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Debt Affordability Committee 1 Debt Affordability Committee July 17, 2013.

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Presentation on theme: "Debt Affordability Committee 1 Debt Affordability Committee July 17, 2013."— Presentation transcript:

1 Debt Affordability Committee 1 Debt Affordability Committee July 17, 2013

2 Debt Affordability Committee 2 “On or before September 10 of each year, the committee shall submit to the governor and the general court the committee’s estimate of the total amount of new commonwealth debt that prudently may be authorized for the next fiscal year” “The committee shall review on a continuing basis the size and condition of the commonwealth tax supported debt as well as other debt of any authority of the commonwealth…The estimate shall be made available electronically and prominently displayed on the official website of the commonwealth.” -Massachusetts General Laws Chapter 29 Section 60B Debt Affordability Committee’s Charge

3 Debt Affordability Committee 3 Meeting Topics 1.Introductions – April 26, Tax Supported Debt – May 17, 2013 a.Tax Supported Debt Part 2 – May 31, Debt Ratio Comparisons – June 20, Debt Service and Authorizations – July 17, 2013 a.Public Hearing – July 17, Preliminary Recommendation – July 30, Recommendation – August 15, Final Report – September 5, 2013

4 Debt Affordability Committee 4 Introduction of attendees Vote on Minutes of June 20, 2013 Meeting States for Consideration Projected Debt Service Outstanding Authorizations General Obligation Debt Component Unit Debt Next meetings Today’s Agenda

5 Debt Affordability Committee 5 June 20, 2013 – VOTE Minutes

6 Debt Affordability Committee 6 States for Consideration Required Connecticut Maine New Hampshire Rhode Island Vermont New York For Consideration Colorado Georgia Indiana Maryland Michigan Missouri New Jersey North Carolina Virginia Wisconsin

7 Debt Affordability Committee 7 States for Consideration with Ratings Required Connecticut (AA) Maine (AA) New Hampshire (AA) Rhode Island (AA) Vermont (AA+) New York (AA) For Consideration Colorado (AA) Georgia (AAA) Indiana (AAA) Maryland (AAA) Michigan (AA-) Missouri (AAA) New Jersey (AA-) North Carolina (AAA) Virginia (AAA) Wisconsin (AA)

8 Debt Affordability Committee 8 Pertinent Debt Ratios Statute –Debt service to General Fund revenues –Debt to personal income –Debt to estimated full-value of property –Debt per capita Other –Debt as a % of GDP –Debt service as a % of total budget –Debt service as a % of tax levy

9 Debt Affordability Committee 9 Debt Service Projection Based on FY2013-FY2017 Capital Investment Plan

10 Debt Affordability Committee 10 Debt Service Projection Based on FY2013-FY2017 Capital Investment Plan

11 Debt Affordability Committee 11 Debt Authorized and Unissued As of July 3, 2013: –$ B As Proposed by the Administration –Capital Supplemental - $375 M –General Government - $928 M –IT - $869 M –Energy & Environment - $912 M –Military - $177 M –Housing - $567 M –Transportation - $19 B $13.7 billion for projects identified in the Way Forward $5.3 billion for projects identified in the FY13 to FY17

12 Debt Affordability Committee 12 General Obligation Debt $15,244,263 $3,607,275 Total GO Debt = $18,851,538 Source: June 30, 2012 CAFR

13 Debt Affordability Committee 13 Variable Rate GO Debt $000’s % of Total GO Source: June 30, 2012 CAFR 1.4% 1.0%2.1% 7.1% 4.5% Total Variable Rate GO Debt = $3,607,275,000

14 Debt Affordability Committee 14 Special Obligation Bonds $2,398,935 $183,080 Total SO Debt = $2,582,015 Source: June 30, 2012 CAFR

15 Debt Affordability Committee 15 Variable Rate SO Debt $000’s Dedicated Tax Revenue Source: June 30, 2012 CAFR Total Variable Rate SO Debt = $183,080,000

16 Debt Affordability Committee 16 Hedging Contracts Entered into to hedge volatility in interest rates by synthetically fixing the interest rate Variable rate plus swap costs still lower than fixed interest rates Varying final maturities, some match associated bonds, others only a portion Fair value balance of negative $564 million as of 6/30/12 –the negative fair value of swap contracts is offset by lower interest rates on the swapped debt

17 Debt Affordability Committee 17 Hedging Contracts 16 outstanding contracts on GO bonds with a notional amount of $3.1 billion 4 outstanding contract on SO bonds with a notional amount of $183 million Overall of the $3.6 billion variable rate bonds, $3.3 billion are swapped to fixed rate There are no fixed-to-floating rate swaps in the portfolio All swaps are deemed effective hedges pursuant to GASB 53

