Mecklenburg County Debt Affordability Presentation to the Board of County Commissioners June 24,...
-
Upload
maud-harmon -
Category
Documents
-
view
216 -
download
0
description
Transcript of Mecklenburg County Debt Affordability Presentation to the Board of County Commissioners June 24,...
1
Mecklenburg CountyDebt Affordability
Presentation to the Board of County CommissionersJune 24, 2008
22
Overview of Presentation Overview of Debt Position
Rating Agencies’ Perspective
Benchmarks and Ratios
Available Debt Capacity
Recommendations & Next Steps
33
Overview of Debt Position At June 30, 2008 the County’s outstanding debt will total $2,278,565,000. $1.8 billion of General Obligation Bonds and $518 million of Certificates of
Participation (COPs).
Mecklenburg CountyOutstanding Debt
As of J une 30, 2008
517,980,000 23%
1,760,585,000 77%
Bonds
COPs
44
Overview of Debt Position Of that amount, $1.5 billion is fixed rate and $718 million is variable
rate. The total fixed portion includes $331 million of variable rate that
was swapped to fixed rate.Mecklenburg County
Mode of Outstanding DebtAs of J une 30, 2008
1,560,265,000 68%
718,360,000 32%
Fixed
Variable
55
Overview of Debt PositionThe outstanding debt is for the following purposes
Schools 63.2%Land 7.9%Park & Recreation 6.5%Community College 5.9%Courts 5.4%Govt. Facilities 5.1%Jails 3.6%Libraries 2.2%Historic Preservation .2%WTVI .1%
Outstanding Debt by PurposeAs of J une 30, 2008
Historic Preservation,
$4,386,680
Courts, $122,481,677
Government Facilities,
$116,239,002
WTVI , $1,045,759
Land, $180,574,132
Libraries, $49,135,415
Community College, $134,406,704
Park & Recreation, $147,479,641
J ails, $82,358,834
Schools, $1,440,457,158
66
Overview of Debt PositionAuthorized and unissued debt totals $718.5 million.
Bonds Authorized and Unissued2007 Referendum School Facilities - $516 million $436,000,000
Land - $35.6 million 30,640,000Community College Facilities - $30 million 30,000,000
2005 Referendum Community College Facilities - $46.5 million 32,500,0002004 Referendum Park & Recreation Facilities - $69 million 36,000,0002002 Referendum School Facilities - $224 million 14,000,000
TOTAL BONDS $579,140,000Certificates of Participation
School Facilities - $212.8 million 87,765,000Community College Facilities - $36 million 19,500,000
County Facilities - $14.8 million 9,785,000School Administrative Facilities - $21.5 million 12,000,000
Library Facilities - $14.8 million 10,325,000TOTAL COPS $139,375,000
TOTAL $718,515,000
77
Overview of Debt Position
Authorized and Unissued Debt By Purpose
Community College, $82,000,000
Schools, $537,765,000
Land, $30,640,000
Park & Recreation, $36,000,000 Misc. , $12,000,000
Libraries, $10,325,000 Government Facilities,
$9,785,000
Schools 74.8%Community College 11.4%Park & Recreation 5.0%Land 4.3%Misc. 1.7%Libraries 1.4%Govt. Facilities 1.4%
The miscellaneous category represents the authorization for the school administrative facilities approved by the BOCC in 2007.
8
Overview of Debt PositionProjected Debt Service-Current Outstanding Debt
Fiscal Year
Estimated General Debt Service
Estimated School Debt Service
Estimated Total Debt Service
FY 2009 $105,933,316 $149,233,934 $255,167,250FY 2010 $101,685,216 $147,004,923 $248,690,139FY 2011 $94,971,320 $145,500,198 $240,471,518FY 2012 $91,797,392 $142,378,736 $234,176,128FY 2013 $59,552,952 $156,061,284 $215,614,236FY 2014 $68,727,016 $131,343,129 $200,070,145FY 2015 $88,067,553 $103,876,629 $191,944,182
8
9
Overview of Debt PositionProjected Debt Service-Current Outstanding Debt & Authorized and Unissued
9
FiscalYear
Estimated General Debt Service
Estimated School Debt Service
Estimated Total Debt Service
FY 2009 $105,933,316 $149,233,934 $255,167,250FY 2010 $110,237,332 $174,552,807 $284,790,139FY 2011 $109,719,554 $187,949,464 $297,669,018FY 2012 $109,271,575 $193,149,553 $302,421,128FY 2013 $76,575,584 $206,718,652 $283,294,238FY 2014 $85,298,097 $180,657,048 $265,955,145FY 2015 $104,187,084 $151,847,098 $256,034,182
1010
Rating Agencies’ Perspective Mecklenburg County is rated AAA by all
three major credit rating agencies.
