wake county board of commissioners work session · 2012-08-06 · capital and debt management...

Wake County Board of

Commissioners Work

Session

Capital Finance Update and Options for Future Debt Financing

1

• Update and Review of County’s Long-Term Capital Financing Plan – Review of Current Assumptions in Financial Model

– Results of January 24th Sale • $96.79 million GO bond sale for WCPSS

• Results of $124 million variable rate refunding

• Review of Current Capacity & Determining New Capacity

• Identifying Capital Needs for Schools and Wake Tech

• Balancing Capacity With Needs

• Voter Approved Debt and Non-Voter Approved Debt

2

Presentation Overview

BOC Retreat– January 2012

Capital and Debt Management

Policies Seven-year capital plan developed within context of debt

policies and targets necessary to maintain Aaa bond rating:

– Plan funded through dedicated revenue sources • 15.50 cents of 53.4 cents property tax rate

• Portion of Article 40 and Article 42 sales tax revenue (30% and 60% respectively)

– Target 80% debt funding; 20% cash

– 19% Minimum Fund Balance in the Debt Service Fund

– Debt is acquired prior to appropriation of funds and entering into contractual commitments

– Debt repayment schedule meets standards for AAA rated counties (60% to 70% within ten years)

– General fund investment earnings recorded in Debt Service Fund to hedge variable rate debt

3


Recent Feedback from Rating

Agencies

Strengths • Robust Available Balance

Sheet Resources

– Cited numerous times as

mitigating high debt service as

a percent of overall

expenditures

• Financial Modeling and Strong

Debt Management Practices

• Rapid debt amortization

• No Derivatives/Swaps

• Strong and Varied Economic

Base

Weaknesses

• Potential for a prolonged

period of slow assessed value

growth and growing

expenditure pressures

• Slow employment gains and

state government job losses

• Debt as a percent of

expenditures

– Mitigated by balance sheet

resources and fact majority of

debt is for public schools

BOC Retreat– January 2012 4

Capital Markets Access – Variable

Rate Debt

• Hedged by Interest

Earnings of

Investment Portfolio

• Hedged by

Unrestricted Funds

Wake County Update – January 2012 5

0.000%

2.000%

4.000%

6.000%

8.000%

Jul-0

4

De

c-0

4

Ma

y-0

5

Oct-

05

Ma

r-0

6

Aug-0

6

Jan-0

7

Jun-0

7

No

v-0

7

Apr-

08

Sep-0

8

Feb

-09

Jul-0

9

De

c-0

9

Ma

y-1

0

Oct-

10

Ma

r-1

1

Aug-1

1

Portfolio Yield vs. Tax-Exempt Variable Rate

Portfolio Yield Tax-Exempt Variable Rate

$- $100 $200 $300 $400 $500 $600 $700 $800 $900

Jul-0

4

De

c-0

4

Ma

y-0

5

Oct-

05

Ma

r-0

6

Aug-0

6

Jan-0

7

Jun-0

7

No

v-0

7

Apr-

08

Sep-0

8

Feb

-09

Jul-0

9

De

c-0

9

Ma

y-1

0

Oct-

10

Ma

r-1

1

Aug-1

1

Unrestricted Funds vs. Variable-Rate Debt Outstanding ($ Mil.)

Unrestricted funds Variable-rate debt

• County uses a sophisticated model to project debt capacity based on several factors

– Existing Debt Service

– Projected Property and Sales Tax Growth

– Interest Earnings

• Model strategically uses fund balance but ensures county adheres to 19% minimum fund balance in the debt service fund

– Current fund balance is 74.4%, lowest point projected is 38.7% in FY 2016.


