HomeMy WebLinkAbout04-03-19 Work Session MinutesCapital Financing / Debt Management
April 3, 2019
Dublin City Council –Work Session
([KLELW$
Balanced Budget Discussion
April 3, 2019
Dublin City Council –Work Session
([KLELW%
Balanced Budget
Basis for Discussion
Concern expressed during the 2019 Operating Budget meetings regarding “unbalanced budget”
Council feedback from pre-retreat questionnaire
City expenses and maintenance costs are outpacing City resource growth. We need an action plan to change this equation.
Need for a Balanced budget policy
Concern with General Fund balance decreasing in 2018
Balanced Budget
Operating Budget
Fund level accounting utilized (required by law)
Budget is presented on a fund level; summarization is characterized as ‘operating revenue’ and ‘operating expenditures’ (in
addition to fund level detail)
Operating expenditures/revenues take into account the activity of all funds that provide day-to-day services to the residents:
General Fund
Street Maintenance & Repair Fund*
State Highway Fund
Court Computer Fund
Cemetery Fund*
Recreation Fund*
Swimming Pool Fund*
Safety Fund*
Hotel/Motel Tax Fund
Education & Enforcement Fund
Wireless 911 Fund
Law Enforcement Trust Fund
*Represents funds in which the General Fund subsidizes due to revenues being insufficient to cover expenditures
Operating Funds are essentially
all funds with the exception of
debt service funds, enterprise
funds and capital improvement
funds.
Budgeted Operating Revenues versus Expenditures
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
BudgetMillions
Budgeted Expenditures Budgeted Revenue
Actual Operating Revenues versus Expenditures
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Millions
Actual Expenditures Actual Revenue
Budget vs. Actual Expenditures
$50
$55
$60
$65
$70
$75
$80
$85
$90
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Millions
Budgeted Expenditures Actual Expenditures
Budget vs. Actual Revenue
$50
$55
$60
$65
$70
$75
$80
$85
$90
$95
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Millions
Budgeted Revenue Actual Revenue
Budget vs. Actual Revenue and Expenditures
$50
$55
$60
$65
$70
$75
$80
$85
$90
$95
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Millions
Budgeted Expenditures Actual Expenditures Budgeted Revenue Actual Revenue
Actual Expenditures vs. Original/Revised Budget
(Operating Budget)
$-
$20
$40
$60
$80
$100
$120
2016
Budget
2016 Actual 2017
Budget
2017 Actual 2018
Budget
2018 Actual 2019
BudgetMillions
Original Budget Revised Budget
85.2%
Spent
86.4%
Spent 87.7%
Spent
Annual Operating Budget
For each fund in which expenditures are projected to exceed revenue, fund balance is proposed to be
utilized
Administratively, we maintain that represents a “balanced budget”
Operating Budget is built on conservative revenue estimates; realistic expenditure estimates (both
determined in the fall prior to the beginning of the next fiscal year –i.e. fall of 2019 for budget beginning
January 1, 2020)
Balancing act between conservative planning and realistic expectations
To the extent that we are too conservative, City services may be reduced unnecessarily (during the preparation of the
operating budget) in order to show minimal use of or no use of fund balance
Forcing a “balanced budget” without the use of the fund balance will require reductions in expenditures
(which translates into services) based on an estimate (determined during the preparation of the operating
budget), not actual information.
