Mecklenburg County Debt Affordability. Presentation to the Board of County Commissioners June 24, 2008. Overview of Presentation . Overview of Debt Position Rating Agencies’ Perspective Benchmarks and Ratios Available Debt Capacity Recommendations & Next Steps. 2.
Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
Presentation to the Board of County Commissioners
June 24, 2008
The outstanding debt is for the following purposes
Authorized and unissued debt totals $718.5 million.
The miscellaneous category represents the authorization for the school administrative facilities approved by the BOCC in 2007.
Projected Debt Service-Current Outstanding Debt
Projected Debt Service-Current Outstanding Debt & Authorized and Unissued
“Fitch believes that economic growth will keep pace with the growing debt levels, resulting in a continued moderate debt burden; however it views with concern the county’s lack of compliance with its debt policies.”
“Although Fitch generally views the adoption of such a policy favorably, it notes that the county is out of compliance with one of the targets; limiting its impact on credit strength.”
“it views with concern the increased operating pressures posed by growing debt service payments. At 17.9% of fiscal 2007 actual expenditures and 20% of the county’s 2008 general fund operating budget, the county’s debt service payment is high and in excess of its 16% target.”
Moody’s Investor Service
“Debt service equaled 18.3% of 2007 operational expenditures, above the county’s targeted ceiling of 16%. Fiscal 2008 and fiscal 2009 debt service is also projected to exceed the county’s target levels. The county continuing to exceed this fiscal target could have negative credit implications moving forward. Further, the ability of the county to manage debt service expenditures relative to its budget will be a key factor in future credit analysis.”
Expectation of Rating Agencies
Current Debt Policy
Overall Debt Per Capita: measure will be maintained in the range of $3,500 to $3,600.
Overall Debt as a Percentage of Assessed Valuation: ratio is targeted at 3.3% with a ceiling of 4%.
Debt Service as a Percentage of Operational Budget: ratio is targeted at a level of 14% with a ceiling of 16%.
Ten-year Payout Ratio: maintain a floor of 64%
Projected Ratios at June 30, 2008
Comparison to other “AAA” Counties
Comparison to other “AAA” Counties In North Carolina
Source: Moody’s MFRA data as of April 25, 2008
Determining Available Debt Capacity
Projected Bond Sales
Projected Debt Service-Current Outstanding, Auth/Unissued, CIP & Available Capacity
Tax Rate Effect
Projected Outstanding Debt
At the end of FY 2009, outstanding debt is projected to total $2.5 billion.
This is expected to increase to $3.3 billion by the end of FY 2015.
Based on projected bond sales, debt per capita and debt service as a percentage of operational budget are out of compliance with the current debt policy.
1) Amend Debt Policy to include revised debt ratio targets:Increase overall debt per capita to $4,000.Increase debt service as a percentage of the operational budget to 22%.
2) Increase pay-go funding for capital projectsOptions for pay-go funding
Dedicate three pennies on the tax rate for capital projects.Dedicate all or a portion of 8% excess fund balance for capital projects.Dedicate proceeds from all county land sales for capital projects.Move forward with new ¼ cent sales tax and dedicate proceeds to capital projects.
If this pay-go strategy were to be in place for FY09, an estimated $101.3 million could be available to fund capital projects.
*Assumes the sale of Hal Marshall is completed in FY09
3) Incorporate pay-go strategy into the County’s Debt Policy.
4) Cap borrowing at $350 million per year to stay within debt ratio targets.