Mecklenburg County Debt Management Guidelines

1. Mecklenburg County Debt Management Guidelines Budget/Public Policy Workshop March 28, 2006

2. Purpose of the Debt Management Guidelines • Provide a tool for the Board to determine the County’s annual capital funding range based on debt management guidelines • Focus the Board on the resources available for County and CMS capital needs • Focus BOE on policy for prioritizing capital projects based on available funds (needs) • Premised on the idea that resources as well as needs should drive the County’s capital program and the related debt service • Does not obligate the Board to fund a certain dollar amount

3. Recommendation • A range of bond funding: • FY07 $74-161 Million • FY08 $166-172 Million • FY09 $201-208 Million • FY10 $245-253 Million • Within this target range, the County will maintain its relative position on several metrics used by AAA jurisdictions • CMS funding – 3 options • Discuss pros and cons of each • Present this as information and answer questions. Will come back at a future workshop with a final recommendation.

4. Notes on Projections • Assumes: • Assessed valuation growth at 3% average • Expenditure budget growth at 4% • Overlapping debt constant at $925,596,000 • Population growth at 2.5% • Impact of Paygo and Lottery funds are not included in projections

5. Debt Management Guidelines Guideline Use Debt as a Percentage Of Assessed Valuation Measures debt levels against the property tax base. Debt per capita Relative measure of debt burden placed on a population (per person share of the Debt). Debt Service as a Percentage of theOperating Budget Reflects County’s budgetary flexibility to change spending and respond to economic downturns by measuring what portion of the budget is consumed by long-term fixed costs.

6. Debt as a Percentage of Assessed Valuation

7. Debt Per Capita

8. Debt Service as a Percentage of the Operating Budget

9. Capital Range Setting Process • Examine current debt position and debt service • Project future impact of debt issuances on current debt position/service • Recommend a capital range that: • Maintains current debt position relative to metrics • Continues/maintains achievement of the County’s desired results • Recognizes Paygo as a source of funds for County needs

10. Capital Range Parameters • Stay within a range of $3,500-3,600 debt per capita and maintaining the ratios

11. County Capital Range Debt capacity of County given current obligations and targets

12. Effect of Limit on % of Assessed Value

13. Effect of Limit on Debt Per Capita

14. Effect of Limit on % of Operating Budget

15. Other Considerations Guideline Actual • Unreserved General Fund Balance 12-14% 12.8% • Ten Year Payout Ratio 64% 66.3% (Minimum)

16. CMS Capital Range • Choices for Determining CMS Capital Funding • Historical average (57% of total) • Capital needs (avg. of $230 M per year for 10 years) • Capacity to spend ($170 Million) • Recommendation is to fund at 57% of total

17. CMS Range Options

18. EBAC Recommendations • Enrollment – use actual estimate rather than 3 year averageuse State projections, not historical average • Composition of enrollment – take into account higher cost of Special Needs/Limited English Proficiency studentsper capita funding is an average cost per child. LEP/EC/FRL higher costs taken into account. • Inflation – take into account inflation across expense categoriesuses more inflation categories than just salaries • Capital component – original framework underfundsbased on annual funding ranges • Operating-Capital Interaction – skewed to detriment of CMSno longer a part of the framework

19. Next Steps • Consider Board feedback and answer questions • Bring final recommendation back to Board