History has shown that despite estimating expenditures to exceed revenue, that hasn’t been the case
10
Annual Operating Budget
General Fund Balance Policy
Requires a minimum level of 50% of the budgeted annual operating expenditures
To the extent the fund balance exceeds 75%, 25% of the amount in excess of 75% will be transferred to
the Capital Improvement Tax Fund
Expenditures excludes advances as those are one-time expenses, repaid over time
Includes transfers made to special revenue funds
Includes transfer to Capital Improvement Tax Fund
GFOA recommendation: Minimum General Fund Balance of no less than two months of regular general
fund operating revenues or expenditures (17%)
Moody’s rating methodology (US Local Government GO Debt)
Conditions for Use of General Fund Balance (per policy)
Natural disaster or other emergency
Economic recession/depression
Unexpected decline in revenue
Unexpected large one-time capital expenditures
11
AAA Aa
Fund Balance >30% 30%>n > 15%
Fund Balance (5-year trend) >30% 25%>n > 10%
General Fund Balance
12
Year-End Balance Expenditures Percent
2009 $34,773,949 $53,605,030 64.87%
2010 $39,926,471 $52,580,723 75.93%
2011 $45,001,134 $54,349,386 82.80%
2012 $52,039,415 $56,242,629 92.53%
2013 $56,038,803 $56,454,574 99.26%
2014 $61,017,044 $56,542,533 107.91%
2015 $59,556,334 $60,861,299 97.86%
2016 $56,698,773 $66,277,333 85.55%
2017 $60,125,537 $69,831,133 86.10%
2018 $57,212,737 $76,806,088 74.49%
2018 General Fund Balance and Activity
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Revenue Expenses
Ending Fund
Balance
2017 $60,125,537
2018 $94,498,288 $97,411,088 $57,212,088
Total expenditures exceeded revenue by
$2,912,799 (includes transfers and advances)
$1,938,050 – Transfer to Capital Improvement Fund
per GF Balance Policy
$632,250 – Purchase of Thomas property (Ord 86-18)
$4,261,294 – Purchase of Young property (Ord 71-18)
$4,000,000 – Purchase of Delta building (Ord 01-18)
$1,285,025 – Purchase of Rings Farm (payment 2 of 5)
(Ordinance 05-16)
Total Capital Transfers/Capital Purchases $12,116,619
(all non-recurring expenditures)
Discussion
Proposed Budget Timelines
2020 – 2024 CIP
May 13 – Council Work Session
Discussion about Council’s capital priorities
June 17 – Council Work Session
Administration presents proposed CIP; project
discussion; gather Council feedback
August 5 – Council Work Session
Council review of proposed CIP (with revisions if needed)
August 12, 26 – 1
st and 2nd reading of
CIP
15
2020 Operating Budget
August 19 – Council Work Session
Discussion about Council’s priorities for 2020
September – Council Committee
Review of proposed Operating Budget
Similar to 2018 process for 2019 Operating Budget
October 14, 28 – Council Work Session
Council review of Operating Budget
November 4, 18 – 1
st and 2nd reading of
CIP
Proposed Budget Timelines
16
What would Council like to see as part of the CIP/Operating Budget workshops?
What can staff do to better facilitate discussion about the individual projects and financing of the projects?
Did Council like utilization of the committee’s to review the departmental budgets?
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General Obligation Debt Limitations
2
Statutory Limits
•Chapter 133 of the Ohio Revised Code
•Establishes debt limits which are tied to assessed valuation
•133.04 and 133.05 define what securities are not included in calculation
Constitutional Limits
•In conjunction with ORC, establishes debt limits based on assessed valuation and debt of overlapping entities
•Changes as assessed valuation changes, new debt is issued, existing debt is retired
Dublin Limit
•Based on adopted Debt Policy
Debt Limitations –Dublin Debt Policy
Debt Policy approved by City Council September 12, 2016 (Ord No. 31-16); reviewed April 24, 2017; reaffirmed
April 23, 2018; Formalized long-standing practice of City
Of the Income Tax revenue dedicated to the Capital Improvement Tax Fund, 60% will be allocated to pay debt
service on projects while the remaining 40% will be used to cash fund projects