County was last rated in December 2007 and our AAA ratings were affirmed and given a stable outlook.
Despite the affirmation of the AAA rating and the overall strength of the credit, the rating reports indicate some areas of concern.
1111
Rating Agencies’ PerspectiveFitch Ratings:“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.”
1212
Rating Agencies’ PerspectiveMoody’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.”
1313
Rating Agencies’ PerspectiveExpectation of Rating Agencies
Mecklenburg County will continue to issue debt to finance its capital program;
Mecklenburg County will update its debt policy to more accurately reflect its current and future debt positions;
Mecklenburg County will identify other sources of funding for its capital program.
1414
Benchmarks and RatiosCurrent 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%
1515
Benchmarks and RatiosProjected Ratios at June 30, 2008
Ratio TargetResults at 6/30/08
Overall Debt Per Capita $3,600 $3,641Overall Debt as Percentage of Assessed Valuation 4% 3.4%Debt Service as Percentage of Operational Budget 16% 17.1%Ten Year Payout Ratio 64% 66.9%
1616
Benchmarks and RatiosComparison to other “AAA” Counties
Comparative S&P “AAA” County Medians (as of 6/30/07)
Mecklenburg County
S&P 2007 Median
Ratio of County to Median
AAA Rated High
AAA Rated Low
Overall Debt to Market Value 3.36% 1.90% 1.77x 5.90% .10%
Market Value Per Capita $105,788 $104,142 1.01X $265,654 $50,734
Overall Debt Per Capita $3,551 $2,484 1.43x $4,266 $161
Comparative Moody’s “Aaa” County Medians (as of 6/30/07)
Mecklenburg County
Moody’s 2007
Median
Ratio of County to Median
Principal Payout Percentage in 10 Years 67.2% 66.2% 1.01x
Per Capita Income $27,353 $27,595 .99xUnreserved/Undesignated General Fund Balance as a % of Revenues 19.3% 20.5% .94x
Household Effective Buying Income (000’s) $117 $119 .98x
1717
Benchmarks and RatiosComparison to other “AAA” Counties In North Carolina
Mecklenburg County
(6/30/07)Wake
(06/30/06)Durham
(06/30/07)Forsyth
(06/30/07)Guilford
(06/30/07)
Overall Debt to Market Value 3.8% 3.1% 2.3% 3.3% 2.2%
Market Value Per Capita $109,615 $100,631 $89,250 $89,250 $93,551
Overall Debt Per Capita $4,416 $3,085 $2,023 $2,903 $2,042
Principal Payout Percentage in 10 Years
66.9% 70% 70.2% 66.8% 52.9%
Unreserved/Undesignated General Fund Balance as a % of Revenues
16.1% 10.4% 7.3% 22.8% 9.7%
Debt Service as a Percentage of Operational Budget
18.3% 17.3% 10% 11.1% 7.7%
Source: Moody’s MFRA data as of April 25, 2008
1818
Measuring Debt CapacityDetermining Available Debt Capacity
1) Analyze capital needs
2) Project future assessed valuation, population growth, and operating expenditures.