Debt and Capital Financial Model

• Changes from November 2011 – Lowered property tax valuation growth for FY 13-

FY17

– Increased sales tax projection for FY 13

– Lowered investment rate for FY 13-14;FY16

– Lowered tax exempt variable interest rate FY13-FY22

7

Capital Planning Assumptions

Through 2022


GROWTH RATES: 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Total Property Tax Rate 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40

Property Tax Rate for Capital 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50

Property Tax Valuation Growth 1.03% 0.82% 1.50% 2.00% 2.50% 3.00% 3.50% 3.50% 3.50% 3.50% 3.50%

Sales tax annual growth rate 1.00% 3.29% 2.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Investment rate 1.00% 1.00% 1.50% 2.00% 2.50% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Tax-exempt fixed interest rate 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50% 4.50%

Tax-exempt variable interest rate 0.30% 0.70% 1.05% 1.40% 1.75% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10%

Variable Rate Fees 0.57% 0.55% 0.55% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60%

Total All-In Variable Rate Costs 0.87% 1.25% 1.60% 2.00% 2.35% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70%

• Property Tax Assessed Valuation

• Sales Tax

• Investment Rate

• Tax Exempt Variable Rate


Capital Planning Assumptions

Changes

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Nov-11 1.03% 1.00% 2.00% 3.00% 3.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

Jan-12 1.03% 0.82% 1.50% 2.00% 2.50% 3.00% 3.50% 3.50% 3.50% 3.50% 3.50%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Nov-11 1.00% 1.50% 2.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Jan-12 1.00% 3.29% 2.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Nov-11 1.00% 2.00% 2.00% 2.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Jan-12 1.00% 1.00% 1.50% 2.00% 2.50% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Nov-11 0.30% 0.75% 1.55% 2.05% 2.25% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70%

Jan-12 0.30% 0.70% 1.05% 1.40% 1.75% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10%

Adjusting Our Property Tax Projections

9

0%

1%

2%

3%

4%

5%

6%

7%

FY02 FY03 FY04 FY05 FY06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18

Actual June 2008 June 2009 June 2010 June 2011 January 2012

Adjusting Sales Tax Projections


-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

Perc

en

t C

han

ge

– $96.79 million remains from $970 million authorized in 2006; amount offered hereby (Sold on January 24)

– All community college bonds issued from $92 million authorized in 2007

– $44.7 million remains from $45 million authorized in 2007 for libraries

– $21 million remains from $50 million authorized for open space in 2007

January 2012: Debt Issuances

11

Bond Issues

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Total

Libraries - 6,100,000 10,800,000 11,000,000 16,800,000 44,700,000

Open Space - 11,000,000 10,000,000 - - 21,000,000

Comm College - - - - - -

Schools - G.O. 96,790,000 - - - - 96,790,000

Total 96,790,000 17,100,000 20,800,000 11,000,000 16,800,000 162,490,000


• $96.79 million for WCPSS

– Model assumed 4.5%; actual results 4.28%

– Model assumed premium of $4 million;

actual results $15.89 million

– Model assumed TIC of 3.97 %;

actual results 2.40%

• Refund $124 million variable rate debt

– Used $30 million of interest

– Refunded $94 million to fixed rate

• Assumed 1.9%; actual results 1.39%


Results of January 24, 2012 Sale (Closes February 8)

Assumptions: 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Tax rate (cents) 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40 53.40

Tax Base

Valuation $119,158,250 $120,390,000 $121,379,164 $123,157,219 $125,620,365 $128,760,874 $132,623,700 $137,265,530 $142,069,824 $147,042,268 $152,188,748 $157,515,355

Annual growth rate Actual 1.03% 0.82% 1.50% 2.00% 2.50% 3.00% 3.50% 3.50% 3.50% 3.50% 3.50%

Levy after collection rate 621,638 629,846 635,801 644,101 657,057 673,576 693,894 718,309 743,579 769,734 796,804 824,821

Revenue per penny 11,641 11,795 11,906 12,062 12,304 12,614 12,994 13,451 13,925 14,414 14,921 15,446

Capital tax rate 15.76 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50 15.50

Ad valorem tax - capital program 183,465 182,820 184,549 186,958 190,719 195,514 201,411 208,498 215,833 223,425 231,282 239,414

Percent change - ad valorem tax 0.29% -0.35% 0.95% 1.31% 2.01% 2.51% 3.02% 3.52% 3.52% 3.52% 3.52% 3.52%

