the government, local governments across the country were preparing financial documents to keep track of stock information such as assets held and promote asset and liability reforms. In the past, there were multiple creation methods, and it was difficult to compare with other local governments, but now, based on unified standards, it has become possible to compare and use it as analytical data. Yokohama City has been preparing financial statements based on unified standards since the fiscal year 2016.

Hammer

What exactly is the financial documents written?

Shrimp

The financial statements consist of four tables.
First of all, the balance sheet. This shows the status of property as of the end of the fiscal year. It's a revolutionary thing to make a balance sheet because there's never been any specific property owned by local governments.
The second is the statement of cash balance. This is a table that summarizes the increase or decrease in money for one year by three categories: business activities, investment activities, and financial activities. It's close to the settlement of accounts we've made at the city hall.
The third is the administrative cost statement. This also shows how much the cost of administrative services for one year, and the burden on costs, such as usage fees. By the way, costs include things that don't involve actual money movements, such as "depreciation costs."
The fourth is the statement of changes in net assets. Net assets are net assets obtained by subtracting liabilities from assets in the balance sheet. This is a table that shows why this net asset has increased or decreased from the previous year. The four tables each work together rather than separate ones, and by looking at this content, you can grasp the overall picture of the financial situation of local governments, such as assets and money.

Hammer

What did you find from the financial statements for FY2022?

Shrimp

If you look at the balance sheet of the general account, you can see that tangible fixed assets are increasing. In Yokohama City, it increased by 32.1 billion yen due to the construction of a landfill at Minamihonmoku Pier.
Looking at the statement of fund balance, both income and expenditure have decreased significantly compared to last year due to the progress of collection of loans to small and medium-sized enterprises in the city. .
Then, looking at the administrative cost statement, for example, the administrative cost in fiscal 2022, including all costs without depreciation and expenditures, was 1,664.4 billion yen.

Hammer

You can see not only the money you have entered and the money you have come out, but also the full cost, including assets and costs that do not involve spending money, from various perspectives.

Shrimp

That's right. That's why the financial statements are prepared and published as a document that complements the financial statements of local governments that look only at the movement of money. In fiscal 2022 financial statements, not only four tables, but also a variety of materials and data, such as an overview of points, comparison of two years with the previous year, and changes in five years, are visualized.

Hammer

Let's take a look! If you have any questions, please let me know.

Hammer

There is an administrative cost statement by business on the web page where the financial statements are posted. What is this?

Shrimp

"The administrative cost statement also shows how much the administrative service cost for one year and how much it costs, such as usage fees for costs. Costs include things that don't involve actual money movements, such as "depreciation." The administrative cost statement can be created not only in general account, whole, and consolidation units, but also in more detailed units. The administrative cost statement by business is created in units of business.

Hammer

What are the benefits of making each business?

Shrimp

Not only do you know the cost of the project for one year, but you can also visualize the cost situation per citizen and per service recipient of the project. For example, in the park maintenance business, in 2022, the cost per citizen was 2,215 yen. You can also check if the cost was appropriate for the services you provided and use it when considering business plans for the next fiscal year and beyond. It's like a business chart. We also make a business evaluation report for each project, and there are analysis results such as the effects of initiatives and future directions. By using the administrative cost statement and the business evaluation report for each business as a set, it can lead to more effective and efficient business management.

Hammer

If you look at the administrative cost statement and the business evaluation report by business, you can understand each business.

Aoi-chan

Ebi-chan, what kind of debt do you have in Yokohama?

Shrimp-chan

Municipal bonds are mainly "construction local bonds" to maintain facilities used by citizens, such as roads and parks, and "temporary financial measures issued to compensate for the shortage of local allocation tax distributed by the government. Bonds ".

Aoi-chan

Ebi-chan, you said that extraordinary financial measures bonds will be issued to compensate for the shortage of local allocation tax, but can you tell me more about extraordinary financial measures bonds?

