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HomeMy WebLinkAbout13-Debt Summary211 Debt Management & Policy The City’s goal is to fund capital improvement projects on a ”pay as you go” basis wherever possible. For large infrastructure projects and during heavy growth, debt financing is sometimes required. Debt financed projects must meet the City’s financing criteria as included in the Fiscal and Budgetary Policy. X. Debt Management The City of Georgetown recognizes the primary purpose of capital facilities is to provide services to the community. Using debt financing to meet the capital needs of the community must be evaluated according to efficiency and equity.  Efficiency must be evaluated to determine the highest rate of return for a given investment of resources.  Equity is resolved by determining who should pay for the cost of capital improvements. In meeting the demand for additional services, the City will strive to balance the needs between debt financing and “pay as of you” methods. The City realizes that failure to meet the demands of growth may inhibit its continued economic viability, but also realizes that too much debt may have detrimental effects on the City’s long-term financial condition. The City will issue debt only for the purpose of acquiring or constructing capital assets for the general benefit of its citizens and to allow it to fulfill its various purposes as a city. Debt financing will be considered for non-continuous capital improvements of which future citizens will be benefited. Financing alternatives will be explored prior to debt issuance. When the City of Georgetown utilizes long-term financing, it will ensure that the debt is soundly financed by:  Conservatively projecting the revenue sources that will be utilized to pay the debt.  Financing the improvement over a period not greater than the useful life of the improvement.  Determining that the cost benefit of the improvement including interest costs is positive. The City may utilize the benefits of short-term debt financing to purchasing operating equipment provided the debt doesn’t extend past the useful life of the asset, and the potential impact to the tax rate is within policy guidelines. The I & S (interest and sinking) portion of the tax rate can not exceed $0.04 for short-term debt (3-10 years). The City’s debt management objective is to maintain level debt service that does not adversely impact tax or utility rates and does not hinder the City’s ability to effectively operate the utility systems, street network, or other facilities. The City’s debt payments must stay within provisions of state law, bond covenants and council adopted policies. All of these criteria and objectives are met with the debt financing proposed in this budget. The City of Georgetown’s bonds are rated: General Obligation Utility Revenue Moody’s A2 A2 Standard & Poor’s AA AA- Outstanding Debt Summary - By Type as of October 1, 2008 Deb 2008/200 2008/200 Principal & Interest Outstanding Handling Fees% GENERAL GOVERNMENT TAX SUPPORTED DEBT: Certificate of Obligation and General Obligation Bonds: Streets and Transportation 336,245 1%121,853 1,13 1,092,261 Parks and Recreation Facilities 12,648,550 23 30 Public Safety 4,768,222 9%929,677 1,74 3,709,092 Other City Facilities 36,540,510 67 6,30 TOTAL TAX SUPPORTED DEBT 9,485 54,293,527 5,852,88 100 ENTERPRISE DEBT: Utility Revenue Bonds: 2,440,541 Electri 24,624,933 40 1,50 Water Services Irrigation 1,409,564 2%118,369 1,00 Water 1,595,022 11,503,761 19 1,00 Wastewater 2,100,322 19,741,742 32 1,00 Total Utility Revenue Debt 6,254,254 57,280,000 4,500 Certificates of Obligation Bonds - Self-Supporting: (2) Airpor 1,364,709 2%209,091 42 Stormwater Drainage 3,115,241 5%319,995 59 Total CO Bonds - Self Supporting 4,479,950 529,08 1,015 0 5,515TOTAL ENTERPRISE DEBT 61,759,950 6,783,34 100 TOTAL CITY SUPPORTED DEBT 212 116,053,477 1 2,636,223 15,000 CONTRACTUAL OBLIGATIONS (1): Brazos River Authority (BRA) Contractual Obligation 26,536,043 853,324 Total Contractual Obligations 26,536,04 (1) Funds Georgetown's pro-rata share of the Williamson County Raw Water Line. (2) Does not include CO's issued on behalf of the Georgetown Transportation Enhancement Corporation (GTEC) that are repaid through GTEC sales tax. 853,324 Outstanding Debt by Type Legal