Excess of the debt allocation may be used to cash fund projects
The maximum amount of debt (both existing and proposed) shall not exceed 90% of the allocation of income tax
revenue allocated to pay debt service
3
2% Income Tax
75% General
Fund
25% Capital
Improvement Tax
Fund
60% for debt
service on capital
projects
Limited to 90% of
available revenue
(buffer against
declines in income
tax revenue)
40% to cash fund
capital projects
Dublin Limits
Existing Income Tax Supported Debt
When calculating existing Income Tax supported debt (utilizing the allocation defined in the
policy) the following are considered:
Debt service in which there are no other sources of revenue that can be used
City facilities
Roadways
Debt service in which other sources of revenue may be used but contain an income tax revenue as a
backing
TIF funded debt service
Reserve income tax funding if 110% of annual debt service payment isn’t available between annual
TIF revenues and TIF fund balances
4
Existing Income Tax Supported Debt
Outstanding debt supported by Income Tax revenue (year debt retired):
Avery-Muirfield/US 33 Interchange (2019)
Emerald Parkway –Perimeter Dr./Shier Rings (2019)
Service Center Expansion (2021)
Swimming Pool Construction (2025)
LED Street Lights (2022)
Justice Center Addition (2035)
Service Center Expansion (2037)
Pedestrian Bridge/High Street (2037)*
Riverside Crossing Park (2038)*
*TIF revenues are eligible to pay debt service but full debt burden is currently shown as funded through income tax revenue
5
Debt Capacity Limitations –Dublin Debt Policy
Year
Estimated
Income Tax
Revenue1
Allocation to
Capital Fund
2
Debt Service
Allocation3
90% of Debt
Service
Allocation
Existing IT
Supported Debt
Service4
Debt Allocation
not Committed
% of Capacity
Used
2019 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $4,476,818 $7,052,182 39%
2020 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $3,751,810 $7,777,190 33%
2021 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $4,759,663 $6,769,337 41%
2022 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $5,173,685 $6,355,315 45%
2023 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $4,896,187 $6,632,813 42%
2024 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $4,898,473 $6,630,527 42%
2025 $85,400,000 $21,350,000 $12,810,000 $11,529,000 $4,901,929 $6,627,071 43%
1 0% growth annually in income tax revenue.
2 25% of income tax revenue dedicated to the Capital Improvement Tax Fund
3 60% of the income tax revenue in the Capital Improvement Tax Fund reserved to pay debt service on capital projects
4 Actual debt service payments for existing debt funded by Income Tax
6
Existing Income Tax Supported Debt
(% represents amount of 90% allocation which is used by existing debt service)
39% 33% 41% 45% 42% 42% 43% 41% 41% 41% 41%
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
90% IT Allocation Total IT Allocation Actual Debt Service
10% Cushion (built into Debt Policy)
7
Sensitivity Analysis
Actual Debt Service versus Various Decreases in Income Tax Revenue (% capacity used)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
50% Decline 30% Decline 20% Decline 10% Decline 0% Growth Actual Debt Service
39% 33% 41% 45% 42% 42% 43% 41% 41% 41% 41%
43% 36% 46% 50% 47% 47% 47% 45% 45% 45% 45%
49% 41% 52% 56% 53% 53% 53% 51% 51% 51% 51%
55% 46% 59% 64% 61% 61% 61% 58% 58% 58% 58%
78% 65% 83% 90% 85% 85% 85% 82% 81% 81% 82%
8
TIF Supported Debt
Outstanding debt supported by TIF revenue
(year debt retired):
Rings Road Improvements (2020)
Woerner-Temple Road (2020)
Perimeter Drive Extension (2020)
Emerald Parkway –Phase 7A (2020)
Industrial Parkway/SR 161 Improvements (2029)
Emerald Parkway –Phase 8 (2033)
I270/US33/SR161 Interchange (ROW 2023/Construction 2034)
BSD Land Acquisition (for Roundabout) (2033)
Riverside Dr. Realignment/Roundabout/Park (2035)
John Shields Parkway Phase II (2036)
Bridge Park Roadway Network (2035)
Bridge Park Parking Structures (2035/2044)
Reserve income tax funding if 110% of
annual debt service payment isn’t
available between annual TIF revenues
and TIF fund balances
9
TIF Supported Debt Requiring Income Tax Backing
Outstanding debt supported by TIF revenue
(year debt retired):
Reserve income tax funding if 110% of
annual debt service payment isn’t
available between annual TIF revenues
and TIF fund balances
10
Emerald Parkway –Phase 8 (2033) –$131,875 average/year needed; 2030-2033
I270/US33/SR161 Interchange (ROW 2023/Construction 2034) –$311,000 average/year; 2030-2034
BSD Land Acquisition (for Roundabout) (2033) –$222,100 average/year; 2026-2033
Riverside Dr. Realignment/Roundabout/Park (2035) –$925,900 average/year; 2019-2035
Bridge Park Roadway Network (2035) –$87,000 average/year; 2019-2025*
*Based on MSP per Development Agreement; any amounts received over the MSP will reduce the amount needed of
income tax funding
NOTE: Amounts and dates in RED reflect the average amount of income tax funding needed during the time period
indicated
Sensitivity Analysis
Actual Debt Service versus Various Decreases in Income Tax Revenue (Accounting for TIF supported debt)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
50% Decline 30% Decline 20% Decline
10% Decline 0% Growth Actual Debt Service
Reserved for TIF Supported Debt
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Income Tax Information
15-year average growth: 3.7%
10-year average growth: 2.4%
5-year average growth: 1.5%
Largest decrease: 2009 at 6.1%
Largest increase: 2001 at 11.4%
Top 10 employers contributed 22.5%
of total income tax revenue in 2018
It would take losing the top 18
employers to lose 30% of our income
tax revenue
12
Income Tax Receipts % Change over PY
2000 $ 43,825,247 8.3%
2001 $ 48,826,163 11.4%
2002 $ 50,156,963 2.7%
2003 $ 51,870,173 3.4%
2004 $ 53,106,978 2.4%
2005 $ 57,987,883 9.2%
2006 $ 64,217,598 10.7%
2007 $ 67,232,642 4.7%
2008 $ 70,219,039 4.4%
2009 $ 65,907,593 -6.1%
2010 $ 68,848,526 4.5%
2011 $ 71,619,257 4.0%
2012 $ 75,430,513 5.3%
2013 $ 82,105,369 8.8%
2014 $ 88,068,530 7.3%
2015 $ 87,784,862 -0.3%
2016 $ 89,980,298 2.5%
2017 $ 87,506,868 -2.7%
2018 $ 88,120,215 0.7%
Loss of Verizon 2012-2016
Loss of Nationwide 2016-2018
Loss of Chase 2016-2017
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
13
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
MillionsNet Debt Expenses
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
14
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
MillionsTransfers from TIF/Other Funds Net Debt Expenses
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
15
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
MillionsTransfers from Capital Improvement Tax Fund (Income Tax)Transfers from TIF/Other Funds Net Debt Expenses
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
16
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
MillionsPremium (Within Bond Retirement Fund Balance)Transfers from Capital Improvement Tax Fund (Income Tax)
Transfers from TIF/Other Funds Net Debt Expenses
Premium: Generated when the coupon rate is
higher than the yield on the bonds. Premium is
required to be maintained in the Bond Retirement
Fund and is used to pay interest only on the
applicable bonds.
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
17
$-
$5
$10
$15
$20
$25
MillionsAdditional IT Allocation Available for Debt Premium (Within Bond Retirement Fund Balance)
Transfers from Capital Improvement Tax Fund (Income Tax)Transfers from TIF/Other Funds
Net Debt Expenses
Amount reflected above the purple bar represents
the additional amount of 20-year debt that could be
supported by the ‘Additional IT Allocation Available
for Debt’
Debt Service Analysis –2000 –2030 (assuming current outstanding debt)
18
$-
$5
$10
$15
$20
$25
Additional IT Allocation Available for Debt
Premium (Within Bond Retirement Fund Balance)Transfers from Capital Improvement Tax Fund (Income Tax)
Transfers from TIF/Other FundsNet Debt Expenses
-Amount transferred in from Capital
Improvement Tax Fund (income
tax allocation) and TIF funds to
pay debt service generally
matches the amount due; excess
amounts are not transferred in.