Shrimp-chan

Of course! Let's talk briefly about the system.
If local tax revenues such as self-governing city taxes are reduced, they will be compensated by the local allocation tax originally issued by the government. The local allocation tax is collected as a national tax in order to adjust the difference in tax revenue generated by differences in the situation of each region and to guarantee financial resources so that people living in any region can provide a fixed administrative service. The financial resources are allocated to the self-governance on a fixed basis.
Temporary financial measures bonds are local bonds that are not allowed to be issued temporarily as a special case under Article 5 of the Local Finance Law because the national tax, which is the basis of the local allocation tax is insufficient.
Originally, this special measure started in 2001 for a limited period of three years, but due to the shortage of national tax revenues, the extension has been repeated since then, and temporary measures are still continuing. .
In addition, the principal and interest of extraordinary financial measures bonds will be compensated later by local allocation tax.

Aoi-chan

Hey. Even if the tax revenue of the city decreases, there is a mechanism that the government compensates.

Aoi-chan

I've heard that if you want to create a facility that can be used by all citizens for a long period of time, like roads and parks, you can borrow the money you need to make it without using taxes.

Shrimp-chan

That's right. The facilities used by citizens will be used not only by those who are currently using them, but also by babies, children, and future citizens who will be born in the future. Nevertheless, it would be unfair to build a facility only with the taxes of the people who are using it now. Therefore, the burden is shared by the active and future generations by borrowing the necessary money, creating facilities, and repaying the borrowed money.

Aoi-chan

There was an image that it was not good to borrow, but the debt of the city hall has a meaning that the burden does not change between generations. But it is not good for future citizens to continue to increase debts, isn't it?

Shrimp-chan

That's right. Even in our lives, for example, when we build a loan and buy a house, we decide the amount of money to borrow considering whether the repayment of the monthly loan will make life difficult or whether the repayment can be continued without difficulty in the future. Right. Similarly, in Yokohama City, we decide on rules and borrow money so that the balance of debt does not continue to increase.

Aoi-chan

What kind of rules do you have?

Shrimp-chan

In Yokohama, it is expected that the population will decrease in the future. Therefore, we set the borrowing balance per citizen so that current citizens and future citizens will be about 830,000 yen at the level of 2021, and issue (debt) municipal bonds so that they fall within that range. I'm going. This is a great rule that even if the population decreases, debt will not increase, and the burden per citizen will not increase!

Aoi-chan

I'm relieved to know that I'm thinking about the future.

Aoi-chan

I understand the rules for issuing municipal bonds, but how much do you borrow in 2024?

Shrimp-chan

Earlier, you explained that the borrowing balance per citizen will be about 830,000 yen for both current and future citizens. With this idea, I simulated how much I could borrow every year. Then, we found that we could borrow about 530 billion yen in the four years from FY2022 to FY7.
In fiscal 2016, we plan to use 106.6 billion yen.

Aoi-chan

Do you use 106.6 billion yen to create a facility that can be used by all citizens for a long period of time like roads and parks?

Shrimp-chan

That's a terrible question. In fact, out of 106.6 billion yen, 99.6 billion yen is used to create facilities. This includes the development of roads and schools, the renewal of public facilities in conservation, and the development of the former site of the former Kamiseya Communication Facility. The remaining 7 billion yen is a debt called extraordinary financial measures bonds. This is actually the money that the government should give for administrative services in Yokohama City, but the country is also financially difficult. That's why I can't pay the country, but I was told that I can borrow it in Yokohama City. I have decided the amount to borrow, including the debt of this extraordinary financial measure bond.

Aoi-chan

Somehow difficult.

Shrimp-chan

Oh~. Didn't you explain to Aoi-chan about "Tell me about extraordinary financial measures bonds?"

Hammer

The financial vision states that debts will be managed with the municipal bond balance per citizen, but has the primary balance of the Yokohama method lost?

Shrimp

I remember it well. The primary balance of the Yokohama method was a rule of issuing municipal bonds that the amount of municipal bonds that can be issued in one year would be less than the amount of debt repayment for that year.
Until FY2021, we have set a goal of "equilibrating the primary balance of the Yokohama method over the full year of the medium-term four-year plan, excluding further deficit local bonds (COVID-19 countermeasures bonds)," and are working on systematic issuance of municipal bonds, and have achieved the target. In the next medium-term plan, there is no target for primary balance, but the primary balance during the period will be in the black.
In any case, the primary balance of the Yokohama method will be announced properly with the budget for each fiscal year.

Hammer

It doesn't mean that you don't use the primary balance of the Yokohama system. Because it was a well-known financial index to everyone, I didn't want you to lose it as a publicity mascot for Yokohama municipal bonds. It was good!