Debt Margin for General Obligations: All taxable property within the City is subject to the assessment, levy and collection by the City of a continuing, direct annual ad valorem tax sufficient to provide for the payment of principal and interest on the Bonds within the limits prescribed by law. Article XI, Section 5, of the Texas Constitution is applicable to the City, and limits the maximum ad valorem tax rate to $2.50 per $100 assessed valuation (for all City purposes). The Charter of the City adopts the provisions of the constitution without further limitation. Under rules promulgated by the Office of the Attorney General of Texas, such office will not approve tax bonds of the City unless the City can demonstrate its ability to pay debt service requirements on all outstanding City tax bonds, including the issue to be approved, from a tax levy of $1.50 per $100 of valuation, based on 90% collection of tax. Allowable levy per $100 valuation $1.50000 Proposed levy for debt service (included in total adopted rate of $.35622) 0.15569 Percentage of allowable levy used 10.4% Assuming the maximum tax rate for debt service of $1.50 on the January 1, 2008, certified assessed valuation of $4,176,836,943 at 90% collection, tax revenue of $56,387,298 would be produced. This revenue could service the debt on $673,849,778 issued as 20-year serial bonds at 5.50% (with level debt service payments). 213 Summary of Debt Service Charges to Maturity General Obligation Bonds and Certificates of Obligation – TAX SUPPORTED Debt funded by dedicated portion of local ad valorem tax 214 Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2009 54,293,527 2,350,893 3,501,990 5,852,883 2010 50,791,537 2,152,663 3,593,935 5,746,598 2011 47,197,602 2,017,041 3,529,236 5,546,277 2012 43,668,366 1,874,388 3,437,976 5,312,364 2013 40,230,390 1,731,947 3,549,002 5,280,949 2014 36,681,388 1,589,529 3,484,694 5,074,223 2015 33,196,694 1,443,244 3,403,868 4,847,112 2016 29,792,826 1,296,807 3,452,558 4,749,365 2017 26,340,269 1,157,357 3,563,070 4,720,427 2018 22,777,199 1,010,957 3,154,233 4,165,189 2019 19,622,966 876,511 2,748,215 3,624,726 2020 16,874,751 758,071 2,408,694 3,166,765 2021 14,466,057 653,792 2,432,480 3,086,273 2022 12,033,577 547,470 2,188,251 2,735,721 2023 9,845,326 450,595 2,279,869 2,730,464 2024 7,565,457 346,006 2,319,753 2,665,759 2025 5,245,704 240,760 2,417,011 2,657,771 2026 2,828,693 129,601 1,420,640 1,550,241 2027 1,408,053 64,579 1,262,898 1,327,476 2028 145,155 6,713 145,155 151,869 20,698,923 54,293,527 74 ,992,450 Summary of Debt Service Charges to Maturity General Obligation Bonds and Certificates of Obligation – SELF SUPPORTING Debt issued for specific purpose and repaid through dedicated revenues 215 Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2009 4,479,950 206,188 322,899 529,086 2010 4,157,051 181,581 321,010 502,591 2011 3,836,041 168,805 340,708 509,513 2012 3,495,333 153,573 314,957 468,530 2013 3,180,375 139,635 328,931 468,566 2014 2,851,444 125,737 375,251 500,987 2015 2,476,194 108,993 390,799 499,791 2016 2,085,395 91,111 406,242 497,353 2017 1,679,153 73,896 423,719 497,615 2018 1,255,434 55,729 364,567 420,296 2019 890,866 38,993 203,574 242,567 2020 687,292 30,222 121,083 151,305 2021 566,210 25,142 110,286 135,429 2022 455,923 20,418 72,505 92,922 2023 383,419 17,276 73,876 91,152 2024 309,543 14,007 75,247 89,253 2025 234,296 10,677 77,989 88,666 2026 156,307 7,168 49,360 56,528 2027 106,947 4,946 52,102 57,049 2028 54,845 2,537 54,845 57,381 1,476,631 4,479,950 5, 956,581 Summary of Utility Debt Service Charges to Maturity Revenue bonds issued to finance construction of electric, water and wastewater improvements, and secured by the net operating revenue of all combined utilities. The allocation of debt principal is based on the use of each bond issue. Each utility pays debt service from operating revenues. The Brazos River Authority Contractual Obligations are the liability of the Water Services Fund. Year Ending Outstanding Total BR September 30 Beginning of Year Interest Principal Requirements Contract 2009 57,280,000 2,614,254 3,640,000 6,254,254 853,324 2010 53,640,000 2,245,605 3,935,000 6,180,605 963,297 2011 49,705,000 2,098,087 3,685,000 5,783,087 1,365,598 2012 46,020,000 1,954,893 3,780,000 5,734,893 1,023,396 2013 