3) Establish not-to-exceed limits for debt ratios
1919
Measuring Debt CapacityProjected Bond Sales
Estimated Estimated Estimated Estimated Estimated Estimated Estimated January 2009 January 2010 January 2011 January 2012 January 2013 January 2014 January 2015
PROJECT Sale Sale Sale Sale Sale Sale Sale
Recommended CIP 677,000,000$ 14,000,000$ 136,000,000$ 225,000,000$ 192,000,000$ 30,000,000$ 40,000,000$ 40,000,000$
BONDS Authorizedand Unissued
Approved in November 6, 2007 Referendum School Facilities ($516,000,000) 436,000,000$ 174,000,000$ 156,000,000$ 94,000,000$ 12,000,000$ Community College Facilities ($30,000,000) 30,000,000 10,000,000 15,000,000 5,000,000 - Land ($35,640,000) 30,640,000 10,000,000 10,640,000 10,000,000 -
496,640,000$ 194,000,000$ 181,640,000$ 109,000,000$ 12,000,000$
Approved in November 8, 2005 ReferendumCommunity College Facilities ($46,500,000) 32,500,000$ 15,000,000 12,500,000 5,000,000
Approved in November 2, 2004 ReferendumPark and Recreation Facilities ($69,000,000) 36,000,000 15,000,000 10,000,000 11,000,000
Approved in November 5, 2002 ReferendumSchool Facilities ($224,000,000) 14,000,000 14,000,000 -
Total Bonds 1,256,140,000$ 252,000,000$ 340,140,000$ 350,000,000$ 204,000,000$ 30,000,000$ 40,000,000$ 40,000,000$
CERTIFICATES OF PARTICIPATION Estimated EstimatedApproved January 2009 January 2010
PROJECT and Unissued Sale Sale
School Facilities ($123,165,000, $31,600,000 & $58M) 87,765,000 87,765,000
Community College Belk Addition ($15,000,000) 3,500,000 3,500,000 New Parking Deck ($21,000,000) 16,000,000 5,000,000 11,000,000
County Facilities Freedom Mall - IST Phase 2 & RES ($14,785,000) 9,785,000 9,785,000
School Administrative Facilities ($12,000,000) 12,000,000 7,000,000 5,000,000
Library Facilities Hickory Grove Relocation ($4,207,000) 2,907,000 2,907,000 Scalybark Relocation ($5,565,000) 3,865,000 3,865,000 Sharon Road Library Relocation ($5,053,000) 3,553,000 3,553,000
Total Approved COPs 139,375,000$ 123,375,000$ 16,000,000$ -$ -$ -$ -$ -$
TOTAL BONDS AND COPS W?CIP 1,395,515,000$ 375,375,000$ 356,140,000$ 350,000,000$ 204,000,000$ 30,000,000$ 40,000,000$ 40,000,000$
Other Projects - - - 146,000,000 320,000,000 310,000,000 310,000,000 Capacity Total Bonds and COPs 375,375,000$ 356,140,000$ 350,000,000$ 350,000,000$ 350,000,000$ 350,000,000$ 350,000,000$
Schools Totals (Bonds & COPs) 537,765,000$ 275,765,000$ 156,000,000$ 94,000,000$ 12,000,000$ -$ -$ -$
20
Measuring Debt Capacity
20
Fiscal Year
Estimated General Debt Service
Estimated School Debt Service
Estimated Total Debt Service
FY 2009 $105,933,316 $149,233,934 $255,167,250FY 2010 $111,637,332 $174,552,807 $286,190,139FY 2011 $124,684,554 $187,949,464 $312,634,018FY 2012 $146,361,575 $193,149,553 $339,511,128FY 2013 $146,528,084 $206,718,652 $353,246,736FY 2014 $188,468,097 $180,657,048 $369,125,145FY 2015 $235,699,584 $151,847,098 $387,546,682
Projected Debt Service-Current Outstanding, Auth/Unissued, CIP & Available Capacity
21
Measuring Debt CapacityTotal
Fiscal Current Debt Authorized & Projected Request Tax Rate Projected Request Tax Rate Estimated Tax RateYear Outstanding Unissued Total Debt Service Effect Debt Service Effect Debt Service Effect
2009 26.87 0.00 26.87 - 0.00 - - 255,167,250 26.87 2010 20.95 3.04 23.99 1,400,000 0.12 - - 286,190,139 24.11 2011 19.53 4.65 24.18 14,965,000 1.22 - - 312,634,018 25.40 2012 18.34 5.35 23.69 37,090,000 2.91 - - 339,511,128 26.60 2013 16.29 5.11 21.40 55,352,500 4.18 14,600,000 1.10 353,246,736 26.69 2014 14.57 4.80 19.37 56,935,000 4.15 46,235,000 3.37 369,125,145 26.89 2015 13.48 4.50 17.99 55,442,500 3.89 76,070,000 5.34 387,546,682 27.22
