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No. Goochland County will be able to carry and pay off the additional debt under its existing tax rate.
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Using bonds to pay for the projects would help ensure that they are started and completed more quickly. Additionally, issuing bonds stabilizes the year-to-year costs for capital projects and spreads the cost of long-life major projects over time.
State law does not establish legal debt limits for counties. Given guidance from the credit rating agencies and advice from the County’s financial advisors, the Board adopted these debt ratios as boundaries to keep debt in check relative to the overall County budget:
The bond program is designed not to contribute to an increase in property tax rates. Goochland County has adopted prudent financial management policies designed to protect its triple-A bond rating.
If we were to pay cash for the projects instead of taking on debt, it would either take us many years to save enough money to fund the projects or we would need to increase the tax rate for several years in order to collect through taxes the cash needed on an annual basis for these projects. Issuing bonds spreads the cost of long-life major projects over time, ensuring that both current and future residents share in the payment of the cost of the community's long-term projects.
Yes, reasonable financial forecasts project that the County can afford the anticipated debt service payments on the general obligation bonds. The ratio of debt service expenditures as a percentage of total general fund expenditures can, pursuant to the county’s financial policies, be between 10-12%. The County’s debt service is currently around 2.7% and even with the issuance of $96 million in General Obligation bonds, it is anticipated that our debt service will not exceed 8%.
Moreover, two critically important facts underlie this statement: one, the entire amount will not be borrowed all at once, but over time, as the projects are ready to be constructed; two, when any project is ready for funding, the County and its financial advisors will undertake a careful analysis of the current market conditions, and of the timing, amount, structure, interest rates, operational needs, and debt policies before making a final decision to move forward with bond issuance. Goochland County currently has earned two AAA ratings from bond rating agencies, the highest rating possible. Because of this, the County will be able to obtain the lowest possible interest rates available in the market.
Each year the County goes through the annual budget process of planning current expenditures to meet current ongoing revenues. In anticipation of issuing future debt, the County has been increasing the amount budgeted for debt service each year to ensure that operational needs as well as debt service needs can be met. The County will continue to use conservative annual budgeting as well as multi-year planning to forecast the debt service needs of the County as well as the operational needs.
The new bond debt will have no impact on the TCSD bond debt. The TCSD bonds were issued to finance the infrastructure to be able to provide access to water and sewer utility services in the TCSD area. The bonds have two dedicated sources of revenue to pay the debt service: the $0.32 ad valorem tax on property in the district and 55% of the general increase in real estate revenues from commercial property in the district. Over the years, and with the benefit of two refinancings to take advantage of lower interest rates, those revenue streams have been sufficient to make the debt service payments on the TCSD bonds. Current financial analysis projects that they will continue to be sufficient to cover those debt service payments through the full repayment of the bonds which is anticipated to occur by 2032.