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HomeMy WebLinkAbout14-DebtDebt Debt Table of Contents Debt Management & Policy ................................................................................................................. 203 Outstanding Debt Summary ................................................................................................................ 204 General Debt Service Outstanding Debt By Type ..................................................................................................... 205 Legal Debt Margin for General Obligation .............................................................................. 205 Principal & Interest Requirements -Tax-Supported................................................................ 206 Principal & Interest Requirements - Self-Supporting .............................................................. 207 Utility Debt Service Principal & Interest Requirements .......................................................................................... 208 Utility Revenue Bond Debt Coverage ..................................................................................... 209 Proposed Debt Issues ......................................................................................................................... 210 203 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 AA3 Aa3 Standard & Poor’s AA+ AA- Fitch AA A+ 204 Outstanding Debt Summary - By Type as of October 1, 2009 Debt 2009/2010 2009/2010 Outstanding %Principal & Interest Handling Fees GENERAL GOVERNMENT TAX SUPPORTED DEBT: Certificate of Obligation and General Obligation Bonds: Streets and Transportation 1,900,008 3%172,505 1,139 Parks and Recreation Facilities 11,618,200 20%1,010,649 300 Public Safety Facilities 3,393,130 6%802,177 1,745 Other City Facilities 40,186,435 70%4,135,883 6,301 TOTAL TAX SUPPORTED DEBT 57,097,773 100%6,121,214 9,485 ENTERPRISE DEBT: Utility Revenue Bonds: Electric 29,230,821 46%2,786,727 1,500 Water Services Irrigation 1,358,064 2%118,186 1,000 Water 18,572,035 29%1,565,984 1,000 Wastewater 10,429,080 16%2,073,308 1,000 Total Utility Revenue Debt 59,590,000 6,544,205 4,500 Certificates of Obligation Bonds - Self-Supporting: (2) Airport 1,216,733 2%164,962 420 Stormwater Drainage 2,976,027 5%328,457 595 Total CO Bonds - Self Supporting 4,192,760 493,419 1,015 TOTAL ENTERPRISE DEBT 63,782,760 100%7,037,624 5,515 TOTAL CITY SUPPORTED DEBT 120,880,533 13,158,838 15,000 CONTRACTUAL OBLIGATIONS (1): Brazos River Authority (BRA) Contractual Obligation 25,682,720 963,297 Total Contractual Obligations 25,682,720 963,297 (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. anding Debt by Type 205 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) 0.14482 Percentage of allowable levy used 10.4% Assuming the maximum tax rate for debt service of $1.50 on the January 1, 2009, certified assessed valuation of $4,173,874,126 at 90% collection, tax revenue of $56,347,301 would be produced. This revenue could service the debt on $673,371,798 issued as 20-year serial bonds at 5.50% (with level debt service payments). 206 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 207 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 208 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. 209 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 2009/10 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. UTILITY REVENUE BOND COVERAGE Water Services Electric Fund Fund Total REVENUE: All Other Revenue 1,240,246 1,621,800 2,862,046 Interest 577,000 50,000 627,000 System Billings 22,621,216 58,461,733 81,082,949 Total Revenues 24,438,462 60,133,533 84,571,995 EXPENSES: Departments 15,543,018 52,973,462 68,516,480 Total Expenditures 15,543,018 52,973,462 68,516,480 Net Available for Debt Service 8,895,444 7,160,071 16,055,515 Annual Debt Requirement 3,757,478 2,786,727 6,544,205 Times Coverage Ratio 2.37 2.57 2.45 210 Proposed Debt Issues: Utility Revenue Debt:  Debt proceeds will be used for system expansion and repaid through continued growth of the City’s customer base. General Debt:  Long-term obligations will be issued for $5.3 million to fund general capital projects as detailed below: Authorized in November 2008 Bond election. (1) General Capital Projects & Equipment Summary: Future Fire Stations 2,500,000 DB Wood Widening 1,320,000 Williams Drive Widening with WILCO 1,500,000 General Capital Projects 5,320,000 Outstanding 9/30/09 Debt Principal 09/10 Principal Reduction Estimated 2010 New Debt Estimated 9/30/10 Outstanding Debt TAX SUPPORTED DEBT: General Debt Service: General Obligation/Certificates of Obligation 57,097,773 (3,742,072) 5,320,000 58,675,701 SELF SUPPORTED DEBT: General Debt Service: Stormwater 2,976,027 (219,102) 1,200,000 3,956,925 Airport 1,216,733 (114,048) - 1,102,685 total GDS:61,290,533 (4,075,222) 6,520,000 63,735,311 Utility Revenue Debt: Electric 29,230,821 (1,433,664) 4,350,000 32,147,157 Irrigation 1,358,064 (62,465) - 1,295,599 Wastewater 18,572,035 (1,311,723) 2,600,000 19,860,312 Water 10,429,080 (1,127,148) 8,770,000 18,071,932 total Utility Revenue Debt:59,590,000 (3,935,000) 15,720,000 71,375,000 TOTAL OUTSTANDING DEBT:120,880,533 (8,010,222) 22,240,000 135,110,311  211 This page intentionally left blank.