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12 Debt 275 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. XII. 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 Date Obtained Utility Revenue Date Obtained Moody’s Aa2 4/23/2010 Aa2 4/23/2010 Standard & Poor’s AA+ 4/29/2009 AA 4/21/2014 276 Outstanding Debt Summary - By Type as of October 1, 2014 Debt 2014/2015 2014/2015 Outstanding %Principal & Interest Handling Fees GENERAL GOVERNMENT TAX SUPPORTED DEBT: Certificate of Obligation and General Obligation Bonds: Streets and Transportation 19,481,450 19%1,137,232 2,335 Parks and Recreation Facilities 11,857,022 12%1,258,334 1,450 Public Safety 37,979,240 37%2,753,655 2,153 Other City Facilities 33,738,590 33%4,414,479 4,497 TOTAL TAX SUPPORTED DEBT 103,056,303 100%9,563,699 10,435 ENTERPRISE DEBT: Utility Revenue Bonds: Electric 30,160,530 43%3,573,771 2,992 Water Services Irrigation 1,084,880 2%129,233 108 Water 23,077,210 33%2,505,463 2,289 Wastewater 12,215,731 17%1,805,120 1,212 Total Utility Revenue Debt 66,538,351 8,013,587 6,600 Certificates of Obligation Bonds - Self-Supporting: (2) Airport 603,846 1%165,223 88 Stormwater Drainage 3,012,205 4%429,344 670 Total CO Bonds - Self Supporting 3,616,051 594,566 758 TOTAL ENTERPRISE DEBT 70,154,402 100%8,608,153 7,358 TOTAL CITY SUPPORTED DEBT 173,210,705 18,171,853 17,792 CONTRACTUAL OBLIGATIONS (1): Brazos River Authority (BRA) Contractual Obligation 23,708,328 1,061,110 Total Contractual Obligations 23,708,328 1,061,110 (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. 277 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 $0.434) 0.22662 Percentage of allowable levy used 15.11% 278 Summary of Debt Service Charges to Maturity General Obligation Bonds and Certificates of Obligation – TAX SUPPORTED Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2015 103,056,309 3,415,929 6,194,650 9,610,579 2016 96,861,659 3,076,688 6,537,815 9,614,503 2017 90,323,844 2,978,685 6,843,910 9,822,595 2018 83,479,934 2,768,385 6,267,766 9,036,151 2019 77,212,168 2,584,002 5,962,751 8,546,753 2020 71,249,417 2,406,402 5,693,609 8,100,012 2021 65,555,807 2,244,583 5,813,706 8,058,289 2022 59,742,101 2,070,903 5,637,108 7,708,011 2023 54,104,993 1,890,373 5,783,971 7,674,344 2024 48,321,022 1,693,840 5,894,136 7,587,976 2025 42,426,886 1,482,060 5,859,564 7,341,624 2026 36,567,322 1,267,156 5,056,578 6,323,734 2027 31,510,744 1,084,856 5,016,594 6,101,451 2028 26,494,150 903,993 4,288,222 5,192,215 2029 22,205,928 753,165 4,274,089 5,027,254 2030 17,931,839 601,206 3,581,063 4,182,269 2031 14,350,776 480,064 2,821,063 3,301,127 2032 11,529,713 384,497 2,271,567 2,656,064 2033 9,258,146 310,889 2,287,072 2,597,961 2034 6,971,074 235,251 2,026,074 2,261,325 2035 4,945,000 167,706 1,595,000 1,762,706 2036 3,350,000 113,913 1,645,000 1,758,913 2037 1,705,000 45,031 1,705,000 1,750,031 32,959,579 103,056,309 136,015,888 279 Ad Valorem Tax-Supported Debt Payments Adjusted Net Voter Approved Year Ending Certificates of Less Certificates of General Obligation Total September 30 Obligation GTEC Portion*Obligation Debt Requirements 2015 6,492,912 (1,732,572) 4,760,340 4,850,238 9,610,579 2016 6,225,208 (1,686,759) 4,538,450 5,076,053 9,614,503 2017 6,050,002 (1,397,506) 4,652,495 5,170,099 9,822,595 2018 5,610,722 (1,491,564) 4,119,157 4,916,993 9,036,151 2019 5,132,877 (1,467,449) 3,665,428 4,881,325 8,546,753 2020 4,851,773 (1,441,217) 3,410,556 4,689,456 8,100,012 2021 4,692,582 (1,428,569) 3,264,013 4,794,276 8,058,289 2022 4,353,047 (1,366,796) 