Hammer

What is the city tax revenue for the sixth year?

Shrimp

The tax revenue forecast for fiscal 2024 is 883 billion yen. It is expected to be the highest in the past.

Hammer

The highest amount in the past is amazing! Could you tell me the details of the increase?

Shrimp

First of all, personal municipal tax is expected to increase by 4.1 billion yen due to an increase in employment income. Property tax is also expected to increase by 7.6 billion yen due to the effects of land revaluation and the increase in new extension houses. In addition, corporate municipal tax is expected to increase by 3.5 billion yen due to an increase in corporate profits, etc., and we expect a total increase of 19.1 billion yen.

Hammer

The taxes you have to pay must be executed effectively and efficiently.

Hammer

There are taxes paid to the country and those paid to rural areas, right? What's the difference?

Shrimp

The distribution is estimated to be 60% for the country and 40% for the provinces. The real allocation of tax, including local allocation tax and national treasury disbursements, which are redistributed from the national government to local governments, is 30% for the national government and 70% for the local government.

Hammer

If you want to redistribute from the country to the region, you should use the local tax from the beginning.

Shrimp

That's right. In order for local governments to execute their affairs and businesses voluntarily and independently, transfer taxes with high tax revenues such as consumption tax, income tax, and corporate tax from national taxes to local taxes, First of all, allocate 50% to the country and 50% to local governments, and drastically review the division of roles between the national and local governments, and allocate taxes according to the new division of roles. 20 from the government ordinance-designated cities such as Yokohama City.

Hammer

I hope the tax allocation will be appropriate for the actual situation.

Hammer

Ebi-chan, a long-term financial estimate of Yokohama City has been published, but what is that?
Why do you announce it?

Shrimp

We clarify how the future decline in the working-age population and the increase in social security expenses will affect finances, and announce it to make citizens aware of the situation in Yokohama City. .
Until now, we have announced the financial outlook during the medium-term four-year plan period and the long-term financial outlook for about 10 years, but it was difficult to see how severe the financial situation would be during that period. . That's why I made a long-term financial estimate up to 2065, when future population projections are coming out.

Hammer

That's right. What will happen to Yokohama's finances from now on?

Shrimp

Now, spending and income for one year are tons, but it seems that there will be a shortage of money of 52.6 billion yen in 2030, 96.2 billion yen in 2040, and 178.8 billion yen in 2065. .

Hammer

Oh! That's hard!
Are you okay?

Shrimp

It is the financial vision that summarizes the ideas and approaches to prevent this situation.
For example, in order to resolve the shortage of 52.6 billion yen in fiscal 2030, we can not increase money by thinking about whether we can review the business we are doing now or making effective use of land and buildings owned by Yokohama City I'm considering.
For more information, please visit the official website.

Hammer

Yes, let's take a look!

Hammer

Ebi-chan, the financial vision was formulated in June of 4th year, but please tell me clearly.

Shrimp

It is expected that while the working-age population will decrease and city tax revenues will decrease, social security expenses will increase as the population ages further, and the financial situation will become quite severe.
Under these circumstances, not only the current citizens, but also the citizens who will be born in the future, what should be done to ensure that everyone can live in Yokohama with peace of mind.

Hammer

What kind of things are there?

Shrimp

Look at the figure below. At the top of the figure, the basic concept of each of the six items, such as debt management, securing financial resources, asset management, budgeting and execution, information dissemination, and institutional response, are described in the figure. It's on the left side of the figure. Then, as shown in the figure climbing the mountain below, we summarized what kind of approach we actually take as an action plan.
It was voted on at the 2nd City Counsil Regular Meeting in 2022.

Hammer

　
I'll read it more!

We also have on-site briefings, so please check them!

Hammer

What kind of goals do you have?

