DEBT MANAGEMENT. Debt Service Fund Leasing Fund Leasing Equipment Acquisition Fund

Transcription

1 DEBT MANAGEMENT Debt Service Fund Leasing Fund Leasing Equipment Acquisition Fund

2 DEBT SERVICE FUND PROGRAM DESCRIPTIONS Debt service expenditures include the City s general governmental debt obligations; certificates of participation (COPS); limited obligation bonds (LOBs); leasing debt payments for City Hall renovations and for selected Recreation equipment and facility repairs; and the administrative expenses associated with bond ratings and issuances. Debt service resources include property tax revenues (7.59 cents on the property tax rate), investment income on unrestricted governmental monies, 80% of the Article 40 one-half cent sales tax distribution, and one-third of the City s municipal ABC revenue collection. OBJECTIVES AND ACHIEVEMENTS General Obligation Debt per Capita: A municipality s general obligation debt, when expressed as an amount per capita, is used to measure the reasonableness of its debt. Generally, per capita debt of around $600 is considered low; $1,300 is considered high. Winston-Salem s June 30, 2014 net bonded debt per capita was $364. Debt Service as Percent of Expenditures: If annual debt service expenditures get too high, the City s expenditure flexibility is reduced. Debt service is a fixed cost, and its increase can indicate excessive debt and produce fiscal strain. The FY annual financial report shows Winston-Salem at 16.4%. Legal Debt Margin: The City has a legal general obligation debt limitation not to exceed 8% of the total assessed valuation of the taxable property within the city s boundaries. This means that the total amount of bonds, notes, warrants, or any other type of general obligation debt issued or outstanding will not be greater than 8%. The FY annual financial report notes the City s net outstanding general obligation debt is $73.2 million, which is 0.4% of the City s total assessed valuation of taxable property. This leaves a legal debt margin of approximately $1.51 billion. Credit Rating: The City s credit rating is an overall indicator of financial condition, quality of financial management, and local economic factors. Winston-Salem is rated AAA by Fitch IBCA, Moody s Investors Service, and Standard and Poor s Corporation. 192

3 DEBT SERVICE FUND Actual Budget Adopted Percent EXPENDITURES BY TYPE FY FY FY Change Principal Retirement $9,800,980 $7,158,310 $7,475, % Capital Lease Charges 5,887,698 1,882,620 3,072, % Interest Payments 7,576,187 6,217,510 7,840, % Fiscal Charges 122, , ,970 0% Administrative Expenses 32,155 53,260 53, % Property Tax Collection Fee 72,322 54, , % Transfer To Capital Projects Fund 251, N/A To Mass Transit Tax Fund 5,562 2, % Total Expenditures by Type $23,748,810 $15,616,180 $18,794, % RESOURCES BY TYPE Property Taxes $10,028,057 $9,435,000 $14,528, % Sales Taxes 4,694,347 4,888,360 5,578, % ABC Allocation 426, , , % Interest Income 379, , , % Interest Subsidy on Recovery Zone Bonds 269, , , % Forsyth County 239, , , % Other Revenues 837, , , % Net Proceeds from Refunding Bonds 286, N/A Transfer From General Fund: Debt Service on Dell Project 400, , ,000 0% From General Fund: Lease Payment for Convention Center Capital 250, , ,000 0% From General Fund: City s Share of Debt Service on Wake Forest Innovation Quarter Infrastructure 170, , , % From General Fund: Debt Service on Bryce A. Stuart Municipal Building 0 0 1,251,400 N/A From Capital Projects Fund 251, N/A From LJVM Coliseum Fund: Proceeds from Sale of Coliseum Used to Extinguish Debt 7,193, N/A Total Resources by Type $25,425,702 $17,079,980 $24,025, % Addition to Fund Balance $1,676,892 $1,463,800 $5,230, % BUDGET HIGHLIGHTS - Debt service fund expenditures are increased $3.2 million, or 20.4%, mainly attributable to principal and interest payments on debt issuances for the Bryce A. Stuart Municipal Building, M. C. Benton, Jr. Convention and Civic Center, and the Union Station Transportation Center. The debt service fund s share of total property tax collection expenses is increased $50,980, or 93.4%, mostly due to the increase of 2.5 cents in the tax rate for debt service. 193

4 DEBT SERVICE FUND BUDGET HIGHLIGHTS - Continued - The FY adopted budget for the debt service fund includes a transfer from the general fund to cover debt service payments associated with the Bryce A. Stuart Municipal Building, which was purchased by the City from the Risk Acceptance Management Corporation (RAMCO) in September The transfer from the general fund represents a portion of rent payments from City departments that will be used to make principal and interest payments on limited obligation bonds issued to purchase the building. - Projected sales tax revenues in the debt service fund are increased $689,970, or 14.1%, due to current and anticipated growth in retail sales. The debt service fund s share of the Alcoholic Beverage Control (ABC) allocation is increased $95,200, or 24.5%, mainly attributable to higher than budgeted current year collections. - Property tax revenues in the debt service fund are budgeted to increase $5.1 million, or 54.0%, due to the increase of 2.5 cents in the property tax rate for debt service. This tax rate increase is necessary to generate the revenue needed to make debt service payments on recently approved limited obligation bond and general obligation bond issuances for the following purposes: Service Area Economic Development Housing Development Public Safety Parks and Recreation Streets and Sidewalks Public Transportation Public Assembly Facilities Total - Debt Issuance Amount $25,000,000 10,000,000 31,000,000 30,850,000 44,350,000 18,300,000 17,500,000 $177,000,000 The following graph provides a multi-year outlook for the debt service fund that includes recently approved debt issuances and projected future debt issuances. The projection below assumes that general obligation bonds would be issued in FY 2016, FY 2018, and FY 2020 and that the 2.5 cents increase in the tax rate is approved as part of the FY 2016 budget. 194