Ad valorem tax allocation:

Debt Service Fund 143,992 158,131 158,712 160,784 164,018 168,142 173,214 179,308 185,616 192,145 198,903 205,896

Reduce Transfer for One-Time Costs (2,800)

School Capital Projects Fund 7,000 - - - - - - - - - - -

Transfer to Wake Tech 5,157 - - - - - - - - - - -

County Capital Projects Fund 27,315 23,756 25,837 26,174 26,701 27,372 28,198 29,190 30,217 31,279 32,379 33,518

Adjustments to County Cash Funded Projects (4,000) - - - - - - - - - -

Reallocate DS to CIP (Hammond Savings) 1,800

Total 179,464 180,887 184,549 186,958 190,719 195,514 201,411 208,498 215,833 223,425 231,282 239,414

Assumptions: 2,011 2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019 2,020 2,021 2,022

Sales tax annual growth rate 0.00% 1.00% 3.29% 2.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50%

Investment rate 1.00% 1.00% 1.00% 1.50% 2.00% 2.50% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

Tax-exempt variable interest rate (w/ fees) 1.00% 0.87% 1.25% 1.60% 2.00% 2.35% 2.70% 2.70% 2.70% 2.70% 2.70% 2.70%

DEBT SERVICE REVENUES

Ad valorem tax

From

Above 143,992 155,331 158,712 160,784 164,018 168,142 173,214 179,308 185,616 192,145 198,903 205,896

Sales Tax: Article 40 & 42 26,855 27,268 28,165 28,728 29,447 30,183 30,937 31,711 32,503 33,316 34,149 35,003

Transfer from Major Facilities Fund 991 991 991 991 991 79

Transfer from Fire Tax (self -financincg) 606 606 606 606 606 606 35 35

Transfer in from Fire Tax (bank debt) 534 534 534 534 534 534 534 430 120

Lottery Proceeds 20,467 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

School Construction

Premium (BAN or Bond) 11,190 4,000

Detention Center Savings 2,800

WCPSS Capital Projects Fund 36,664

WCPSS RZEDBs federal subsidy 907 905 905 905 905 905 905 905 905 905 905 905

Wake Tech financing subsidy @ 45% 101 207 207 207 207 207 207 207 207 207 207 207

Wake Tech financing subsidy @ 35% 54 110 110 110 110 110 110 110 110 110 110 96

QSCB Subsidy 1,741 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780

Interest income - WCPSS, WTCC, 502 161 137 121 177 53 0 0 0 -

Interest income - LOBs proceeds 438 (0) (0) (0) (0) (0) (0) (0) (0)

Interest income - General Fund 4,000 4,000 6,000 8,000 10,000 12,000 12,000 12,000 12,000 12,000 12,000

Interest income - County Capital

Projects (Cash) 500 500 750 1,000 1,250 1,500 1,500 1,500 1,500 1,500 1,500

Plus interest income - Debt Service Fund 7,109 3,114 1,579 1,944 2,279 2,714 2,922 3,014 3,873 5,135 7,224 10,382

Total Debt Service Revenues 217,347 246,951 208,250 213,477 219,998 226,687 234,197 241,000 248,615 257,098 266,778 277,770

DEBT SERVICE EXPENDITURES

Fixed Rate Debt Service (DS) 181,081 194,692 198,386 191,413 187,472 191,077 179,113 128,992 114,400 115,138 127,138 118,586

Variable Rate Debt Service 855 2,827 4,061 5,198 6,498 17,596 23,434 66,829 76,182 57,363 20,091 23,613

Impact of $94 VR to Fixed and $30 M Payoff (358) 2,361 1,304 622 (195) (184) (11,474) (11,475) (11,476) (11,477)

Use of WCPSS Capital Projects Fund for VR 30,000

May 10 Refunding Savings

Debt service - Justice Center 6,648 6,723 12,678 12,529 12,350 12,172 11,993 11,780 11,902 11,309 11,011 10,713

Debt service - Jail 7,336 13,521 13,270 13,014 12,763 12,484 12,218 11,944 11,638 11,336 11,028 10,722