Schools
Fiscal Current Debt Authorized & Debt Tax Rate Projected Request Tax Rate Estimated Tax RateYear Outstanding Unissued Total Service Effect Debt Service Effect Debt Service Effect
2009 15.71 0.00 15.71 - 0.00 - - 149,233,934 15.71 2010 12.38 2.32 14.70 - 0.00 - - 174,552,807 14.70 2011 11.82 3.45 15.27 - 0.00 - - 187,949,464 15.27 2012 11.15 3.98 15.13 - 0.00 - - 193,149,553 15.13 2013 11.79 3.83 15.62 - 0.00 - - 206,718,652 15.62 2014 9.57 3.59 13.16 - 0.00 - - 180,657,048 13.16 2015 7.30 3.37 10.67 - 0.00 - - 151,847,098 10.67
Total
Total
Projected Capacity
Projected Capacity
Projected 2009 CIP Authorization
Projected 2009 CIP Authorization
Estimated Debt Service Tax Rate Effect
Estimated Debt Service Tax Rate Effect
Tax Rate Effect
22
Measuring Debt Capacity
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2104 FY 2015
Outstanding Debt at July 1 (billions)
$2.278 $2.490 $2.662 $2.813 $2.944 $3.069 $3.185
Debt Issuance .375 .356 .350 .350 .350 .350 .350
Debt Retirement .164 .183 .200 .219 .225 .234 .247
Outstanding Balance at June 30th (billions)
$2.490 $2.663 $2.813 $2.94 $3.069 $3.185 $3.288
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.
Projected Outstanding Debt
2323
Measuring Debt Capacity
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2104 FY 2015
Assessed Valuation (billions) $97.4 $116.8 $121.2 $125.7 $130.3 $135.2 $140.2Population 909,593 936,881 964,988 993,937 1,023,755 1,054,468 1,086,102Operating Expenditures (billions) $1.414 $1,495 $1.581 $1.673 $1.769 $1.871 $1.979
Projected RatiosOverall Debt to Assessed Valuation 3.52% 3.08% 3.09% 3.09% 3.07% 3.05% 3.01%Overall Debt Per Capita $3,768 $3,843 $3,886 $3,905 $3,913 $3,909 $3,890Debt Service as % Operational Budget
18.04% 19.24% 19.86% 20.38% 20.05% 19.73% 19.58%
Principal Payout in Ten Years 67.1% 67.3% 67.7% 68.6% 69.5%
1) Assessed Valuation – FY2009 is budget amount; growth rate of 20% in FY2010 and 3.7% growth annually thereafter.2) Population – estimated to grow 3% annually.3) General Fund Operating expenditures – project to increase 5.76% annually.
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.
2424
Recommendations1) 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%.
Ratio Current Targets Proposed TargetsOverall Debt Per Capita $3,600 $4,000Overall Debt as Percentage of Assessed Valuation 4% 4%Debt Service as Percentage of Operational Budget 16% 22%Ten Year Payout Ratio (floor) 64% 64%
2525
Recommendations2) Increase pay-go funding for capital projects
Options for pay-go fundingDedicate 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.
2626
Recommendations
Source FY09 Projected Revenue Three pennies on the tax rate $28,500,00050% of 8% excess fund balance 20,750,000Proceeds from county land sales* 32,000,000Additional ¼ cent sales tax 20,000,000
Total $101,250,000
*Assumes the sale of Hal Marshall is completed in FY09
If this pay-go strategy were to be in place for FY09, an estimated $101.3 million could be available to fund capital projects.
2727
Recommendations3) Incorporate pay-go strategy into the
County’s Debt Policy.
4) Cap borrowing at $350 million per year to stay within debt ratio targets.
28
Next Steps Based on feedback, a revised debt
policy will be developed and presented to the Board no later than September.
2929
Questions?