Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9,...

Department of Finance

Debt Policy andDebt Profile Overview

Finance Committee/City CouncilAugust 9, 2010

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Purpose

• Establish parameters for issuing and managing debt

• Provide information to decision makers related to debt legal requirements and affordability standards

• Establish objectives to be achieved

• Promote objectivity in the decision making process

• Facilitate the actual financing process by establishing important policy decisions in advance

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Legal Requirements

• State Law Authorizes the issuance of debt

• Federal and State Laws Govern the eligibility for tax exempt

status

• Federal and State Securities Laws Govern disclosure, sale and trading

of the debt

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Current City Credit Ratings

• Current Underlying ratings (GO rating)

- S&P AAA - Fitch AAA

• Maintenance of high credit rating minimizes cost of borrowing

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Types of Debt

• GO Bonds

• Utility Revenue Bonds

• Certificates of Participation

• Tax Allocation Bonds

• Special District Tax Bonds

• Special Assessment Bonds

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Types of Debt (continued)

• Joint Venture Arrangements• TRAN• Lines and Letters of Credit• Bond Anticipation Notes• Tax Exempt Commercial

Paper• Housing Revenue Bonds

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Methods of Sale

• Negotiated

• Competitive – Utility Revenue Bonds

• Private Placement

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Selection of the Financing Team

• Bond Counsel

• Underwriter’s Counsel

• Financial Advisor

• Trustee and Paying Agent

• Underwriter(s)

• Other Service Providers

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Refundings

• Current Refunding

• Advance Refunding

• Restructuring of Debt

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Credit Enhancement and Derivatives

• Letters of Credit

• Bond Insurance

• Surety Bonds

• Interest Rate Swaps

• Derivatives Policy

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Basic Legal Documents• Authorizing Resolution

• Indenture

• Official Statement

• Bond Purchase Agreement

• Continuing Disclosure Agreement

• Tax Certificate

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Pasadena Debt Profile

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Total Debt

(in millions)

General Fund Debt $477.68

Electric Revenue Bonds 155.50

Water Revenue Bonds 57.14

Tax Allocation Bonds 6.40

Total $696.72

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Summary of Outstanding General Fund Debt

Outstanding Bonds (as of 7/1/2010)Original

ParPar

(as of 6/30/2009) Dated DateCoupon Range

Final Maturity

Par (as of 7/1/2010)

General Government Bonds1993 COPs (Refunding & Capital Projects) 79,835 24,845 1/6/1994 5.35% 2014 20,4002001 COPs 21,210 4,950 11/15/2001 4.00% 2011 2,5252006 VRDBs (City Hall Portion) 10,355 9,414 2/16/2006 Hedged 2023 8,9102008-B Refunding COPs 27,650 26,950 5/15/2008 4.00 - 5.25% 2019 24,6752008-C Refunding COPs 71,450 68,950 7/16/2008 4.00 - 5.00% 2038 67,685Total General Government 210,500 135,109 124,195

Pension Obligation Bonds 1999-A Taxable POBs 50,735 31,845 8/5/1999 7.15 - 7.28% 2015 27,240

1999-B Taxable POBs (1) 51,205 51,205 8/5/1999 7.33% 2022 51,2052004 Taxable POBs 40,750 35,315 8/5/2004 Variable 2015 33,814Total Pension Obligation Bonds 142,690 118,365 112,259

Self-Supporting Bonds1987 VRDB COPs (Los Robles Av. Parking) 20,300 8,000 12/3/1987 Variable 2012 6,3001993 Refunding COPs (Old Pasadena Parking) 28,050 14,930 7/1/1993 6.25% 2018 13,6402006 VRDBs (Rose Bowl Portion) 36,945 33,586 2/16/2006 Hedged 2023 31,7902006-A CAB COPs (Conference Center) 27,140 27,140 9/7/2006 3.85 - 4.81% 2023 26,7752008-A VRDB Refunding COPs (Conference Center) 134,720 134,720 4/18/2008 Hedged 2035 134,7202008 Taxable Refunding VRDBs (Paseo Colorado Parking) 28,800 28,500 9/17/2008 Variable 2038 28,000Total Self-Supporting 275,955 246,876 241,225

Total General Fund Debt 629,145 500,350 477,679

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Statistics for Comparable California Cities(As of 2009 Fiscal Year End)

(1) Excludes notes/loans payable, line-of-credits, capital leases, compensated absences, etc.

Pasadena Non-Self-Supporting Debt figure excludes Pension Obligations as they are considered Self-Supporting until 2014

Source: 2009 Comprehensive Annual Financial Reports, Budgets and Cities’ websites

Comparable California Cities

Pasadena Beverly Hills Santa Monica San Jose Glendale Burbank

Debt Statistics

Non-Self-Supporting Debt ($millions) (1) $135.1 $146.3 $79.2 $1175.2 $55.5 $18.1Non-Self-Supporting Debt per Capita ($) $900 $4,090 $856 $1,167 $268 $167Non-Self-Supporting as Debt % of AV 0.65% 0.72% 0.34% 1.11% 0.25% 0.08%Unreserved GF Balance ($millions) $48.4 $74.6 $155.5 $178.8 $35.8 $59.9Unreserved GF Balance as % of GF Expenses 26.2% 47.7% 60.7% 24.9% 23.7% 40.3%5-Year CIP ($millions) $1,509 $225 $710 $1,600 $346 $4095-Year CIP - Excluding Utilities ($millions) $665 $123 $638 na $346 $217G.O. Ratings (Moody's/S&P/Fitch) NA/AAA/AAA Aaa/AAA/AAA Aaa/AAA/AAA Aaa/AAA/AAA Aa1/AAA/NR Aa1/AAA/NR

Demographic Statistics

Assessed Value ($millions) 20,752 20,382 23,489 105,828 22,588 23,786AV per Capita ($thousands) $138 $570 $254 $105 $109 $220Per Capita Income as % of State 94% 200% 101% 139% 124% 94%Per Capita Income as % of Nation 102% 216% 110% 150% 134% 102%Population 150,185 35,774 92,494 1,007,000 207,303 108,082Unemployment 9.4% 5.2% 9.5% 13.1% 9.9% 9.2%

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Financial Management Assessment

Standard and Poor's Financial Management Assessment

PasadenaBeverly

HillsSanta

MonicaSan Jose Glendale Burbank

Ratings Strong Strong Strong Strong Good StrongDebt Policies Yes Yes Yes Yes No YesSwap Policies Yes No No No No NoLong-Term Financial Plan Yes Yes Yes Yes Yes YesReserve Policies Yes Yes Yes Yes Yes Yes% of Reserve Policies 10% 40% 10% 3% 35% 20%5 Year CIP Yes Yes Yes Yes 10 Year Yes

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• Strong general fund balances and reserve levels

• Diverse revenues• Moderate debt levels• Conservative financial management

policies• Regional employment center• Major destination for retail, tourism

and entertainment• No significant other post-employment

benefit liabilities

City of Pasadena Credit Strengths

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• Projected debt levels may deteriorate credit profile> Total debt per capita is already high

relative to peers although adequate if self-supported debt is excluded

• Continued soft local residential property market

• Maintain balanced budgets and strong reserves during slow economic environment

City of Pasadena Credit Challenges

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• Based on staff and financial advisor’s analysis, it is estimated that Pasadena’s debt capacity is approximately $75-100 million if the City wishes to maintain its AAA ratings from two rating agencies.

Debt Capacity Conclusions

Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9,...

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Transcript of Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9,...