Five County Stadium financing agreement 991 991 991 991 991 79

Fire truck debt service 534 534 534 534 534 534 534 430 120

QSCBs ($34,910,000) - Principal Only 2,054 2,012 1,971 1,930 1,889 1,848 1,807 1,766 1,725 1,684 1,643 1,602

QSCBs Interest Subsidized 1,741 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780 1,780

QZAB debt service 163 163 163 163 163 163 163 - - - - -

Bond fees (included in DS beg 2013) 1,778 2,064

Contract Services 72 96 96 96 96 96 96 96 96 96 96 96

Salary, Benefits and Admin Support 204 204 204 204 204 204 204 204 204 204 204 204

Total Debt Service Expenditures 203,457 255,248 236,496 229,157 225,363 237,838 231,158 212,347 206,573 187,435 161,514 167,316

Revenues in excess (less than)

expenditures 13,890 (8,298) (28,246) (15,680) (5,365) (11,151) 3,039 28,652 42,042 69,663 105,264 110,454

Adjust to actual

Fund Balance - beginning of year 152,266 166,157 157,859 129,613 113,933 108,568 97,416 100,455 129,108 171,150 240,813 346,076

Fund Balance - end of year 166,157 157,859 129,613 113,933 108,568 97,416 100,455 129,108 171,150 240,813 346,076 456,530

Ending balance as % of next year's G.O.

DS 65.7% 66.8% 56.6% 50.6% 45.7% 42.2% 47.4% 62.6% 91.5% 149.4% 207.2% 288.7%

AD VALOREM TAXES

Financial Model and Debt Capacity

13

Assumptions for

Tax Rates, Growth

in Tax Base, and

Allocation for Debt

and Capital

Assumptions for

Debt Service

Revenues

Assumptions for

Debt Service

Expenditures

Debt

Service

Fund

Balance


Projected

Low of

42.2%

FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22

Before

(November

2011) 64.0% 53.9% 46.7% 42.0% 37.8% 41.4% 52.8% 76.9% 128.2% 184.8% 263.1%

After

(January 2012

Baseline)

66.8% 56.6% 50.6% 45.7% 42.2% 47.4% 62.6% 91.5% 149.4% 207.2% 288.7%

Projected Debt Service Fund Balance (% of Subsequent Years Expenditures)

• Projected Debt Service Fund Balance

Percent Changes from Low of 37.8% to

42.2% in FY 16

• With assumptions for January 24 sale; not actual results


Change in Debt Service Fund

Balance

DETERMINING NEW CAPACITY


• Existing Debt Obligations

– Voter Approved

– Non-Voter Approved

• 2/3 Bonds

• Limited Obligation Bonds (LOBs)

for Hammond Road and Justice

Center

• Revenue Projections and Debt Service Fund Balance

– Assessed Value

– Sales Tax

• No general obligation authorization remaining for WCPSS and Wake

Tech

– Assume issuances beginning in FY 14 and then solve for what can be

issued and funded with cash for each year thereafter.

Approach to Determining New

Capacity


November 7, 2000 Schools $500 million

Criminal Justice (Hammond Road) $20 million

Open Space $15 million

October 7, 2003 Schools $450 million

Libraries $35 million

November 2, 2004 Community College $40 million


November 7, 2006 Schools $970 million

October 9, 2007 Community College $92 million

Libraries $45 million


Past Bond Referenda


-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

450,000,000

500,000,000

FY2002

FY2003

FY2004

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

Debt Service Fund Revenues and Expenditures 2002 - 2022 (Projected)

With Debt Service Fund Balance

Revenues Expenditures Fund Balance

Current Debt Service Obligations


-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Debt Service Principal and Interest

Debt Service Principal and Interest

Current Debt Service Obligations


-

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

Debt Service Principal and Interest (without January 2012 Sale)