18 Debt Affordability Committee 18 Outstanding Swaps Source: June 30, 2012 CAFR

19 Debt Affordability Committee 19 Contingent Liabilities IssuancesTotal DebtAnnual Debt Service Guaranteed MBTAClosed Lien$388 million$127.9 million SteamshipAs needed$58 million$7.5 million RTAsAnnual RANs$160 million, collectivelyVaries by RTA UMBAAs needed up to $200 million$130 million$8.4 million MSCBANo additional allowed$28 million$8.1 million Moral Obligation MassHousing (Rental only) Available but unused for 20 years$196 million*$21 million MassDevelopmentNone, Program not yet active$0-- * MassHousing is actively redeeming bonds in this program

20 Debt Affordability Committee 20 Contract Assistance IssuancesTotal DebtContract Assistance 2013 Contract Assistance 2014 Contract Assistance 2015 Contract Assistance 2016 Contract Assistance 2017 MassDOT (Turnpike) No additional allowed $2.1 billion$125 million MWPATAnnual$3.3 billion$63 million$58 million$54 million$47 million$41 million I-CubedAs needed$10 million$2 million $2.5 million Route 3 NorthNo additional allowed $5 million$1 million (last payment) Saltonstall Building Redevelopment No additional necessary $184 million$9.4 million$9.5 million$9.6 million$9.7 million Long-term Leases As needed$155 million$120 million$100 million$83 million$65 million

21 Debt Affordability Committee 21 FY12 Component Units of the Commonwealth Massachusetts School Building Authority (MSBA)* $5.2 billion Massachusetts Department of Transportation (MassDOT)* Includes the MBTA and 15 RTAs, which are component units of MassDOT DOT = $2.1 billion MBTA = $5.4 billion RTAs = $160 million, collectively Massachusetts Water Pollution Abatement Trust (MWPAT)* $3.3 billion MassDevelopment* $184 million Massachusetts Housing Partnership (MHP)* $392 million Massachusetts Convention Center Authority Commonwealth Corporation Commonwealth Health Insurance Connector Massachusetts Clean Energy Center (CEC) Massachusetts Growth Capital Corporation (MGCC) Community Economic Development Assistance Corporation (CEDAC) Massachusetts Life Sciences Center Massachusetts Technology Collaborative Commonwealth Zoological Corporation *Had debt outstanding as of 6/30/12

22 Debt Affordability Committee 22 UMASS, the State Universities and Community Colleges and their component units, some of which issue debt, are shown in the Commonwealth’s financial reports separately as “business-type activities” – i.e., they provide services in exchange for fees. These institutions are Commonwealth departments and not separate legal entities, and their component units are therefore component units of the Commonwealth. UMASS has 4 component units, including the UMASS Building Authority and the Worcester City Campus Corporation, both of which have issued debt. The State Universities (formerly the state colleges) include the State College Building Authority, a component unit that has issued debt, and each of the 9 State Universities and 15 Community Colleges has a foundation that is a component unit, the primary function of which is fund raising, though some foundations have also issued debt. Debt of these institutions and their component units is not the Commonwealth’s liability, except where that debt is guaranteed, in which case for financial reporting purposes it becomes a contingent liability of the state. UMASS, State Universities and Community Colleges

23 Debt Affordability Committee 23 EntityTotal Debt OutstandingCommonwealth Guarantee UMass $59,560,000 UMBA $1,917,855,000 $130,000,000 Worcester City Campus Corporation $286,870,000 State Universities Bridgewater $12,218,193 Fitchburg $3,105,398 Framingham $36,564,705 MassArt $13,980,902 MCLA $1,159,030 Mass Maritime $3,042,483 Salem $21,666,535 Westfield $16,923,526 Worcester $12,061,667 UMASS and State Universities

24 Debt Affordability Committee 24 EntityTotal Debt Outstanding Community Colleges Berkshire $658,005 Bristol $0 Bunker Hill $21,620,225 Cape Cod $0 Greenfield $141,405 Holyoke $4,104,366 Mass Bay $0 Massasoit $1,729,118 Middlesex $5,575,909 Mount Wachusett $7,074,580 North Shore $4,436,311 Northern Essex $2,485,075 Quinsigamond $1,692,997 Roxbury Not Available Springfield Technical $6,137,907 Community Colleges

25 Debt Affordability Committee 25 Next Meeting Topics July 30 th –Preliminary Recommendation Discussion August 15th –Pension/OPEB –Other Considerations –Final Recommendation


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