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Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9, 2010.

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Presentation on theme: "Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9, 2010."— Presentation transcript:

1 Department of Finance Debt Policy and Debt Profile Overview Finance Committee/City Council August 9, 2010

2 Department of Finance 2 Purpose Establish parameters for issuing and managing debt Provide information to decision makers related to debt legal requirements and affordability standards Establish objectives to be achieved Promote objectivity in the decision making process Facilitate the actual financing process by establishing important policy decisions in advance

3 Department of Finance 3 Legal Requirements State Law Authorizes the issuance of debt Federal and State Laws Govern the eligibility for tax exempt status Federal and State Securities Laws Govern disclosure, sale and trading of the debt

4 Department of Finance 4 Current City Credit Ratings Current Underlying ratings (GO rating) - S&P AAA - Fitch AAA Maintenance of high credit rating minimizes cost of borrowing

5 Department of Finance 5 Types of Debt GO Bonds Utility Revenue Bonds Certificates of Participation Tax Allocation Bonds Special District Tax Bonds Special Assessment Bonds

6 Department of Finance 6 Types of Debt (continued) Joint Venture Arrangements TRAN Lines and Letters of Credit Bond Anticipation Notes Tax Exempt Commercial Paper Housing Revenue Bonds

7 Department of Finance 7 Methods of Sale Negotiated Competitive – Utility Revenue Bonds Private Placement

8 Department of Finance 8 Selection of the Financing Team Bond Counsel Underwriter’s Counsel Financial Advisor Trustee and Paying Agent Underwriter(s) Other Service Providers

9 Department of Finance 9 Refundings Current Refunding Advance Refunding Restructuring of Debt

10 Department of Finance 10 Credit Enhancement and Derivatives Letters of Credit Bond Insurance Surety Bonds Interest Rate Swaps Derivatives Policy

11 Department of Finance 11 Basic Legal Documents Authorizing Resolution Indenture Official Statement Bond Purchase Agreement Continuing Disclosure Agreement Tax Certificate

12 Department of Finance 12 Pasadena Debt Profile

13 Department of Finance 13 Total Debt (in millions) General Fund Debt $477.68 Electric Revenue Bonds 155.50 Water Revenue Bonds 57.14 Tax Allocation Bonds 6.40 Total $696.72

14 Department of Finance 14 Summary of Outstanding General Fund Debt

15 Department of Finance 15 Statistics for Comparable California Cities (As of 2009 Fiscal Year End) (1) Excludes notes/loans payable, line-of-credits, capital leases, compensated absences, etc. Pasadena Non-Self-Supporting Debt figure excludes Pension Obligations as they are considered Self-Supporting until 2014 Source: 2009 Comprehensive Annual Financial Reports, Budgets and Cities’ websites

16 Department of Finance 16 Financial Management Assessment

17 Department of Finance 17 Strong general fund balances and reserve levels Diverse revenues Moderate debt levels Conservative financial management policies Regional employment center Major destination for retail, tourism and entertainment No significant other post-employment benefit liabilities City of Pasadena Credit Strengths

18 Department of Finance 18 Projected debt levels may deteriorate credit profile  Total debt per capita is already high relative to peers although adequate if self-supported debt is excluded Continued soft local residential property market Maintain balanced budgets and strong reserves during slow economic environment City of Pasadena Credit Challenges

19 Department of Finance 19 Based on staff and financial advisor’s analysis, it is estimated that Pasadena’s debt capacity is approximately $75-100 million if the City wishes to maintain its AAA ratings from two rating agencies. Debt Capacity Conclusions

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