5 DEBT SERVICE FUND BUDGET HIGHLIGHTS - Continued - Listed below are the outstanding general obligation bonds and outstanding principal and interest requirements, as of June 30, PROJECTED OUTSTANDING GENERAL OBLIGATION BONDS AS OF JUNE 30, 2015 Original Issue Purpose of Bond Issue Year of Issue Amount Principal Balance Development, recreation, safety, and streets 2006 $19,925,000 $15,200,000 Recreation, safety and streets ,105,000 3,905,000 Refunding ,435,000 3,940,000 Recreation, safety and streets ,785,000 4,070,000 Refunding ,750,000 19,105,000 Development, streets, and housing ,500,000 8,925,000 Recreation, safety, and streets ,955,000 2,505,000 Refunding ,255,000 13,160,000 Recreation, safety and streets ,945,000 3,745,000 Total $94,655,000 $74,555,000 PROJECTED GENERAL OBLIGATION BONDS DEBT SERVICE REQUIREMENTS TO MATURITY AS OF JUNE 30, 2015 Year General Purpose 2016 $9,076, ,005, ,384, ,510, ,446, ,001, ,942, ,316,131 Total $97,684,

6 LEASING FUND PROGRAM DESCRIPTION Accumulates annual payments from City departments to make lease payments to the North Carolina Municipal Leasing Corporation (NCMLC). Assists the City in acquiring real and personal property through the issuance of limited obligation bonds (LOBs) to fund the purchases. The corporation leases the property to the City, which provides lease payments that cover the interest and principal on the LOBs as follows: governmental funds make equal annual payments over a five-year period and proprietary funds make the same scheduled payments with the addition of an annual interest payment at a rate of 5.5%. Goals of the City s leasing program are as follows: (1) reduce acquisition costs of real and personal property for the City by providing a low cost leasing program through the periodic issuance of LOBs, (2) increase productivity by making the purchase and budget decision concentrate on what is needed to do work? rather than how much equipment can the City afford?, and (3) improve replacement policies and reduce on-going maintenance costs by making optimum replacement affordable. Actual Budget Adopted Percent EXPENDITURES BY TYPE FY FY FY Change Principal Retirement $1,997,940 $18,509,640 $4,922, % Interest Payments 3,147,431 3,260,450 1,260, % Fiscal Charges -9, N/A Total Expenditures by Type $5,135,976 $21,770,090 $6,183, % RESOURCES BY TYPE Lease Payments City $11,232,087 $11,894,220 $9,620, % Lease Payments Outside Agencies 536, , , % Investment Income 428, N/A Proceeds from Capital Leases -9,531, N/A Transfer from General Fund 172, , , % Fund Balance Appropriation 2,297,931 8,909, % Total Resources by Type $5,135,976 $21,770,090 $10,241, % Addition to Fund Balance $0 $0 $4,058,200 N/A BUDGET HIGHLIGHTS - The adopted budget is decreased 71.6% due to a balloon payment in FY to retire previously authorized limited obligation bonds that were issued to fund the purchase of capital equipment. In FY , there is no balloon payment scheduled; therefore, the lease payments from City departments and outside agencies will increase the fund balance by $4.1 million to meet the future balloon payment requirement. - The adopted budget includes a transfer from general fund to cover the lease payment on the former AC Delco building, which has been renovated into the Downtown Arts Center ($52,540), and repayment of leasing fund reserves used to acquire the Lowery Street Facility ($120,000). Transfers from the general fund for the Downtown Arts Center and the Lowery Street Facility will be completed in FY and FY , respectively. 196

7 LEASING EQUIPMENT ACQUISITION FUND PROGRAM DESCRIPTIONS Accounts for the total cost of capital equipment, including computer hardware, for governmental funds that is financed through the North Carolina Municipal Leasing Corporation. City departments make annual lease payments of one-fifth of the purchase price to pay off the debt. With the exception of computers, the City leasepurchases equipment that costs $10,000 or more. EXPENDITURES BY TYPE Actual Budget Adopted Percent Capital Outlay FY FY FY Change Rolling Stock $4,480,232 $3,525,680 $6,568, % Computer Equipment 5, , , % General Equipment 672, , , % Communications Equipment 0 236, % Other 634,651 1,143,500 1,892, % Total Expenditures by Type $5,792,397 $6,042,680 $8,827, % RESOURCES BY TYPE North Carolina Municipal Leasing Corporation $5,792,397 $6,042,680 $8,827, % Total Resources by Type $5,792,397 $6,042,680 $8,827, % BUDGET HIGHLIGHTS - The adopted budget for the leasing equipment acquisition fund is increased $2,784,850, or 46.1%. Rolling stock purchases for FY include the following: seven tandem axle dump trucks ($805,000), two fire trucks ($1,150,000), one lift truck ($145,000), thirteen Sanitation trucks of various kinds ($2,244,000), five pick-up trucks ($183,000), six command vans ($222,900), sixty-five police pursuit vehicles ($1,560,000), two backhoes ($188,600), and two cable trailers ($70,000). - Computer equipment purchases include the replacement of the main server at the Public Safety Center ($170,000). - General equipment purchases include five snow plows ($50,000), three salt spreaders ($45,000), one chemical sprayer ($34,000), one reel grinder ($32,020), and two utility vehicles ($35,200). Other equipment includes equipment needed to outfit police pursuit vehicle replacements (354,250), bulletproof vests ($307,080), computers ($435,000), and other Police equipment ($796,480). - The complete list of adopted capital outlay to be financed through the North Carolina Municipal Leasing Corporation can be found in the Supplemental Information section of this document. 197

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