2011 Public Improvement

2010F Public Improvement

2010E Public Improvement

2010D Public Improvement

2010C Refunding

2010B Public Improvement

2010A Public Improvement

2010 LOBs

2009 LOBs

2009D Refunding

2009C Refunding

2009B Public Improvement

2009A Public Improvement

2007B Variable Rate School

2007A Variable Rate School

2007 Public Improvement

2005 School

2005 Refunding

2004 Refunding

• Level Principal

• Interest varies according to series

• Together, results in a TIC (total interest cost)

– Example below from 2011 $116.8 M GO Sale: TIC

3.16%

Typical Structure of Fixed-Rate

GO Issue


Fiscal

Year

Principal

Amount

Interest

RateYield

Total

Principal

and Interest

Payment

Fiscal

Year

Principal

Amount

Interest

RateYield1

Total

Principal

and Interest

Payment

2012 6,100,000$ 3.00% 0.30% 11,201,757 2022 6,100,000$ 5.00% 3.13% 8,410,125

2013 6,150,000 4.00 0.6 11,054,625 2023 6,150,000 3.25 3.45 8,102,625

2014 6,150,000 4.00 0.92 10,808,625 2024 6,150,000 4.00 3.66 7,902,750

2015 6,150,000 5.00 1.39 10,562,625 2025 6,150,000 4.00 3.82 7,656,750

2016 6,150,000 5.00 1.68 10,255,125 2026 6,150,000 4.00 3.94 7,410,750

2017 6,150,000 5.00 1.95 9,947,625 2027 6,150,000 4.00 4.02 7,164,750

2018 6,150,000 5.00 2.23 9,640,125 2028 6,150,000 4.00 4.10 6,918,750

2019 6,150,000 5.00 2.47 9,332,625 2029 6,150,000 4.25 4.25 6,672,750

2020 6,150,000 5.00 2.7 9,025,125 2030 6,150,000 4.25 4.30 6,411,375

2021 6,150,000 5.00 2.92 8,717,625

1 Information obtained from the underwriter of the Bonds .

Maturity Schedule

$116,800,000 General Obligation Public Improvement Bonds, Series 2011

• Would Adhere to Capital and Debt Management Policies – Plan funded through dedicated revenue sources

– Target 80% Debt Funding; 20% cash

– 19% Minimum Fund Balance in the Debt Service Fund

– Debt is acquired prior to appropriation of funds and entering into contractual commitments

– Debt repayment schedule that meets standards for AAA rated counties

• Scenarios assume debt financing would be general obligation bonds

Assumptions for Building Programs


Capacity without a Tax Increase

• $1.66 billion through 2022 in additional

debt capacity

• $94 million through 2022 in additional cash

capacity

• Total additional capacity of $1.8 billion

through 2022

Debt and Cash Funded Capacity

without a Tax Increase


FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total

Planned

WCPSS - - - - - - - - - - -

Libraries 6,100 10,800 11,000 16,800 - - - - - - 44,700

Open Space 11,000 10,000 - - - - - - - - 21,000

Subtotal 17,100 20,800 11,000 16,800 - - - - - - 65,700

Additional Capacity - 190,000 - - 30,000 116,000 179,000 330,000 400,000 420,000 1,665,000

Subotal - 190,000 - - 30,000 116,000 179,000 330,000 400,000 420,000 1,665,000

Total Debt Funded Capacity

Total 17,100 210,800 11,000 16,800 30,000 116,000 179,000 330,000 400,000 420,000 1,730,700

FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total

Planned

County CIP 25,837 26,174 26,701 27,372 28,198 29,190 30,217 31,279 32,379 33,518 290,865

Subtotal 25,837 26,174 26,701 27,372 28,198 29,190 30,217 31,279 32,379 33,518 290,865

Additional Capacity - - - - 1,915 7,404 11,426 21,064 25,532 26,809 94,150

Subtotal - - - - 1,915 7,404 11,426 21,064 25,532 26,809 94,150

Total Cash Funded Capacity 25,837 26,174 26,701 27,372 30,113 36,594 41,643 52,343 57,911 60,327 385,015

Total Capacity

Planned 42,937 46,974 37,701 44,172 28,198 29,190 30,217 31,279 32,379 33,518 356,565

