State of Florida

Debt Overview

Taxation And Budget Reform Commission

Governmental Procedures And Structure Committee

July 20, 2007

Presented by

The Division of Bond Finance

Organization of the State

• Constitutional framework for debt

– General Principles• State general obligation bonds (full faith and credit) may only be

issued when approved by voters – Article VII '11(a)

– Bonds secured by taxes may be issued when authorized

by Constitutional amendment (voter approval)• No pledge of taxes without voter approval

– Revenue Bonds secured by non-tax revenues may be issued without voter approval – Article VII'11(d)

2

Constitutional Authority for State Bond Programs

PECO Bonds Article XII, § 9 (a)(2)

Education Capital Outlay Bonds Article XII, § 9 (d)

Right-of-Way and Bridge Bonds Article VII, § 17

Florida Forever and Everglades Bonds Article VII, § 11 (e)

County Road Bonds Article XII, § 9 (c)

Housing Bonds Article VII, § 16

Pollution Control Bonds Article VII, § 14

Scholarship Loan Bonds Article VII, § 15

Bond Program Constitutional Authority

3

Types of Debt

• General Obligation or Full Faith and Credit Bonds (Constitutionally authorized)

Examples: Public Education Capital Outlay (PECO)

Right-of-Way Acquisition and Bridge Construction (ROW)

• Bonds secured by specified taxes(Constitutionally authorized) -- Article VII '11(e)

Example: Preservation 2000/Florida Forever

4

Types of Debt – continued

• Revenue Bonds secured by non-tax revenues -- Article VII '11(d)Examples: Turnpike Bonds

Lottery BondsUniversity Auxiliary Facilities (Dormitories and Parking Facilities)

• Bonds subject to annual appropriation of debt service or Certificates of Participation (COPs)Examples: Facilities Pool

Prison Bonds

5

Limitations on Debt

• Limits on debt imposed in various ways

(1) Constitutional limits on individual programsExample: PECO – no more than 90% of gross receipts taxes for debt service – Article XII '9(a)(2)

(2) Statutory limitsExamples:Preservation 2000/Florida Forever – no more than $30 million in debt service in each year additional debt is authorized;

Right-of-Way – no more than 7% of STTF revenues for debt service

(3) Bond documentsExample: Limited by enterprise revenues pledged plus additional bonds test

6

Authorization of Debt

• Legislature authorizes debt through substantive law or appropriations act

– Legislature decides what to borrow for and how much

to borrow

– Executive Branch implements legislative authorization

through Division of Bond Finance (DBF)

– Governor and Cabinet are governing board of DBF

– DBF performs centralized debt management function

for State and oversees structuring and execution of

most State debt issuance

7

Debt Management Principles

• Chapter 215.98, F.S., requires annual analysis of State’s debt position through debt affordability analysis

• Debt affordability analysis prepared annually for legislative leadership

• Debt affordability analysis designates benchmark debt ratio and establishes a target and cap

• Benchmark debt ratio is annual debt service to revenues available to pay– Target 6%– Cap 7%

8

Debt Management Principles – cont.

• Debt affordability analysis provides framework for State to measure, monitor and manage State’s debt position

• Debt affordability analysis assists the legislature in prioritizing capital spending and integrates debt authorization function (legislative branch) with debt management function (executive branch)

9

State Debt OutstandingTotal Debt Outstanding: $23.0 billion

Debt Type AmountNet Tax-Supported Debt 17,865.5$

Self-Supporting Debt 5,159.9$

Total State Debt Outstanding 23,025.4$

Debt Outstanding by Type as of June 30, 2006(In M illions of Dollars)

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Debt Outstanding by Program

EducationPublic Education Capital Outlay 8,840.2$ Capital Outlay 823.4 Lottery 2,148.9 University System Improvement 229.4

Total Education 12,042.0$ Environmental

Preservation 2000 / Florida Forever 2,533.7 Everglades Revenue Bonds 98.4 Conservation and Recreation 15.1 Save Our Coast 75.7

Total Environmental 2,723.0 Transportation

Right-of-Way and Bridge Acquisition 1,665.6 State Infrastructure Bank 21.6 Florida Ports 317.2

Total Transportation 2,004.4 Appropriated Debt / Other

Facilities 328.4 Master Lease 17.4 FLAIR Lease 48.6 Prisons 298.0 DMS Aircraft Lease 4.7 Juvenile Justice 16.7 Children & Families 70.3 Radio Tower Lease - Affordable Housing 264.4 Florida High Charter School 21.2 Lee Moffitt Cancer Center 26.4

Total Appropriated Debt 1,096.2

Total Debt Outstanding 17,865.5$

Dollar Amount

Net Tax Supported Debt By ProgramAs of June 30, 2006

(In Million s of Dollars)

EducationUniversity Auxiliary Facility Revenue Bonds 636.6$

EnvironmentalFlorida Water Pollution Control 116.5 Pollution Control 0.0

TransportationToll Facilities 2,414.3$ Orlando-Orange Co. Expressway Authority 1,811.1 Road and Bridge 140.6 State Infrastructure Bank Revenue Bonds 40.7

Total Transportation 4,406.7

Total Debt Outstanding 5,159.9$

Dollar Amount

Bonds Outstanding By ProgramSelf Supporting DebtAs of June 30, 2006

(In Millions of Dollars)

Debt Type Amount

Net Tax-Supported Debt 17,865.5$

Self Supporting Debt 5,159.9$

Total State Debt Outstanding 23,025.4$

State of FloridaDebt Outstanding by Type and Program

As of June 30, 2006(In Millions of Dollars)

11

Total Debt Outstanding Fiscal Years 1996 through 2005

(In Billions of Dollars)

$-

$5.0

$10.0

$15.0

$20.0

$25.0

Debt Outstanding $12.3 $13.2 $15.4 $16.8 $18.0 $18.3 $19.2 $20.4 $21.2 $22.5 $23.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Growth in Debt Outstanding

• Total debt increased $10.7 billion, from $12.3 billion to $23.0 billion over the last ten years

• Debt per capita has also increased from $634 to $979 over the last ten years

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Growth in Annual Debt Service

• Annual debt service payments total approximately $1.7 billion annually

• Increased debt service reduces future budgetary flexibility

• Annual debt service requirements have more than doubled over the last ten years

Net Tax-Supported Debt Service Fiscal Years 1996 through 2006

(In Millions of Dollars)

$-

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

$1,600.0

$1,800.0

Debt Service $741.6 $801.4 $928.1 $1,071 $1,166 $1,303 $1,357 $1,459 $1,551 $1,584 $1,680

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

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Growth in Benchmark Debt RatioDebt Service as a Percentage of Revenue

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

7.00%

7.50%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

7% Cap 6% Target Historical Ratios

Ratio of Debt Service to RevenueFiscal Year

Benchmark Ratio

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

4.28% 4.61% 5.09% 5.23% 5.70% 5.82% 6.12% 5.94% 5.36% 5.10%

• Benchmark debt ratio exceeded 6% target in 2003 due to changes in revenues available caused by the 2001-2003 economic recession

• Benchmark debt ratio has improved over the last three years14