Minutes 03/31/1998 - Laserfiche WebLink

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338 March 31, 1998 Debt Service A local government's best method of funding projects such as schools, roads, and municipal facilities is through the issuance of general obligation bonds. These bonds are sold and repaid, with interest, over 20 years. Debt service represents the payment of principal and interest on general obligation. The graph shows the dollar amount of the debt service in the bars, the diamond line shows debt service as a percentage of operating revenues, and the circle line identifies the target amount of debt service as a percentage of the operating revenues at 10%. A Sound fiscal practice and widely accepted industry standard is that debt service should not exceed 10%of operating revenues. By holding the level.of new general obligation borrowing to $8 million each year, which approximates the amount of principal retired annually, and with growth in revenues expected, we are poised to meet our financial objectives ~within the next three ~/ears. DEBT SERVICE HISTORY 18,000 14.0% 15,000 12.0% 10.0% 12,000 9,00O - 6.0% 6,000 4.0% 3,000 2.0% I ~Total Debt Service Debt Service Operating Reserve (Prudent Savings) The Operating Reserve is another indicator of the City's fiscal health and represents the accumulation of revenues over expenditures. The Operating Reserve is measured each year at a single point in time, the end of the fiscal year. The Operating Reserve represents the City's Only resource for unexpected expenditures without having to borrow funds in the case of emergencies and provides the City with adequate resources to smooth the peaks and valleys of the City's ~ash flow. The generally accepted standard is that the City's Operating Reserve be at least 10% of operating revenues. The bars on the chart represent the City's Operating Reserve since 1980 in terms of dollars. Tlie line on the graph indicates the level at which the Operating Reserve should have been. A large gap exists between the target level and actual level in the late 1980s and early 1990s. Within the last two years, substa~t al progress has been made in achieving the desired leve. As revenues i~lcrease, ~so will the dollar amount of the target. As the target has been attained ;~or the'upcoming fiscal year, no increase in the Operating Reserve is proposed in this bUdget. The Past in Summary_~ As you can see from ~.hese charts, the City has reversed the downward trends and is poised to continue upward. The~ City Council must be commended for its leadersh p in establishingthese financial objectives and congratulated for the strides that have been made in a relatively short period of time in meeting the City's financial objectives.