HomeMy WebLinkAboutIR 7368 7368 p.1
4NFORMAL REPORT TO CPW COUNCIL MEMBERS A=k No
March 16 , 1989
j To the Mayor and Members of the City Council
Subject: PROPOSED GENERAL OBLIGATION BOND SALE FOR 1988-89
(all dollar amounts in 000's)
Proposal
It is proposed that $14,000 in general obligation bonds be sold at a competitive bond
sale on May 2, 1989.
Determination of Capital Financing Needs
Following the established method of determining annual capital financing needs of the
City, those departments responsible for capital construction have been requested to
identify the capital financing required to proceed with project schedules for
approximately the next twelve months. The responses received are as follows:
Park & Recreation $ 1,055
Library 4,990
Streets 20,695
Total $26,740
These identified needs were further analyzed in the light of three basic
considerations - (1) the critical nature of the need, (2) direction from the City
Manager that 1988-89 bond sales be no greater than the $23,828 debt principal being
retired in this fiscal year, and (3) arbitrage restrictions. The result of this
analysis is the recommendation for a spring bond sale of $13,885 in street bonds and
$115 in Library bonds. Also recommended, is that the remaining $12,740 in capital
needs for 1988-89 be re-evaluated and prioritized in the fall for a second 1988-89
sale of no greater than $9,800. A fall sale would create no budget requirements until
1990-91.
Debt Service Impact
The impact of a $14,000 bond sale on the City's debt service requirements is projected
as follows:
Fiscal Present $14,000 New
Year Requirements Sale Requirements
88-89 $55,071 $ 70-- $55,071
89-90 $54,745 $ 1,493 $56,238
90-91 $54,305 $ 1,504 $55,809
91-92 $53,515 $ 1,472 $54,987
92-93 $52,354 4 1,440 $53,794
93-94 $49,911 $ 1,504 $51,415
94-95 $47,190 $ 1,464 $48,654
95-96 $44,917 $ 1,424 $46,341
96-97 $42,506 $ 1,480 $43,986
97-98 $39,353 $ 1,432 $40,785
98-99 $36,306 $ 1,480 $37,786
99-00 $34,597 $ 1,424 $36,021
00-01 $31,266 $ 1,464 $32,730
01-02 $28,265 $ 1,496 $29,761
02-03 $16,863 $ 1,424 $18,287
03-04 $12,098 $ 1,448 $13,546
04-05 $ 7,398 $ 1,464 $ 8,862
05-06 $ 6,998 $ 1,472 $ 8,470
06-07 $ 6,604 $ 1,472 $ 8,076
07-08 $ -o- $ 1,560 $ 1,560
L ISSUED BY THE CITY MANAGER I FORT WORTH, TEXAS
INFORMAL REPORT TO 00ft-Y COUNCIL MEMBERS Am%k No 7368 n•2
.001404,0 March .16, 1989
0 0 JP? To the Mayor and Members of the City Council
Subject:
PROPOSED GENERAL OBLIGATION BOND SALE FOR 1988-89
1989-90 Budget Implications
In recent years the City has softened the tax levy required for debt service, by also
using funds from the Debt Service Fund Balance. In recent years, we have been
successful in replacing the funds from the Fund Balance with interest earned on both
unspent capital project funds and funds accumulated in the Debt Service Fund. Between
1985 and the current year a debt service fund balance of 31-347 of the total annual
debt service requirements has been maintained. On Informal Report No. 7320 (9/20/88),
the City Council was informed that the debt service fund balance was projected to be
reduced to 187 of the annual debt service requirement, or approximately $9,750, by
9/30/89.
This reduction primarily reflects reduced interest earnings resulting from arbitrage
restrictions and the reduced funds available for investment due to smaller bond sales.
The future budget implications of this is that while debt service requirements are
increasing, fewer dollars will be available from either fund balance or interest
earnings to offset the funds required from a tax levy. If $14,000 in bonds are sold,
the total debt service requirement for next year will be $56,238, an increase of
$14,305 over the amount budgeted from the tax levy in the current year. The staff
estimates that interest earnings of $7,000 can be achieved in 1989-90. This creates
budget decision making possibilities ranging from the most risky, keeping the debt
service tax levy at approximately the current level of $ .2824 and budgeting the use of
OP" all of the fund balance and all estimated interest earnings to the most conservative,
funding the entire debt service requirements with the tax levy.
Of paramount importance in considering the budget possibilities is the potential
effect of any decision on the City's bond rating. The general consensus is that the
rating agencies look at the Debt Service Fund Balance in tandem with the General Fund
Balance and that a planned reduction of a debt service fund balance is not the
negative that an unplanned reduction may be, provided that a favorable General Fund
Balance is maintained. In the 9/30/88 Informal Report, referenced above, the staff
recommendation was that the targeted amount of the General Debt Service Fund Balance
be 20-257 of the annual debt service requirements. A fund balance of 207 of the
1989-90 debt requirements would be $11,250. This could be accomplished by raising
$50,738 from the tax levy and using $5,500 of estimated interest earnings.
Bond Sale Schedule
If the City Council gives direction to proceed with the $14,000 bond sale, the
required rating agency presentations will be conducted in early April and the
appropriate M&C will be prepared for the April 11th-Council agenda. The sale would be
conducted at 11:00 AM on Tuesday, May 2nd with ratification action by the Council at
the evening meeting.
ouglas Harman
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City Manager
—ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS