Discussion Items Prepared for the Advisory Board

Transcription

1 Discussion Items Prepared for the Advisory Board Albemarle County, Virginia July 29, 2015 Member NYSE FINRA SIPC

2 The Role of a Financial Advisor The Role of the Financial Advisor includes but is not limited to the following services: Financial Reviews; Fiscal Policy Guidelines; Funding Alternatives; Debt Monitoring for Refinancing Alternatives; and, Leading the Financing Process. July 29, 2015 Albemarle County, Virginia 1

3 Davenport as the County s Financial Advisor Davenport has had the pleasure of working for the County as its Financial Advisor since At that time, the County was looking for ways to increase dollars for pay-go capital. The County had been able to fund its capital program, outside of school projects, with dollars from the annual budget or reserves. However, the projected capital program was larger than the current and projected resources available. Working with Davenport the County implemented a strategy that set aside a portion of future revenue growth toward pay-go capital. In addition, the County borrowed long term funds in 2003 for capital, which included the purchase of the 5 th Street County Office Building. As part of this transaction the County received its first Aaa Issuer rating from Moody s. In July of 2010, the County received an upgrade by S&P to AAA. In 2013, the County added Fitch as a third rating which resulted in an initial rating of AAA. July 29, 2015 Albemarle County, Virginia 2

4 What the Rating Agencies say about Albemarle County Rating Agency Commentary Strengths Strong financial operations characterized by healthy reserve levels and ample operating flexibility Very strong management conditions with strong and formal fiscal policies Debt metrics are low. The County rapidly amortizes its outstanding debt, providing capacity to meet future needs that are considered to be affordable Very strong liquidity providing very strong cash levels to cover both debt service and expenditures Challenges Ability to maintain current level of reserves given General Fund reliance on economically sensitive revenues Ability to maintain pay-as-you-go capital plan While the County s revenue stream has a modest exposure to cyclical revenues, primarily sales taxes, they have all remained relatively constant during the recent recession Wealthy economy benefits from the presence of the University of Virginia July 29, 2015 Albemarle County, Virginia 3

5 How Albemarle County compares to other AAA Counties Population Albemarle County, VA National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA 0 400, ,000 1,200,000 Source: Moody s Investor Services Municipal Financial Ratio Analysis. July 29, 2015 Albemarle County, Virginia 4

6 How Albemarle County compares to other AAA Counties Assessed Value Per Capita Albemarle County, VA National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA $- $100,000 $200,000 $300,000 Source: Moody s Investor Services Municipal Financial Ratio Analysis. July 29, 2015 Albemarle County, Virginia 5

7 How Albemarle County compares to other AAA Counties Median Household Income Albemarle County, VA National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA $- $40,000 $80,000 $120,000 Source: Bureau of Economic Analysis. July 29, 2015 Albemarle County, Virginia 6

8 How Albemarle County compares to other AAA Counties Albemarle County, VA Unassigned Fund Balance as a Percentage of Revenues Total General Fund Balance as a Percentage of Revenues Albemarle County, VA National Aaa Median Virgina Aaa Median National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA 0% 5% 10% 15% 20% 25% Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA 0% 10% 20% 30% 40% 50% County Policy: The Unassigned General Fund Balance should be equal but not less that 10% of the County s total operating revenues, which includes the General Fund plus the School Fund. Note: The Rating Agencies evaluate compliance with formalized fiscal policies as well as how the overall reserve levels compare to other AAAA localities. Note: Arlington County does not account for a true unassigned fund balance. Therefore an apples to apples comparison is not available. Source: Moody s Investor Services Municipal Financial Ratio Analysis. July 29, 2015 Albemarle County, Virginia 7

9 How Albemarle County compares to other AAA Counties Debt as a Percentage of Assessed Value Albemarle County, VA National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Source: Moody s Investor Services Municipal Financial Ratio Analysis. July 29, 2015 Albemarle County, Virginia 8

10 How Albemarle County compares to other AAA Counties Debt Service as a Percentage of Expenditures Albemarle County, VA National Aaa Median Virgina Aaa Median Arlington County, VA Chesterfield County, VA Fairfax County, VA Hanover County, VA Henrico County, VA Loudoun County, VA Prince William County, VA 0% 2% 4% 6% 8% 10% 12% 14% Source: Moody s Investor Services Municipal Financial Ratio Analysis. July 29, 2015 Albemarle County, Virginia 9

11 Financing Options available to Virginia Counties General Obligation Bonds: Full Faith and Credit of the County Lease Revenue Bonds Annual Appropriation at Budget Time Pure Revenue Bonds Supported by Revenues of the project Typically Utilities: Water, Wastewater, Electric, Gas, Transportation State Level Note: There are various ways to Finance projects but ultimately they fall into one of the above categories as to the Security behind the financing. Other Financing Techniques Public-Private Partnership (still must issue debt as GO or LR) Community Development Authority (not instigated by County/debt not issued by County) Special Tax District (can t pledge toward debt - appropriation) Service District (creates the revenue by virtue of a tax that has to be appropriated only for the purpose stated in the creation of the Service District) July 29, 2015 Albemarle County, Virginia 10