Additional Capacity - 190,000 - - 31,915 123,404 190,426 351,064 425,532 446,809 1,759,150

Total 42,937 236,974 37,701 44,172 60,113 152,594 220,643 382,343 457,911 480,327 2,115,715

Percent Debt Funded 40% 89% 29% 38% 50% 76% 81% 86% 87% 87% 81.8%

56.6% 47.2% 35.8% 24.9% 19.2% 19.1% 19.0% 19.2% 19.1% 19.1%

Debt

Cash

Projected Debt Service Fund

Balance % of Subsequent Year

DS


-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022

Th

ou

san

ds

Debt and Cash Capacity without Tax Increase

Planned Debt Service Planned Cash Funded Projects

Unauthorized and Unissued Debt Service Additional Capacity Cash Funded Projects

Debt and Capital Revenue

$190 M

$32 M $123 M $190 M $351 M

$425 M $447 M

FUTURE CAPITAL NEEDS

Wake Tech

WCPSS


• Wake Tech

– BOC approved use of $4 million WTCC

operating fund balance and $7 million in

savings from 2007 building program to jump

start needs

• New Classroom Building

• Renovation of Holding Hall


Future Needs

Wake Tech Master Plan Facts • Projects included in the Master Plan update total $338

million.

• Master Plan Includes: – Main Campus: 4 new buildings, 1 renovation, and parking

improvements

– North Campus: 5 new buildings (3 classroom, 2 regional plants), programming renovations at Buildings A and B, athletic fields, and onsite and public infrastructure

– Public Safety Center: Final Phase of Renovation for Instructional Space

– Health Sciences: Renovation of Allied Health Building

– RTP Campus: First classroom building (Phase I)

• Master Plan Prioritized in Two Phases – Priority 1: $210 million (2010 dollars)

– Priority 2: $120 million (2010 dollars)


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Wake Tech - - 8.00 11.0 - - - 13.0 22.2 35.0 25.8 36.0 - - 75.0 93.0 - 60.0 46.0 - - - -

-

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Millio

ns

Wake Tech Debt

2000 - 2012; Modeled 2013 - 2022

• Assume $15M in FY17 and $7M in FY 18 cash funding


• Last bonds issued in support of CIP 2006 on January 24th

• WCPSS is currently reviewing and updating capital planning assumptions

– Sharing information with County staff

• WCPSS is reviewing additional programs and facilities which may require additional reallocations within CIP 2006 or future funding


WCPSS Capital Program

• Enrollment Projections Lowered with

Continued Delay in Economic Recovery

WCPSS Updated Enrollment

Projections:


120,000

130,000

140,000

150,000

160,000

170,000

180,000

190,000

200,000

Enrollment Projections: CIP 2006, Fall 2009, January 2011 and December 2011

CIP 2006 Enrollment Projections Fall 2009 Enrollment Projections

Jan 2011 Enrollment Projections Dec 2011 Enrollment Projections

• WCPSS is currently revising number of new schools needed.

• Prior information included number of new schools based on: – county-wide picture --did not reflect regional excess or

deficit;

– Assumed every seat in use—100% utilization;

– Assumed all present temporary classrooms remain in use;

– Assumed most new schools are year-round;

• New schools needed will be determined from revised enrollment projections and choice assignment plan – Prior estimates showed 25 new schools needed by FY 21

31

New Schools Needed:

32

(17,500)

(15,000)

(12,500)

(10,000)

(7,500)

(5,000)

(2,500)

0

2,500

5,000

7,500

Seats Gained100%

Elementary Cumulative Seat

Availability/Deficit

0 0 0 0 2 4 7 10 13 16 New Schools Needed

33

0 0 0 0 0 0 1 2 3 4

(12,500)

(10,000)

(7,500)

(5,000)

(2,500)

0

2,500

5,000

Seats Gained100%

Seats Available/Deficit at 100%

4,900

3,300

Middle Cumulative Seat Availability/Deficit

New YR Schools Needed

34

(12,500)

(10,000)

(7,500)

(5,000)

(2,500)

