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16 - DebtDebt DEBT TABLE OF CONTENTS DebtManagement & Policy......................................................................................................................289 OutstandingDebt By Type........................................................................................................................ 290 General Debt Service Principal & Interest Requirements.............................................................................................. 291 Legal Debt Margin ifiv, General-Obligation.................................................................................293 Utility Debt Service Principal & Interest Requiranents.............................................................................................. 294 Utility Revenue Bond Debt Coverage......................................................................................... 295 Proposed Debt Issues296 ................................................................................................................................ 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 usually required. Debt financed projects must meet the City's long-term financing criteria as included in the Budget & Financial Policies. 115.1 Debt Policy City staff recommend the use of debt financing when appropriate. It will be judged appropriate when the following conditions exist: (1) non -continuous capital improvements are desired, and (2) future citizens will receive a benefit from the improvement. When the City of Georgetown utilizes long-term financing, it will ensure that the debt is soundly financed by: (1) conservatively projecting the revenue sources that will be utilized to pay the debt, (2) financing the improvement over a period not greater than the useful life of the improvement, and (3) determining that the cost benefit of the improvement including interest costs is positive." 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: Fitch Moody's Standard & Poor's DEBT ANNUAL OPERATING PLAN ELEMENT 2000/01 General Obligation A I:` A Utility Revenue A 0 F1 289 Outstanding Delft summary - By Type as of October 1, 2000 Debt 2000/2001 Outstanding % Principal & Interest GENERAL OBLIGATION DEBT: Tax Supported: Streets and Transportation Parks and Recreation Facilities Public Safety Facilities Other Improvements Subtotal - Tax supported GO Debt 6,937,453 32% 746,629 2,009,553 9% 295,042 3,466,450 16% 336,565 4,534,900 21% 464,076 16,948,356 1,842,312 Self Supported: Airport 2,191,545 10% 174,952 Stormwater Drainage 2,865,099 13% 192,760 Subtotal - Self supported GO Debt 5,056,644 367,712 Total General Obligation Debt 22,005,000 100% 2,210,024 UTILITY REVENUE DEBT: Electric 9,426,548 29% 995,165 Water 12,209,492 38% 1,309,217 Wastewater 10,453,960 33% 1,117,916 Total Utility Revenue Debt 32,090,000 t00% 3,422,298 TOTAL DEBT OUTSTANDING 54,095,000 5,632,322 P: Stre General Obligation Debt Utility Revenue Debt Public Safety ,�tormwarer Other Electric Wastewater DEBT 290 ANNUAL OPERATING PLAN ELEMENT 2000/01 GENERAL DEBT SERVICE SUMMARY The City's general obligation debt is primarily funded from a dedicated portion of local ad valorem tax. Certain issues are for specific purposes and will be repaid through dedicated revenues. 