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OFFICE OF THE ALBANY CITY TREASURER DATE: MARCH 1, 2018 TO: MEMBERS OF THE COMMON COUNCIL FROM: HON. DARIUS SHAHINFAR RE: 2018 DEBT REPORT The following provides information on the City’s debt service and current outstanding debt. The 2018 information was provided from the 2018 budget and the 2017 information is unaudited. The City audit will not be complete until September of 2018. Overall debt was reduced by $12.37m (10%) from 2017 to 2018 and $33.3m (24%) between 2014 and 2018 ($140.1m to $106.8m). This report is made up of five sections. The first compares total General Fund expenses to total debt service expenses and landfill debt from 2014 to 2018 and the second shows debt issued and retired from 2014 to 2018. The third part provides a listing of outstanding debt by year for general obligation bonds with landfill general obligation bonds shown separately, and annual debt service from 2018 to 2025. The next section provides information on the estimated overlapping indebtedness. The last part provides information on the City’s credit rating from Standard and Poor’s. Total General Fund Expenses compared to Debt Service (Thousands) $168,485 $167,833 $167,123 $168,962 $176,441 $16,415 $16,724 $15,219 $15,894 $15,845 $4,901 $4,952 $4,912 $5,428 $5,386 2014 2015 2016 2017 2018 Total Debt Service and Landfill Debt to Total GF Expenses (In Thousands) GF Expenses Debt Service Landfill Debt ---PAGE BREAK--- 2 The chart above compares the actual General Fund expenses to actual Debt Service expenses (including paydown on the BANs and the portion of landfill debt) by year from 2014 to 2018.* *2017 the total General Fund expenses were not finalized as of the date of this report. For 2018 this report includes the total budgeted General Fund expenses. In 2016 the City issued $13,474,579 in General Obligation Serial Bonds including $2,264,400 for all landfill related projects and equipment with a maturity of 7 years, and $10,834,579 for all equipment and projects not landfill related with a maturity of 9 years (which refunded (refinanced) existing debt at a lower interest cost). The total interest expense on the 2016 GO bonds will be $1,324,963. During 2017 the City also issued $44,596,417 in Bond Anticipation Notes at an interest rate of 1.19% not reoffered. The BANs include 2014 – 2017 capital projects. The BANs are considered a short-term liability since they mature in 1 year from the date of issue. The BANs require a paydown of $3.7 million and interest expense of $530,698 when they mature in June 2018. Debt Issued and Retired The chart above shows the amount of debt issued on the left side bar and debt retired on the right side bar by year from 2014 – 2017. This chart includes principal and interest expense (including the BANs paydown and interest). 2018 shows only the debt budgeted to be paid for the year. BANs may be reissued for a 5 year period, after which projects must be bonded or paid from operating expenses. The advantage of utilizing BANs rather than bonds is the extremely low applicable interest rates and the flexibility that can be provided for debt issuance. Given the aggressive paydown of bonded debt over $0 $0 $14,800 $0 $21,316 $21,676 $20,131 $21,322 $21,231 2014 2015 2016 2017 2018 2014 - 2018 Debt Issued vs Debt Retired (In Thousands) Debt Issued Debt Retired ---PAGE BREAK--- 3 the next few years, it may be possible for the City to retire a large portion of the BAN debt without the necessity of bonding it, even taking into account the 2018 - 2022 Capital Plan. If the City is able to do this, it could be a potential savings of millions to City taxpayers. The Percentage of Debt Service to General Fund Expenses The chart above demonstrates the percentage of Debt Service expense ($21.2m including the BAN pay down and interest) to total budgeted General Fund expenses ($176.4m) for 2018. 88% 12% 2018 Budget GF Expenses compared to Total Debt Service GF Expenses Debt Service ---PAGE BREAK--- 4 The Percentage of Debt Service less Landfill Debt to General Fund Expenses The chart above demonstrates the percentage of Debt Service less landfill debt ($15.8m) to total budgeted General Fund expenses ($176.4m) for 2018. From 2014 to 2017 the percentage of debt service has remained consistent at between 10% to 12.5% of total general fund expenses. When landfill debt is deducted the percentage is closer to 7% to 91% 9% 2018 Budget GF Expenses compared to Debt Service less Landfill and Other Debt GF Expenses Debt Service ---PAGE BREAK--- 5 OUTSTANDING DEBT SCHEDULE The total outstanding debt including Bond Anticipation Notes for 2018 totals $106,808,827. The General Obligation Bonds including Landfill total $62,212,410 with the last maturity in the year 2025. The total outstanding bonds by the end of the year will be $45.2m if no additional debt is added to this total in 2018. This is the $62.2m less the current year debt expense of $17.0m. The last column shows the current annual debt by year. The paydown, interest due and total of the current bond anticipation notes is listed below the outstanding bonds total. Schedule of Principal and Interest Payments Serial Bond Indebtedness as of January 2018 (Including Bond Anticipation Note) Principal (Landfill) Interest (Landfill) Total 2018 15,360,000 4,955,000 1,646,290 431,150 17,006,290 2019 12,370,000 5,055,000 1,169,832 295,500 13,539,832 2020 12,715,000 5,215,000 815,301 156,175 13,530,301 2021 6,545,000 395,000 455,169 11,950 7,000,169 2022 3,905,000 400,000 255,168 4,000 4,160,168 2023 3,700,000 155,250 3,855,250 2024 1,500,000 61,050 1,561,050 2025 1,535,000 24,350 1,559,350 Bonds $57,630,000 $4,582,410 $62,212,410 BAN $3,694,000 $530,698 $44,596,417 Totals $61,324,000 $5,113,108 $106,808,827 ---PAGE BREAK--- 6 Estimated Overlapping Indebtedness* In addition to the City, the following political subdivisions have the power to issue bonds and to levy taxes or cause taxes to be levied on taxable real property in the City. Bonded indebtedness, including bond antic- ipation notes, is estimated as of the close of the 2015 fiscal year of the respective municipalities and is not adjusted to include subsequent bond issues, if any. Pursuant to applicable constitutional and statutory provisions, this indebtedness is deductible from gross indebtedness for debt limit purposes. Sewer and water exclusions and budgeted appropriations. Estimated State Building aid. Source: New York State Comptroller’s Special Report on Municipal Affairs for fiscal years ending 2015. Debt Ratios The following table sets forth certain ratios relating to the City's indebtedness. Debt Ratios As of June 14, 2017 Percentage Amount Per of Full Indebtedness Capita Valuation Net Indebtedness $ 96,476,812 $ 983.34 1.99% Net Indebtedness Plus Net Overlapping Indebtedness 166,648,681 1,698.57 3.45% The 2016 Census population of the City is 98,111. The City’s 2017 full value of taxable real estate is $4,837,259,196. Estimated net overlapping indebtedness is $70,171,869. *Fiscal Advisors & Marketing Inc. CITY BOND RATINGS Standard and Poor’s latest rating for the bonds is A+ (with a stable outlook). All outstanding debt is backed by insurance policies from municipal insurance companies. The biggest factor in our bond rating and our fiscal stress score is the status of our fund balance (currently about $7m). Best practice is that it should be at 10% of our expenses, or roughly $18m. Status of Gross Estimated Net City Applicable Municipality Debt as of Indebtedness Exclusions Indebtedness Share Indebtedness County of: Albany 5/4/17 281,482,943 $ 23,516,853 $ 257,966,090 $ 19.20% 49,529,489 $ School District: Albany 5/25/2017 140,424,353 119,781,973 20,642,380 100.00% 20,642,380 Total: 70,171,869 $