0

2,500

5,000

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Seats Gained100%

SeatsAvailable/Deficit at 100%

10,100

8,700

High Cumulative Seat Availability/Deficit

0 0 0 2 3 4 4 4 5 5 New Schools

Needed

• Capacity (County-wide) Needed by:

– Elementary: 2 Schools by 2015

• E-25 (approved in concept October 2011) reduces

need to 1

– Middle: 2 Schools by 2018

– High: 2 Schools by 2014

• H-10 (approved in concept October 2011) reduces

need to 1

WCPSS New Schools


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

WCPSS 24.00 150.0 175.0 175.0 225.0 41.00 - 500.0 256.5 100.0 134.9 106.8 96.79 - 165.0 165.0 165.0 150.0 150.0 150.0 150.0 150.0 150.0

-

100.00

200.00

300.00

400.00

500.00

600.00

Mil

lio

ns

WCPSS Debt 2000 - 2012; Modeled 2013 - 2022

• Assume $15 M each year FY 17-22 cash funding


• Assume funding of WTCC building program equal to $210 million for Phase 1 and $128 million for Phase 2

• Assume WCPSS Bond Issue of $150 million or $100 million each year • FY 14-17 (assume $165M or $115M)

• Assume referenda every three years, beginning in Spring 2013 – Bonds would be issued beginning in FY14

• Assume overall plan for WTCC, WCPSS, and County maintains 80/20 debt to cash ratio


New Capital Expenditure

Assumptions

• Wake Tech: $338 million through 2022

• WCPSS: $1.48 billion through 2022 or $1.035

billion through 2022

• Not sufficient capacity in short term, but

adequate capacity between FY 2012-2022


Impact of Potential WTCC &

WCPSS Capital Programs

FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total

Available Capacity - - 190,000 - - 31,915 123,404 190,426 351,064 425,532 446,809 1,759,150

New Capital Exp. - - 261,000 279,000 165,000 240,000 218,000 165,000 165,000 165,000 165,000 1,823,000

Difference ($150 M) - - (71,000) (279,000) (165,000) (208,085) (94,596) 25,426 186,064 260,532 281,809 (63,850)

Difference ($100 M) - - (21,000) (229,000) (115,000) (158,085) (44,596) 75,426 236,064 310,532 331,809 386,150

• To have capacity in near term for WCPSS

and Wake Tech, other options are

necessary

– Defer Libraries and Open Space

– Reduce assumed spending plan for WCPSS

and Wake Tech

– Reduce County Capital

– Local Option Sales Tax

– Increase in Property Tax Rate


Financing Options

• ¼ Cent Authorized by General Assembly (G.S. 105-535)

• 23 Counties have approved ¼ penny sales tax by referenda • 14 stated purpose included education

• Estimated Wake County revenue: $28 million per year


Local Option Sales Tax

Buncombe* 11/8/2011 Robeson 8/3/2010 Randolph* 3/2/2010 Catawba* 11/6/2007

Durham* 11/8/2011 Wilkes 6/22/2010 Lee* 11/3/2009 Martin 11/6/2007

Montgomery* 11/8/2011 Duplin 5/4/2010 Rowan 11/3/2009 Pitt* 11/6/2007

Orange* 11/8/2011 New Hanover 5/4/2012 Cumberland 5/6/2008 Sampson* 11/6/2007

Cabarrus* 5/17/2011 Onslow* 5/4/2010 Haywood* 5/6/2008 Surry* 11/6/2007

Halifax 2/1/2011 Hertford* 3/2/2010 Alexander 1/8/2008

• Assume funding available for FY 2014

– BOC would adopt for FY 2014 budget if

referendum approved

• Assume sales tax would be used to pay

debt service on new debt and provide

cash funding for education capital projects


Local Option Sales Tax

• Sales Tax Supports $500 million of capacity in

FY 14 and FY 15

• Sales Tax provides sufficient funding through FY

2022, but not sufficient in short term at assumed

spending levels.