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 2001 16,948,356 914,852 927,460 1,842,312 2002 16,020,896 829,275 940,043 1,769,318 2003 15,080,853 779,716 989,708 1,769,424 2004 14,091,146 726,911 907,745 1,634,656 2005 13,183,400 679,985 642,776 1,322,761 2006 12,540,624 645,601 673,962 1,319,563 2007 11,866,661 609,710 713,590 1,323,300 2008 11,153,071 574,926 748,414 1,323,340 2009 10,404,657 537,867 783,238 1,321,105 2010 9,621,419 498,311 849,792 1,348,103 2011 8,771,627 455,925 887,860 1,343,785 2012 7,883,767 410,888 932,807 1,343,696 2013 6,950,960 363,163 980,452 1,343,616 2014 5,970,507 312,223 1,038,097 1,350,320 2015 4,932,410 258,234 1,088,440 1,346,675 2016 3,843,970 201,589 1,211,086 1,412,675 2017 2,632,884 138,433 1,275,067 1,413,499 2018 1,357,818 71,841 742,216 814,057 2019 615,602 33,182 495,602 528,784 2020 120,000 6,750 120,000 126,750 2,000,000 1,500,000 us 6, a °a 1,000,000 0 0 r 'r 500,000 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 12 '13 '14 '15 '16 '17 '18 '19 20 9,049,383 16,948,356 25,997,739 General Debt Service - Tax Supported DEBT ANNUAL OPERATING PLAN ELEMENT 2000/01 291 Summary of Debt Service Charges to Maturity General Obligation Bonds and. Certificates of Obligation - SELF SUPPORTING Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2001 5,056,644 250,171 117,540 367,712 2002 4,939,104 244,386 204,957 449,343 2003 4,734,147 234,577 220,292 454,869 2004 4,513,854 223,865 252,255 476,119 2005 4,261,600 212,085 237,224 449,309 2006 4,024,376 201,070 246,038 447,108 2007 3,778,339 189,676 256,410 446,086 2008 3,521,929 177,587 271,586 449,173 2009 3,250,343 164,511 281,762 446,273 2010 2,968,581 150,676 270,208 420,884 2011 2,698,372 137,463 287,140 424,602 2012 2,411,232 123,152 297,193 420,344 2013 2,114,039 108,165 314,548 422,712 2014 1,799,492 92,090 326,903 418,993 2015 1,472,589 75,087 346,560 421,646 2016 1,126,029 57,007 298,914 355,921 2017 827,116 42,061 314,933 356,994 2018 512,182 26,314 367,784 394,098 2019 144,398 7,581 144,398 151,979 600,000 500,000 400,000 m 300,000 Cl 3 0 tL- 200,000 100,000 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 2,717,522 5,056,644 7,774,165 General Debt service - Self supporting DEBT 292 ANNUAL OPERATING PLAN ELEMENT 2000101 4 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 $1.25 per $100 of valuation, based on 90% collection of tax. Allowable levy per $100 valuation $1.25000 Proposed levy for debt service (included in total adopted rate of $.31409) .11562 Percentage of allowable levy used 10.0% RATIO OF DIRECT DEBT TO TAXABLE VALUATION 91193 93/94 94/95 95/96 96/97 97/98 98199 99/00 00/07 07!02- uzlu;5- u:5/u4' MUD- , •Projected DEBT ANNUAL OPERATING PLAN ELEMENT 2000/01 293 UTILITY DEBT SERVICE The City has issued debt in the form of revenue bonds to finance construction of electric, water and wastewater improvements. The debt is secured by the net operating revenue of all combined revenues of those utilities. The allocation of debt principal and costs is based on the use of each bond issue. Each utility fund pays debt service from operating revenues. Summary of Utility Debt ,Service Charges to Maturity: Year Ending Outstanding Total September 30 Beginning of Year Interest Principal Requirements 2001 32,090,000 1,617,298 1,805,000 3,422,298 2002 30,285,000 1,444,830 2,015,000 3,459,830 2003 28,270,000 1,358,879 2,085,000 3,443,879 2004 26,185,000 1,268,964 2,200,000 3,468,964 2005 23,985,000 1,168,276 2,265,000 3,433,276 2006 21,720,000 1,063,253 2,240,000 3,303,253 2007 19,480,000 959,530 2,200,000 3,159,530 2008 17,280,000 858,608 1,950,000 2,808,608 2009 15,330,000 768,966 1,995,000 2,763,966 2010 13,335,000 675,304 2,040,000 2,715,304 2011 11,295,000 577,521 1,740,000 2,317,521 2012 9,555,000 491,994 1,780,000 2,271,994 2013 7,775,000 403,664 1,535,000 1,938,664 2014 6,240,000 325,996 1,615,000 1,940,996 2015 4,625,000 242,973 1,715,000 1,957,973 2016 2,910,000 154,573 715,000 869,573 2017 2,195,000 117,540 720,000 837,540 2018 1,475,000 79,890 795,000 874,890 2019 680,000 38,250 330,000 368,250 2020 350,000 19,688 350,000 369,688 