ObjectivesBACKGROUND

In this webinar, participants will learn:– Measuring the impact of the

pandemic on your financial position

– Financing sources for financial operations

– Issuing debt in a volatile market

– Credit ratings in a COVID-19 environment

– Answers to commonly asked questions

4

Polling question #1

What is your silver lining of the pandemic?

A. Liquor delivery

B. Working all day in pajamas or stretch pants

C. Netflix

D. Walking and biking

E. Virtual social events

F. Keeping everyone six feet away!

Respond using the polling section in the WebEx screen to the right

5

Polling question #2

What percentage overall budget reduction do you anticipate due to the Pandemic?

A. 0 to 5%

B. 5 to 10%

C. 10 to 15%

D. 15 to 20%

E. More than 20%

Respond using the polling section in the WebEx screen to the right

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Polling question #3

What cost containment options are you considering? (choose one or more)

A. Hiring freeze and attrition

B. Salary freeze

C. Capital project deferment

D. Using reserves

E. Furloughs and temporary layoffs

F. Program cuts and long-term layoffs

G. Other non-wages and benefits or non-capital itemsRespond using the polling section in the

WebEx screen to the right

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– 475.754– City and County authorized

– Past use tornadoes/floods– But “other public emergencies”

specifically authorized

– Tax receipts < expenditures caused by the emergency

– No bids required

– Auditor and Commerce to approve terms/conditions

– Certs not included in Net Debt Limit

Emergency borrowing for city/county disaster/public emergency/certificates

FINANCING SOURCES FOR FINANCIAL OPERATIONS

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Municipal liquidity facility cont’d

FINANCING SOURCES FOR FINANCIAL OPERATIONS

Eligible Notes– Tax Anticipation Notes (TANs)

– Tax and Revenue Anticipation Notes (TRANs)

– Bond Anticipation Notes (BANs)

– Other short-term notes

Limitations

– Notes purchased is limited to 20% of the general revenue or utility revenue for fiscal 2017

– States may request purchases in excess of the limit to assist political subdivisions and other instrumentalities not eligible on their own 20

Polling question #4

How many months before you need to borrow for liquidity?

A. 1-2 months

B. 3-5 months

C. 6-9 months

D. 9-12 months

E. Unlimited

Respond using the polling section in the WebEx screen to the right

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Polling question #5

How long before we are back in business as state?

A. May 31

B. July 4

C. August 1

D. Before MNGFOA in Alexandria (not cancelled yet)

E. Halloween

Respond using the polling section in the WebEx screen to the right

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Putting credit ratings into context

CREDIT RATINGS IN A COVID-19 ENVIRONMENT

– Rating are relative risk measures

– Distance to distress

– Should default in ordinal order

– Rating through the cycle

– Rating should hold over the economic cycle

– Investment grade ratings are long way from non-payment

– This is not a normal economic cycle 34

– Individual ratings do not have negative outlook

– Reflects negative operating environment

– Expect more downgrades than upgrades

S&P: Negative outlook to all US Public Finance

CREDIT RATINGS IN A COVID-19 ENVIRONMENT

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– Cashflow modeling helps quantify the COVID impact

– Revenues

– Impact of revenues delayed or denied

– Expenditures

– COVID related new costs

– Identify items that can be cut from the budget

– Reserves provide cushion to operations

– Cashflow Borrowing

– Not necessarily a credit negative

– Repay in 12 months

Cash is kingCREDIT RATINGS IN A COVID-19 ENVIRONMENT

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What should you do?

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− DON’T PANIC

− Communicate proactively with rating agencies and investors

− Have and share good cashflow projections and scenario analysis

− Review debt, fund balance and other policies for compliance

− Have a plan B, and maybe even C and D

− Work with your Municipal Advisor