Strategic Plan Discussion

Capital Funding and Debt Policy

November 5, 2013

Martin Lyons Asst. City Managerwww.cityofevanston.org

Current City Financial Policies

• Fund Reserve Policies– General – Water– Sewer– Parking

• Budget Policies– Pages 35-44 of 2013 Budget– Covers Timetable, Processes, etc

• Debt Policy– Covers Debt Limit– Provides definitions of debt

City Debt Background

• City has historically been Aa1 or Aaa rated– Solid Property Tax Base– Home Rule– Consistent Payment Record and Management

• City has used alternative debt forms– General Obligation Bonds– Revenue Bonds– Variable Bonds– IEPA Loans– Lines of Credit

• PENSION DEBT

Five Year History of Debt

• Why Five Years?– Everything changed in 2008 in Debt World– City adopted new approach to Pension Funding

– Does not include other debt (e.g. IEPA Loans)

Fiscal Year Total Bond Debt Total Pension DebtTotal Bond and Pension Debt

FY 2003-04 $ 190,740,000 $ 78,939,178 $ 269,679,178

FY 2008-09 $ 174,110,000 $ 187,712,291 $ 361,822,291

FY 2009-10 $ 151,470,000 $ 203,246,731 $ 354,716,731

FY 2010-11 $ 153,535,000 $ 168,243,070 $ 321,778,070

FY 2011 $ 157,695,000 $ 173,913,528 $ 331,608,528

FY 2012 $ 154,159,999 $ 177,493,388 $ 331,653,387

City Debt Comparison Detail - 2013

GO Other Total G.O. Debt to

EAVTotal Debt to EAV

Municipality EAV Debt Debt Debt Ratio Ratio

ARLINGTON HEIGHTS

3,399,641,981 $59,185,000 0 $59,185,000.00 1.74% 1.74%

AURORA 3,598,534,505 $147,040,000 $69,378,000.00 $216,418,000.00 4.09% 6.01%

DES PLAINES* 2,184,333,304 $64,365,000 $7,649,272.00 $72,014,272.00 2.95% 3.30%

ELGIN 2,356,508,821 $106,322,872 $106,322,872.00 4.51% 4.51%

HOFFMAN ESTATES

1,878,266,056 $105,020,000 $73,353,944.00 $178,373,944.00 5.59% 9.50%

JOLIET 2,676,345,255 $8,500,000 $57,417,998.00 $65,917,998.00 0.32% 2.46%

NAPERVILLE 6,072,976,994 $164,580,000 $164,580,000.00 2.71% 2.71%

PALATINE 1,987,066,782 $109,495,809 $116,859,000.00 $226,354,809.00 5.51% 11.39%

SCHAUMBURG 4,049,712,606 $289,575,000 $289,575,000.00 7.15% 7.15%

SKOKIE 2,561,731,480 $40,549,983 $16,449,476.00 $56,999,459.00 1.58% 2.23%

WAUKEGAN 1,442,086,224 $92,479,003 $10,045,000.00 $102,524,003.00 6.41% 7.11%

WILMETTE 1,869,928,027 $71,095,000 $2,712,695.00 $73,807,695.00 3.80% 3.95%

EVANSTON 2,727,367,573 $152,644,999 $72,485,368.00 $225,130,367.00 5.60% 8.25%

AVERAGE 3.86% 5.41%

City Debt Comparison 2010-13

  GO Other Total

G.O. Debt to EAV

Total Debt to EAV

EAV Debt Debt Debt Ratio Ratio

2013 Average $2,839,761,003 $104,850,639 $39,318,376 $134,339,421 3.86% 5.41%

2013 Evanston $2,727,367,573 $152,644,999 $72,485,368 $225,130,367 5.60% 8.25%

  GO Other Total

G.O. Debt to EAV

Total Debt to EAV

EAV Debt Debt Debt Ratio Ratio

2010 Average $3,677,127,906 $106,603,916 $22,752,571 $121,772,296 2.90% 4.15%

2010 Evanston $2,938,397,892 $174,110,001 $104,020,223 $278,130,224 5.93% 9.47%

Current Govt and Business Bonds

Future Considerations/Strategy

• City Pension Funding will require continued high funding levels.

• City Infrastructure (roads, water mains, sewer lines, etc) are on minimum replacement schedules currently – difficult to stretch any further.

• City Facilities in need of repair and/or replacement which will increase debt or current revenues to fund.

• To address both Capital needs, debt will still be needed.

Basic Capital Funding Strategy

• Split capital funding into two categories• Infrastructure systems moved gradually to

current revenue or “pay as you go” funding.• Facilities maintenance/ongoing upkeep also

covered through current revenues.• Facilities renovation/replacement funded

through long-term debt issuance.• Grants, and all other revenue will be

aggressively pursued.

Current Debt Plus Capital Improvements “Pay as You Go”

--

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

Fiscal and Calendar Year Ending December 31st

CapitalImprovements2013A (Abated)

Abated DebtService2013A (Levy)

Sources of “Pay as You Go”

• Gradual reduction of bond issuance, with difference in Debt Levy becoming a new Capital Levy.

• One-time Revenues.– Used as reserve set aside for future facilities

replacement– Used to “catch up” on infrastructure replacement– Not used as a replacement for other revenue

sources.• Increasing ratio of Capital expenses compared to

Operating expenses without increasing revenues.• New Revenues or increases in the rates of current

revenues, dedicated to Capital Funds only.

Implementation

• Gradual reduction of bond issuance, with difference in Debt Levy becoming a new Capital Levy.

• Gradual Increase in new capital revenue sources.

• Mix of Debt and “Pay as you Go” funding.

Projected Debt Service Debt and Capital Levy

--

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

Fiscal and Calendar Year Ending December 31st

Levy Suported Debt Service 2013A (Levy)

Abated Debt Service 2013A (Abated)

Pay as You Go Debt ServiceLevel New Capital Levy-No Debt

Projected Debt Service Debt Only Funding for Capital

--

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034

Fiscal and Calendar Year Ending December 31st

Levy Suported Debt Service 2013A (Levy)

Abated Debt Service 2013A (Abated)

Debt only

15

Comparison of Debt Service vs. Debt Service and Capital Levy

Next Steps

• Update Inventory of Facilities/Needs– Current Facilities Status Report– Utilization by Facilities

• Prioritization• Determine if alternatives exisit

• Update Infrastructure Replacement Schedules– Roadway/Sidewalk/Alley– Trees– Water/Sewer/Parking

Next Steps

• Reconcile Funding and Replacement Schedules– Compare City’s resources with Industry Best

Practices– Integrate results with Operating/staffing

needs• Engage Evanston – Prior to 2015 Budget

Process, provide findings.• Create Policy and Procedures to Guide future

Budget and Long Term Financial Plans.

QUESTIONS?