42,240,000 1,808,465 3,595,000 5,403,465 1,021,945 2014 38,645,000 1,666,882 3,735,000 5,401,882 1,011,637 2015 34,910,000 1,517,718 3,910,000 5,427,718 1,006,612 2016 31,000,000 1,362,533 2,970,000 4,332,533 1,011,637 2017 28,030,000 1,241,658 3,060,000 4,301,658 1,011,368 2018 24,970,000 1,114,298 3,225,000 4,339,298 1,011,096 2019 21,745,000 216 977,463 2,895,000 3,872,463 995,745 2020 18,850,000 850,816 3,025,000 3,875,816 1,359,667 2021 15,825,000 716,816 2,790,000 3,506,816 1,300,070 2022 13,035,000 592,021 2,800,000 3,392,021 1,295,007 2023 10,235,000 464,306 2,400,000 2,864,306 1,297,077 2024 7,835,000 355,780 1,975,000 2,330,780 1,296,546 2025 5,860,000 266,186 2,065,000 2,331,186 1,300,529 2026 3,795,000 173,093 1,850,000 2,023,093 1,288,528 2027 1,945,000 89,036 1,260,000 1,349,036 1,296,419 2028 685,000 31,681 685,000 716,681 1,293,666 2029 1,299,085 2030 1,297,491 2031 734,477 2032 201,829 22,141,590 57,280,000 79,421,590 26 ,536,043 Interest Principal BRA 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '26 '27 '28 '29 '30 '31 '32 Utility Debt Service Utility Revenue Bond Debt Coverage The City has agreed through its bond ordinances to maintain a minimum "times coverage" ratio of 1.25. The ordinance allows the City to eliminate its reserve fund requirement with coverage of 1.35 or better. The times ratio is calculated using the net revenue available for debt service from the combined Water, Electric and Wastewater utilities' operations divided by the combined debt service requirement of the utilities. The times coverage ratio is also reviewed by bond rating agency analysts when the City receives a rating for a potential bond issue. The following combined times coverage ratios have occurred, based on actual revenues and expenditures, for the fiscal years indicated: The 2008/09 Proposed Operating Plan provides the revenue to debt ratios shown below. The City’s Fiscal and Budgetary Policy requires that each utility maintain separate coverage of at least 1.5, including both the Airport and Stormwater Drainage. The excess coverage provided by each fund is used to pay for related utility system capital improvements and other uses approved by the City Council. 217 UTILITY REVENUE BOND COVERAGE Services Electri Fund Fund Total REVENUE: All Other 1,951,109 1,825,689 3,776,798 Interest 545,500 125,000 670,500 System 20,332,873 57,776,114 78,108,987 Total Revenues 22,829,482 59,726,803 8 2,556,285 EXPENSES: Departments 16,355,484 50,908,340 67,263,824 Total Expenditures 16,355,484 50,908,340 67,263,824 Net Available for Debt Service 6,473,998 8,818,463 1 5,292,461 Annual Debt Requirement 3,194,699 2,277,415 5,472,114 Times Coverage Ratio 2.03 3.87 2.79 Proposed Debt Issues: Outstanding 9/30/08 Debt Principal 08/09 Principal Reduction Estimated 2009 New Debt Estimated 9/30/09 Outstanding Debt TAX SUPPORTED DEBT: General Debt Service: General Obligation/Certificates of Obligation 54,293,527 (3,501,990) 12,079,000 62,870,537 SELF SUPPORTED DEBT: General Debt Service: Stormwater 3,115,241 (172,766) 1,950,000 4,892,475 Airport 1,364,709 (150,133) 1,214,576 Sanitation - transferred to general debt - - - total GDS:58,773,477 (3,824,889) 14,029,000 68,977,588 Utility Revenue Debt: Electric 24,624,933 (1,342,996) 6,100,000 29,381,937 Irrigation 1,409,564 (51,500) - 1,358,064 Wastewater 19,741,742 (1,169,862) 4,625,000 23,196,880 Water 11,503,761 (1,075,642) 4,006,000 14,434,119 total Utility Revenue Debt:57,280,000 (3,640,000) 14,731,000 68,371,000 TOTAL OUTSTANDING DEBT:116,053,477 (7,464,889) 28,760,000 137,348,588 (1) General Capital Projects & Equipment Summary: Police/Municipal Court Facility Purchase & Renovation 10,000,000 Self Contained Breathing Apparatus 400,000 Remodel Fire Station 2 529,000 Land Acquisition 400,000 Future Fire Stations 200,000 11,529,000 Bond Issue Costs 550,000 General Capital Projects & Equipment Bond Costs 12,079,000 Utility Revenue Debt: 4 Debt proceeds will be used for system expansion and repaid through continued growth of the City’s customer base. General Debt: 4 Long-term obligations will be issued for $12.1 million to fund general capital projects as detailed below: 4 An $81.5 million bond package is being presented to voters in November 2008. If approved, bonds would be issued over a 10-15 year period for approved projects.