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 13,635,995 32,090,000 45,725,995 Utility Debt Service '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 DEBT 294 ANNUAL OPERATING PLAN ELEMENT 2000/01 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: 8.00 6.00 4.00 2.00 UTILITY REVENUE BOND COVERAGE 0.00 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00' 00/01' 'Projected The 2000/01Proposed Operating Plan provides the revenue to debt ratios shown below. The City's Budget and Financial policies require 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 transfers out as approved by the City Council. Water Electric Wastewater Fund Fund Fund Total REVENUE: All Other Revenue 1,231,235 865,657 771,925 2,868,897 Interest 100,500 106,100 51,225 257,825 System Billings 6,715,000 19,543,796 4,000,000 30,258,796 Total Revenues 8,046,735 20,515,553 4,823,150 33,385,438 EXPENSES: Departments 4,294,252 15,661,382 2,153,576 22,909,290 Total Expenditures 4,294,252 15,661,382 2,153,576 22,909,290 Net Available for Debt Service 3,752,483 4,854,171 2,669,574 99,276,228 Annual Debt Requirement 1,309,217 995,165 1,117,916 3,422,298 Times Coverage Ratio 2.87 4.88 2.39 3.29 DEBT ANNUAL OPERATING PLAN ELEMENT 2000101 295 296 Proposed 2000/01 Debt Certificates of Obligation: Parks Improvements Lighting of Athletic Complex $ 490,000 Street Improvements Street projects 640,000 Total Certificates of Obligation 1,130,000 `Not included in tax rate calculation; subject to future discussion as projects arise Utility Revenue Bonds: Electric System Improvements 1,530,000 Total Utility Revenue Bonds 1,530,000 Total Proposed 2000/01 $ 2,660,000 Electric System Improvements 58% nprovements 24% rks Improvements 18% Note: The City expects Total Debt Outstanding to be $53,905,000 at September 30, 2001, which includes the 2000101 proposed issue and $2,850,000 of principal reduction. DEBT ANNUAL OPERATING PLAN ELEMENT 2000/01 Financial Impact: General Obligation Debt: => Capital improvements are reviewed and adjusted each year by City Council and staff, with debt issuances being adjusted accordingly. The on-going City facility needs assessment and expansion, along with the finalization of major street projects, will compose the majority of the need for additional debt issuance in the upcoming five year horizon. => The City will review its Stormwater Drainage project needs in the upcoming year and determine funding sources for projects that are deemed necessary. => Additional funding sources being reviewed as a means to fund future streets and other General Obligation projects, including Parks and Facilities. Utility Revenue Debt: => Debt proceeds will be used for system expansion and repaid through continued growth of the City's customer base. Capital projects and related debt are reviewed against actual needs and customer growth in each year. => A rate study, which is planned for the 2000/01 fiscal year, will determine whether utility rates will need any adjustments during the next five years. Summary of Estimated Debt Needs: Fiscal Year 00/01 01102 02103 03104 04/05 General Obligation: Tax supported: Facility Expansion 0 1,000,000 1,000,000 1,000,000 1,000,000 Parks Improvements 490,000 0 0 0 0 Street Improvements 640,000 4,280,000 2,450,000 2,645,000 2,225,000 Self-supporting., Stormwater Drainage 0 0 877,000 475,000 325,000 Utility Revenue: Electric 1,050,000 1,800,000 1,800,000 1,700,000 1,700,000 Water 0 0 0 0 2,500,000 Wastewater 0 0 0 450,000 800,000 Total Estimated Debt Needs 2,180,000 7,080,000 6,127,000 6,270,000 B,550,000 DEBT ANNUAL OPERATING PLAN ELEMENT 2000/01 297 �o� GEORG��o Vn �ED � This page intentionally left blank. DEBT 299 ANNUAL OPERATING PLAN ELEMENT 2000/01