Shrimp

The "Ordinance on Promotion of Responsible Financial Management in the Future" stipulates the rules for setting financial targets in the medium-term plan.
In addition, based on the medium- to long-term fiscal policy formulated in June 2022, the “Financial Vision for Sustainable Development of Yokohama City”, the “Yokohama City Medium-Term Plan 2022-2025” includes “Debt management from a medium- to long-term perspective through thorough debt governance”, “Stable and structural enhancement of financial resources through strategic and comprehensive efforts”, and “Efficient management of financial management of asset execution targets for fiscal management (Faccificient management through effective management through effective measures,” and efficient implementation of financial resources,” and asset management (5)
We set "financial targets" and "approachs" for each medium-term plan period, and by conducting fiscal management and budgeting for each fiscal year in line with this, we strive to ensure fiscal sustainability from a long-term perspective. Yeah.

Hammer

What is the "Ordinance on Promotion of Responsible Financial Management in the Future"?

Shrimp

The ordinance was enacted in 2014. Both the mayor and the council aim to promote responsible financial management in the future while sharing basic principles and responsibilities.

Hammer

Specifically, how do you recommend?

Shrimp

The mayor sets a financial goal and clarifies its purpose. And by reporting the progress of the goals to Congress, we will work to balance the promotion of necessary measures and the maintenance of financial soundness. We will create Yokohama City where citizens living in the future can play an active role!

Hammer

I want to know what Yokohama's finances are compared to other cities. Is there a way?

Shrimp

Yes. For example, there are indicators called "real debt service ratio" and "future burden ratio".
By comparing the numbers in this index with other cities, you can know how Yokohama is compared to other cities.

Hammer

What does the "real debt service ratio" and "future burden ratio" mean?

Shrimp

The “real debt service ratio” is the ratio of the repayment of borrowings paid in one year to the total income for one year. The smaller the number, the less the burden of repayment of the debt.
The “future burden ratio” is the ratio of the total income for one year, such as the repayment of borrowings that will be paid in the future, to the total income for one year. You can see that the smaller the numbers, the less burden in the future.

Hammer

How best is Yokohama City compared to other cities in terms of the “real debt service ratio” and “future burden ratio”?

Shrimp

Compared to 20 ordinance-designated cities, the “real debt service ratio” is the 15th among 20 cities in the fiscal year ended March 31, 2022. "Future burden ratio" is the 17th out of 20 cities.

Hammer

It's lower than the middle. Isn't it very good?

Shrimp

It's certainly higher than other cities. However, we are making efforts to manage borrowings and proceed with planned repayments!

Hammer

What are the prospects for the “real debt service ratio” and “future burden ratio” in the future?

Shrimp

I've heard that other cities will get better and better, but Yokohama City is expected to be as much as it is now.

Hammer

Oh, is it okay?

Shrimp

It's okay! Municipal bonds in Yokohama have received a rating "A1" that can be trusted as much as government bonds! Interest rates are not high compared to other cities. At briefings for investors who buy municipal bonds, they carefully explained their efforts to maintain financial soundness and received high praise.

Hammer

I've heard that the budget is roughly divided into three accounts: general account, special account, and public enterprise account, but I've also heard about ordinary account. . What's this?

Shrimp

The ordinary account man will explain that!
Thank you very much for your attention!

Ordinary account man

Ordinary accounts are one of the national accounting categories, and are accounting in a category organized according to unified standards so that comparisons between local governments can be made. The scope of businesses accounting for each account, such as general accounts and special accounts, is actually different for each local government. Therefore, accurate analysis is not possible even when compared to each local government in accounting categories such as general accounts and special accounts.
Therefore, it is possible to compare local governments by comparing with ordinary accounts.

Hammer

If you use ordinary accounts, you can compare and analyze with other cities!

Ordinary account man

Ordinary accounts are often used to analyze financial results data. The analysis results of each local government show that the “Financial Status Data Book” on the website of the Ministry of Internal Affairs and Communications. The analysis results of Yokohama City are also posted on the Yokohama City website, so be sure to take a look.

Hammer

I want to know how many assets in Yokohama are. Do you have such data?

Shrimp

We have published financial statements based on unified standards since the fiscal year 2016, but you can see by looking at the "balance sheet" in that! The balance sheet shows stock information on assets and liabilities at the end of the fiscal year. Looking at the most recent end of FY2022, general account assets amounted to ¥ 9,627.2 billion.

Hammer

It's a big deal! I would like to see not only the assets but also the financial statements of other cities.

Shrimp

If you want to compare it with other cities, you can access the published pages of each city from the Ministry of Internal Affairs and Communications website, so take a look.

Hammer

It's important to look at it from various angles.