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No. Bond sale proceeds authorized for a specific purpose may not, by law, be used for any purpose other than the purpose specified in the referendum question.
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Two questions will be before voters to ask whether Goochland County should be authorized to issue up to $96 million in general obligation bonds to pay for improvements to public facilities. Voters will respond “yes “or “no” to each question. The proposed bond amounts are:
Virginia law requires County voters to approve general obligation bonds through a referendum. You have the opportunity to vote either YES or NO on the question. If there are more YES votes on a question, then the Goochland County Board of Supervisors will be authorized to sell bonds for the purpose described in the ballot question. If there are more NO votes on a question, the county cannot issue general obligation bonds to finance the purpose described in the question unless authorized in another referendum.
Bonds are a means of financing projects. Bonds are loans to pay for capital projects. The bonds (loans) are repaid through regular principal and interest payments. The principal and interest payments are often referred to as “debt service.”
For the proposed projects the County plans to issue General Obligation (GO) bonds.
Under State law, counties are required to secure voter approval through a referendum before issuing GO bonds. Cities do not have this requirement. Because the County has a GO credit rating of AAA from two rating agencies, the County generally may obtain lower interest rates on GO bonds than on other bonds. Lower interest rates are beneficial to taxpayers. Moreover, the issuers of other types of commercial bonds also charge administrative fees that are higher than the administrative costs incurred in issuing General Obligation bonds.
Bonds are generally not issued all at once. The County would not issue the bonds until work on a project is expected to occur. All the projects associated with the referendum have been specifically identified as upcoming needs in the County’s Capital Improvement Program (CIP) for several years. The current CIP lists all of the projects as being priorities to be undertaken within the next 8 years.
Bond referendum authority allows the County to issue/sell bonds for eight years after the approval of the referendum. Additionally, the Circuit Court may grant another two years, for a total of 10 years.
No, not necessarily. The referendum does not seek voters’ approval to complete the projects, but instead seeks voters’ approval to finance them through issuance of GO bonds which are backed by the County’s full faith and credit. The County could still proceed with the projects using other financing mechanisms.
If one or both of the bond referendum questions does not receive more YES votes than NO votes, the County cannot issue general obligation bonds to fund the identified projects. General obligation bonds are not the only funding source available; the County could pursue the projects with alternative funding sources. However, general obligation bonds traditionally carry lower overall borrowing costs when compared to other funding options and therefore are considered the most prudent method to finance long-term capital projects.
Issuance of bonds is an additional means of financing capital projects. Virginia law requires that in order for General Obligation bonds to be considered and used as a mean of financing by the County, Goochland voters must have an opportunity to vote either YES or NO on each bond question. If there are more YES votes on a question, then the Goochland County Board of Supervisors will be authorized to sell bonds for the purposes described in the ballot question. If there are more NO votes on a question, the County cannot issue general obligation bonds to finance the projects described in the question, but could instead find alternative means to fund the projects.
No, there are several steps in the process. The first step has already occurred because, for several years, these projects have been identified as needed in the county’s Capital Improvement Program (CIP). The next step is choosing how to fund the projects. The referendum is a necessary step in order to be able to use General Obligation (GO) bonds to finance these projects. GO bonds are usually the least expensive way to borrow money to fund long-term capital projects.
Even after the referendum, GO bonds won’t be issued until the Board of Supervisors and County staff collect specific data about the costs and interest rates available for a GO bond issuance. If GO bonds are the best way to finance a project, then the Board of Supervisors will then adopt a resolution authorizing the actual sale of the GO bonds. GO bonds will only be issued if the revenue projected for the County budget is sufficient to cover existing principal and interest payments (debt service) as well as debt service from the issuance of any new bonds.
The County has several fiscal policies concerning debt and debt service. One of those policies requires that the ratio between the County’s debt service and expenditures be at 10% with a ceiling of 12%. Every year, county staff will review calculations and projections of debt-service-to-expenditures and other debt ratios. Staff will ensure that the ratios continue to be met over the life of the bonds; if the debt-service-to-expenditure ratio is approaching the ceiling, then capital projects can be shifted to later years or deleted.
The County will be able to issue the General Obligation bonds that the voters supported and undertake those projects. The County could seek alternative funding options for the projects in the bond question that was not approved.
For capital projects, the County has funding alternatives other than General Obligation bonds, including cash funding and other bond types and borrowing options. Passage of these referendum questions does not mean that the County will be left without the means to fund other capital improvement projects.