2,986,251 4,721,760 7,708,011 2023 4,189,638 (1,262,313) 2,927,325 4,747,019 7,674,344 2024 4,175,717 (1,242,275) 2,933,441 4,654,535 7,587,976 2025 3,494,196 (715,658) 2,778,538 4,563,087 7,341,624 2026 2,805,903 (434,434) 2,371,469 3,952,266 6,323,734 2027 2,544,814 (354,355) 2,190,459 3,910,992 6,101,451 2028 1,850,361 (174,090) 1,676,271 3,515,944 5,192,215 2029 1,681,481 (174,228) 1,507,254 3,520,000 5,027,254 2030 919,179 (66,009)853,169 3,329,100 4,182,269 2031 917,362 (64,059)853,302 2,447,825 3,301,127 2032 267,349 (64,609)202,739 2,453,325 2,656,064 2033 141,792 - 141,792 2,456,169 2,597,961 2034 141,007 - 141,007 2,120,319 2,261,325 2035 - - - 1,762,706 1,762,706 2036 - - - 1,758,913 1,758,913 2037 - - - 1,750,031 1,750,031 66,537,920 (16,564,462) 49,973,457 86,042,431 136,015,888 * GTEC Debt is self supporting certificates of Obligation (CO Bonds) repaid through dedicated sales tax revenue. 280 Summary of Debt Service Charges to Maturity Certificates of Obligation – SELF SUPPORTING – Enterprise Funds (Airport & Stormwater Drainage) Debt issued for specific purpose and repaid through dedicated revenues Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2015 3,616,051 136,349 458,216 594,566 2016 3,157,835 119,854 410,899 530,753 2017 2,746,935 106,306 426,608 532,914 2018 2,320,327 91,704 388,050 479,754 2019 1,932,278 78,011 220,409 298,419 2020 1,711,869 70,182 186,466 256,648 2021 1,525,403 59,842 172,443 232,284 2022 1,352,961 52,252 164,836 217,088 2023 1,188,124 46,239 173,908 220,147 2024 1,014,216 39,493 178,577 218,070 2025 835,640 32,445 184,757 217,202 2026 650,882 25,122 127,991 153,113 2027 522,891 20,078 134,194 154,271 2028 388,698 14,752 130,098 144,850 2029 258,600 9,480 102,939 112,419 2030 155,661 5,459 28,937 34,396 2031 126,724 4,483 28,937 33,420 2032 97,787 3,506 30,933 34,439 2033 66,854 2,423 32,928 35,352 2034 33,926 1,230 33,926 35,156 919,209 3,616,051 4,535,261 281 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 BRA September 30 Beginning of Year Interest Principal Requirements Contract 2015 665,338,351 2,340,323 5,673,264 8,013,587 1,061,110 2016 659,665,087 2,148,830 4,747,169 6,895,999 1,237,584 2017 654,917,918 1,989,981 4,905,826 6,895,807 1,237,500 2018 650,012,092 1,842,089 5,115,826 6,957,915 1,237,499 2019 644,896,266 1,681,688 4,827,045 6,508,733 1,219,092 2020 640,069,221 1,516,069 4,607,592 6,123,662 1,583,349 2021 635,461,629 1,354,998 4,425,030 5,780,029 1,524,296 2022 631,036,598 1,200,942 4,488,687 5,689,629 1,518,758 2023 626,547,911 1,038,912 3,986,869 5,025,782 1,520,636 2024 622,561,041 886,881 3,657,665 4,544,546 1,519,178 2025 618,903,376 748,281 3,813,884 4,562,165 1,524,631 2026 615,089,492 600,294 3,673,212 4,273,507 1,511,318 2027 611,416,280 459,829 3,157,541 3,617,370 1,520,159 2028 608,258,739 344,348 2,708,760 3,053,108 1,517,615 2029 605,549,979 242,006 2,114,979 2,356,985 1,522,931 2030 603,435,000 167,794 1,090,000 1,257,794 1,521,024 2031 602,345,000 130,869 1,135,000 1,265,869 730,823 2032 601,210,000 92,100 1,180,000 1,272,100 200,825 2033 600,030,000 47,175 1,230,000 1,277,175 - 18,833,409 66,538,351 85,371,760 23,708,328 282 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 both the Electric and Water Service Funds. The times coverage ratio is also reviewed by bond rating agency analysts when the City receives a rating for a potential utility bond issue. The following combined times coverage ratios have occurred, based on actual revenues and expenditures, for the fiscal years indicated: The 2014/15 Annual Budget 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. 