- Purple bar represents the excess
income tax revenue available to
pay debt service
- Excess fund balances within the
TIF funds are not reflected on this
chart given their ability to only be
used for specific debt
Current Debt Profile
Early Retirement of Outstanding Debt
20
Credit Type Series Name Dated Date Final Maturity Call Date Original Par Outstanding Par Callable Par
Limited Tax GO Various Purpose Imp. and Ref'g Bonds, Series 2009B 11/18/2009 12/1/2021 12/1/2019 $10,375,000 $2,745,000 $1,530,000
Capital Facilities Imp. Bonds, Series 2013 12/19/2013 12/1/2033 12/1/2021 $9,855,000 $9,805,000 $8,480,000
Capital Facilities Imp. and Ref'g Bonds, Series 2014 1/7/2014 12/1/2029 12/1/2021 $23,645,000 $13,630,000 $8,440,000
Various Purpose Imp. and Ref'g Bonds, Series 2012 10/2/2012 6/1/2032 6/1/2022 $10,820,000 $5,265,000 $2,805,000
Various Purpose Bonds, Series 2018B 12/18/18 12/1/2038 12/1/2023 $4,000,000 $4,000,000 $3,295,000
Various Purpose Bonds, Series 2015 9/30/2015 12/1/2035 12/1/2025 $49,200,000 $44,420,000 $29,805,000
Capital Facilities Bonds, Series 2016 12/6/2016 12/1/2036 12/1/2025 $9,325,000 $8,630,000 $5,840,000
Various Purpose Bonds, Series 2017 8/2/2017 12/1/2037 6/1/2027 $31,880,000 $30,760,000 $20,390,000
Various Purpose Bonds, Series 2018A 12/18/18 12/1/2038 12/1/2028 $18,700,000 $18,700,000 $11,370,000
Limited Tax GO Total $167,800,000 $137,955,000 $91,955,000
Unlimited Tax GO Various Purpose Ref'g Bonds, Series 2009A 11/18/2009 12/1/2020 12/1/2019 $15,105,000 $1,380,000 $200,000
Unlimited Tax GO Total $15,105,000 $2,700,000 $200,000
Nontax Revenue Special Ob. Nontax Revenue Bonds, Series 2015A 10/28/2015 12/1/2044 12/1/2025 $16,000,000 $16,000,000 $16,000,000
Special Ob. Nontax Revenue Bonds, Series 2015B 10/28/2015 12/1/2035 12/1/2025 $16,000,000 $15,700,000 $10,145,000
Nontax Revenue Total $32,000,000 $32,000,000 $26,145,000
Grand Total $217,891,000 $172,127,000 $118,300,000
Early Retirement of Outstanding Debt
Redemption (Call)
Process by which issuer repays to the bondholder the principal
amount and any accrued interest on the security to the date of
redemption.
Defeasance
Absent a refunding, defeasance requires the City to set cash aside
in an escrow account to pay the bonds as they come due. City is
still required to make all interest payments due on the bonds
through the call date.
Debt is not recognized as outstanding due to the collateralization
of the funds held in escrow.
21
Call Dates
2019 - $1,730,000
2020 - $ -
2021 - $16,920,000
2022 – $2,805,000
2023 - $3,295,000
2024 - $ -
2025 - $61,790,000
2026 - $ -
2027 - $20,390,000
2028 - $11,370,000
Note: If Council would like to explore these options further, it is recommended that a
subsequent meeting be schedule with the City’s Municipal Advisor.
Discussion Regarding Current Debt Policy
Current Debt Policy, approved September 2016, formalized a long-standing practice (in place since AT LEAST the 1996-2000
CIP approved in 1995):
Allocates 60% of the income tax revenue dedicated to the Capital Improvement Tax Fund to support debt service
Provides that only 90% of the amount noted above is available to be programmed
Staff recommends maintaining the current Debt Policy which provides appropriate safeguards which help mitigate against
declines in revenue:
Dedicated revenue stream to retire debt service
Conservative revenue estimates
Limit amount available to spend on debt service to 90% of estimated revenue
Significant cash balances
Additional coverage for debt supported by TIF revenues (subject to changes in property valuations)
5-year CIP that is updated annually
Forward planning for projects as part of the CIP, including those funded by debt, does not commit the City. If income tax revenues
were to decline in a manner that caused concern, the CIP would be adjusted to reflect the changing economic environment.
While it is important to remain mindful with regard to debt levels with future projects, a Debt Policy should be a strategic policy
that can be used in long-term capital planning; promote stability.
22
Comparable Information
23
Discussion
25