12 Overview of General Obligation Bonds General Obligation Bonds: Full Faith and Credit of the County. Rating of the County (Issuer Rating: currently Aaa by Moody's and AAA by S&P and Fitch). Issued by the County (have to hold Referendum first). Good for 8 years (+2 additional years by petition of the Court). Bonds issued by the Virginia Public School Authority ( VPSA ) are General Obligation Bonds even though no Referendum is necessary. July 29, 2015 Albemarle County, Virginia 11

13 Overview of Lease Revenue Bonds Lease Revenue Bonds: Subject to Annual Appropriation at Budget time. Essential Projects with Collateral are rated one notch lower than Issuer Rating (Aa1/AA+/AA+). Essential Projects include 2003 transaction Public Safety Building as well as Schools, Fire Stations, Administration, Jails, and Courthouses. Non-essential projects or projects with no collateral are rated two notches lower than the Issuer Rating (Aa2/AA/AA). Note that even with two notches off the County s current Issuer Rating net of all expenses the County can finance at the same interest rates or possibly lower rates on its own using Lease Revenue Bonds versus VPSA s GO Bonds. Typically Issued through the Economic Development Authority. Bundling projects together may lead to a higher rating (or Bond Insurance commitment). July 29, 2015 Albemarle County, Virginia 12

14 Overview of Lease Revenue Bonds Type of Projects Financed with Lease Revenue Bonds: Essential Projects: Schools Courthouses Jails E911 Radio System Public Safety Administrative Buildings Non-Essential Projects or Projects that are difficult to collateralize: Roads Conservation Easement/Greenspace Library Parks & Recreation Renovations July 29, 2015 Albemarle County, Virginia 13

15 Method of Bond Issuance Available to Virginia Counties There are several methods by which Virginia Counties can issue either General Obligation or Lease Revenue bonds : Stand-Alone public bond sale by the County; Direct Bank placement by the County; or, Through one of the Commonwealth s programs. Virginia Resources Authority (either as GO Bond or Lease Revenue Bonds) Virginia Public School Authority (as GO Bond even without referendum per Code of Virginia) Stand-Alone using County s Aaa/AAA/AAA ratings Pool program using its Aa1/AA+/AA+ ratings Note: VML/VACo is not a program run by the Commonwealth or is this a credit supported by the Commonwealth. They essentially use the Direct Bank placement form of issuance using the County s credit. July 29, 2015 Albemarle County, Virginia 14

16 Method of Bond Issuance Available to Virginia Counties Interest rates are determined by the ultimate rating (for public issuances) or credit as perceived by a bank. Overall borrowing costs are affected more by the interest rate and length of the borrowing. However costs of issuance should also be considered. A Direct Bank placement will be the least costly from an upfront cost of issuance standpoint. There are no underwriter fees, rating fees or costs of preparing an offering document. Total costs of issuance can range from $30,000 to $60,000 depending upon complexity. Public Bond sale costs of issuance varies depending upon size as underwriters fees are usually a percentage of the deal and not a fixed amount. Including all costs of issuance this can run as high as 2% of the borrowing amount. Consideration should also be given to the fact that a Bank Placement may not be the best option due to the size of the issuance and/or the ability to receive a fixed rate for the desired length of the borrowing. July 29, 2015 Albemarle County, Virginia 15

17 Richmond Headquarters One James Center 901 East Cary Street, Suite 1100, Richmond, Virginia Telephone: (804) Toll-Free: (800) Courtney E. Rogers Senior Vice President July 29, 2015 Albemarle County, Virginia 16

18 Disclaimer The U.S. Securities and Exchange Commission (the SEC ) has clarified that a broker, dealer or municipal securities dealer engaging in municipal advisory activities outside the scope of underwriting a particular issuance of municipal securities should be subject to municipal advisor registration. Davenport & Company LLC ( Davenport ) has registered as a municipal advisor with the SEC. As a registered municipal advisor Davenport may provide advice to a municipal entity or obligated person. An obligated person is an entity other than a municipal entity, such as a not for profit corporation, that has commenced an application or negotiation with an entity to issue municipal securities on its behalf and for which it will provide support. 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Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates. Certain assumptions may have been made for modeling purposes or to simplify the presentation and/or calculation of any projections or estimates, and Davenport does not represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein. This material may not be sold or redistributed without the prior written consent of Davenport. Version 01/13/2014 DJG/CR July 29, 2015 Albemarle County, Virginia 17