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. Water Services Electric Fund Fund Total REVENUE: All Other Revenue 4,385,108 4,395,917 8,781,025 Interest 67,600 26,000 93,600 System Billings 25,098,634 62,318,107 87,416,741 Total Revenues 29,551,342 66,740,024 96,291,366 EXPENSES: Departments 19,477,049 52,361,263 71,838,312 Total Expenditures 19,477,049 52,361,263 71,838,312 Net Available for Debt Service 10,074,293 14,378,761 24,453,054 Annual Debt Requirement 4,562,116 3,659,699 8,221,815 Times Coverage Ratio 2.21 3.93 2.97 UTILITY REVENUE BOND COVERAGE 283 Proposed Debt Issues: Outstanding 9/30/14 Debt Principal 14/15 Principal Reduction Estimated 2015 New Debt Estimated 9/30/15 Outstanding Debt TAX SUPPORTED DEBT: General Debt Service: General Obligation/Certificates of Obligation 103,056,302 (6,194,650) 7,985,000 104,846,652 SELF SUPPORTED DEBT: General Debt Service: Fire-based Paramedic Program - - 400,000 400,000 Conservation - - 750,000 750,000 Stormwater 3,012,205 (318,493) 2,215,000 4,908,712 Airport 603,846 (139,724) - 464,122 total GDS:106,672,353 (6,652,867) 11,350,000 111,369,486 Utility Revenue Debt: Electric 30,160,531 (2,526,270) 5,723,000 33,357,261 Irrigation 1,084,880 (87,160) - 997,720 Wastewater 12,215,731 (1,334,213) 7,990,000 18,871,518 Water 23,077,210 (1,725,621) - 21,351,589 total Utility Revenue Debt:66,538,352 (5,673,264) 13,713,000 74,578,088 Issuance Costs:376,000 TOTAL OUTSTANDING DEBT:173,210,705 (12,326,131) 25,439,000 185,947,574 General Debt:  Long-term obligations are proposed to fund capital projects as detailed below: General Debt: GO - 1460 Widening, final payment 4,371,000 CO - Downtown projects 694,000 CO - Parks projects 1,150,000 CO - Airport 870,000 CO - Equipment & public safety vehicles 900,000 Total Projected General Debt 7,985,000 Self Supporting Debt: CO - TRV's - Fire-based Paramedic Program 400,000 CO - Stormwater 2,215,000 CO - Westside Service Center - Conservation 750,000 Total Projected Self Supporting Debt 3,365,000 Utility Debt: Revenue - Electric 5,723,000 Revenue - Water/Wastewater 7,990,000 Total Projected Utility Debt 13,713,000 Issuance Costs 376,000 TOTAL CITY-WIDE DEBT ISSUE 25,439,000 284 Authorized General Obligation Debt: General Obligation Bonds (GO’s):  General obligation bonds must be authorized by a vote of the citizens of Georgetown. They are used only to fund capital assets of the general government and are not to be used to fund operating needs of the City. The full faith and credit of the City as well as the City’s ad valorem taxing authority back general obligation bonds. Conditions for issuance of general obligation debt include:  When the project will have a significant impact on the tax rate;  When the project may be controversial even through it is routine in nature; or  When the project falls outside the normal bounds of projects the City has typically done. General Obligation Debt Authorized by the Voters Roads Parks Public Safety Facility Total Year Authorized by the Voters 2008 46,000,000$ 35,500,000$ -$ 81,500,000$ 2011 - - 29,500,000 29,500,000 Total Authorized 46,000,000 35,500,000 29,500,000 111,000,000 Year & Issue 2010 1,370,000 - - 1,370,000 2010A 9,430,000 2,500,000 - 11,930,000 2012 - - 12,500,000 12,500,000 2012A - - 12,500,000 12,500,000 2013 - 5,000,000 4,500,000 9,500,000 2014 4,800,000 - - 4,800,000 Total Issued 15,600,000 7,500,000 29,500,000 52,600,000 Authorization Remaining 30,400,000$ 28,000,000$ -$ 58,400,000$