Impact of Local Option Sales

Tax


FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Total

Available

Capacity

w/Sales Tax 300,000 200,000 116,250 31,915 123,404 190,426 351,064 425,532 446,809 2,185,399

New Capital

Exp. 261,000 279,000 165,000 240,000 218,000 165,000 165,000 165,000 165,000 1,823,000

Difference

(@$150 M) 39,000 (79,000) (48,750) (208,085) (94,596) 25,426 186,064 260,532 281,809 362,399

Difference

(@$100 M) 89,000 (29,000) 1,250 (158,085) (44,596) 75,426 236,064 310,532 331,809 812,399

• 1 cent of property tax equals approximately $12

million

• Assume property tax implemented in budget

adoption following Spring referenda (FY 14, FY

17)

• Estimated Property Tax Increase Needed


Property Tax Increase to Support

Building Programs

New Capital

Expenditures

Expenditures

Less $50M/yr

FY 14 2.5 1.80

FY 17 1.8 1.55

Total 4.3 3.35

– To achieve capacity in early years, a tax

increase is needed.

– At highest capital expenditure assumptions,

capacity was reduced in FY 19 – 22 to

minimize tax increase needed in FY 17

Property Tax Capacity



Existing New Capacity 190,000 - - 31,915 123,404 190,426 351,064 425,532 446,809 1,759,150

New Capacity with 2.5 and 1.8

cents Property Tax Increases261,000 279,000 165,000 240,000 218,000 165,000 261,964 244,532 333,409 2,167,904

Difference 71,000 279,000 165,000 208,085 94,596 (25,426) (89,100) (181,000) (113,400) 408,754

New capacity with 1.8 and 1.55

cents Property Tax Increases 211,000 229,000 115,000 190,000 168,000 115,000 351,064 425,532 446,809 2,251,404

Difference 21,000 229,000 115,000 158,085 44,596 (75,426) (0) (0) (0) 492,254

• Sales tax provides about same capacity

overall, but does not provide sufficient

capacity in mid-years

Property Tax vs Sales Tax



Sales Tax 300,000 200,000 116,250 31,915 123,404 190,426 351,064 425,532 446,809 2,185,399

New Capacity with 2.5 and 1.8


New capacity with 1.8 and 1.55


• No authorization remaining for general

obligation bonds for WCPSS and Wake

Tech

• Options to Access Additional Debt

– Voter Approved Debt

• Requires bond referenda

– Non-voter Approved Debt

• 2/3 Bonds

• Limited Obligation Bonds (LOBs)

Accessing Debt Capacity


• Authorized by NCGS 159-49 (General Obligation Bond Statute)

• Few purposes for which bonds may not be used (convention centers, art galleries and museums, public transportation centers) but schools and other essential-type projects are permitted

• Determined on a fiscal year basis.

• Amount that may be issued is two-thirds of the amount by which the outstanding indebtedness of the County was reduced in the last preceding fiscal year

• County has issued 2/3 bonds previously – $24 million in 2000 for schools

– $41 million in 2005 for schools


Two-Thirds Bonds

• The County will reduce the principal amount of its GO debt in FY 2013 by $129,960,000 – This creates two thirds capacity of $86,640,000

($129,960,000 * 0.667) on July 1, 2013.

– If the County sells $17,100,000 of GO bonds in January 2013 as currently planned (libraries and open space), the two thirds capacity on July 1, 2013 would be reduced to $75,240,000.

– Wake County’s capacity is constrained by reduction in principal amount and amount of debt that may be issued without a property tax increase


Two-Thirds Bonds

• Understand timing and need for future

building programs for Wake Tech and

WCPSS

• Continue to assess options for future debt

financing

• Refine projects to be requested, cost

estimates, and timing of contractual

commitments


Next Steps

• Capacity exists to meet additional capital

needs for education.

• The ―timing‖ of the need will determine

policy actions.

• Policy Issues:

– Voter approved debt/ non-voter approved debt

– If additional revenues are needed

• Sales tax (referendum required)

• Property tax

Choices and Policy Discussion


QUESTIONS?


wake county board of commissioners work session · 2012-08-06 · capital and debt management...

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