1. finance

BOND BASICS 101
The Bond Referendum Questions
Voters Will Consider This Fall
Spotsylvania County’s Current
Bond Ratings
Several bond rating agencies in New York review the
County’s financial position and assess it based on
criteria including: economy, finances, debt and management. The County is rated by the major bond
rating agencies as follows:
Moody’s—Aa2—Obligations rated `Aa’ are judged to
be of high quality and are subject to low credit risk;
the modifier 2 indicates a mid-range ranking in the
category.
Standard & Poor’s—AA+ —An obligation rated `AA’
differs from the highest-rated obligations only in
small degree. The obligor’s capacity to meet its financial commitment is strong.
Fitch— AA+ —Very high credit quality `AA’ ratings
denote expectations of very low credit risk. They
indicate very strong capacity for payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable events.
In sum, the County’s bond ratings are strong.
As a general rule, the higher the bond rating,
the lower the borrowing cost. Higher bond
ratings indicate strong fiscal management.
For further information visit:
www.spotsybond.org or call the bond line at
540-507-7015.
Make Your Opinion
Count
Be Informed
VOTE on November
4th!
www.spotsybond.org
On November 4, 2014, Spotsylvania voters will decide on five
bond referendum questions on General Obligation Bonds, as
follows:
Question 1: “ Shall the County of Spotsylvania, Virginia,
contract a debt and issue its General Obligation Public Improvement Bonds in the maximum amount of sixty-three million, three hundred eight thousand, nine hundred fifty dollars
($63,308,950.00) to provide funds, together with other available funds, to undertake a program of Capital Improvement
Projects for the improvement of public roads, including but
not limited to those in the following areas: the area of I-95,
Exit 126; the area of I-95, Exit 118; Route 1 corridor; Route
2 corridor; Route 208 corridor; Harrison Road; the intersection
at Elys Ford and Route 3; Grand Brooks Road; and other
public roads requiring improvements?”
Question 2: “Shall the County of Spotsylvania, Virginia, contract a debt and issue its General Obligation Public Improvement Bonds in the maximum amount of eleven million, two
hundred ninety-one thousand, four hundred seventy-eight
dollars ($11,291,478.00) to provide funds, together with
other available funds, to undertake a program of Capital
Improvement Projects related to satisfying environmental and
solid waste needs and requirements, including but not limited
to the improvement of the Livingston landfill?”
Question 3: “Shall the County of Spotsylvania, Virginia, contract a debt and issue its General Obligation Public Improvement Bonds in the maximum amount of thirty-six million,
three hundred eighty-eight thousand, six hundred forty-one
dollars ($36,388,641.00) to provide funds, together with other
available funds, to undertake a program of Capital Improvement Projects related to public safety, including but not limited
to the following projects: construction of a new animal shelter;
replacement of the County's computer aided dispatch system;
installation of Global Positioning System (GPS) equipment on
public safety vehicles and at appropriate intersections in the
County; replacement of Fire and Emergency Medical Services
(EMS) equipment and vehicles; and construction of a fire training
center?”
Question 4: “Shall the County of Spotsylvania,
Virginia, contract a debt and issue its General Obligation Public Improvement Bonds in the maximum
amount of twenty-one million, four hundred fiftyfour thousand, nine hundred twenty-nine dollars
($21,454,929.00) to provide funds, together with
other available funds, to undertake a program
of Capital Improvement Projects related to general government equipment and facilities, including but not limited to upgrades and replacement
of equipment and technology used by various County departments, as well as renovations to various
County-owned buildings, such as judicial center
renovations; renovations to the former Sheriff’s
office; and renovations to the Holbert building or
reconfiguring the building at Merchant Square?”
Question 5: “Shall the County of Spotsylvania,
Virginia, contract a debt and issue its General Obligation Public Improvement Bonds in the maximum
amount of one hundred forty-one million, seven
hundred twenty-four thousand, eight hundred
seventy-six dollars ($141,724,876.00) to provide
funds, together with other available funds, to undertake a program of Capital Improvement Projects for
the Spotsylvania County Public Schools, including
but not limited to the acquisition of real property
for future school sites; construction of new
schools; renovation of existing schools and other
capital maintenance projects; HVAC, roof, and
other maintenance projects; technology and
equipment upgrades and replacement; and purchase of new and replacement school buses?”
IF the County were to borrow the entire $274 million proposed in the 2014 Bond referendum questions, it is estimated that the annual debt payment
would be equivalent to an approximate $0.22 on
the real property tax rate at current assessed value.
IF approved, each project will come to the Board
for determination as to whether the project is affordable, whether the project is still required, and
whether the debt meets the County’s financial
guidelines.
Why Have Bond Referendum
Questions?
Effective April 21, 2005, Spotsylvania’s Board of Supervisors established the County’s Debt Referendum Policy
which states “All new facility construction projects or
acquisitions that exceed available budgeted funds shall
be subject to voter referendum, unless financed through
revenue-supported mechanisms (i.e., water/sewer revenue bonds).”
Virginia law requires that in order for General Obligation
(GO) bonds to be considered and used as a means of
financing by the County, the Spotsylvania County voters
shall consider their use through the referendum process. Voters have the opportunity to vote either YES or
NO on each of the questions. If the majority votes YES
on a question, then the Spotsylvania County Board of
Supervisors will be authorized to sell GO bonds for the
purpose described in the ballot question. If the majority
votes NO on a question, the County may not issue GO
bonds to finance the purpose described in the question,
but shall instead find alternative means to fund projects.
A Close-To-Home Example
As an example: family members can apply to a credit
card company to increase their spending limit (granting
the ability to increase their borrowing). Even with an
approved limit increase, they don’t have to spend up to
that limit, they just have the credit card company authorization to do so if they choose. Obviously, there will
be monthly bills as that family must pay back the money
borrowed (through the credit card).
Similarly, bond issuance will result in County and taxpayer obligations to pay back what was borrowed. This is
why it is so important for voters to voice their opinions
on proposed bond referendum questions—because of
the potential future obligations incurred by County taxpayers, should the Board deem it prudent to issue
bonds.
In essence, in the bond referendum process,
citizens act as “the credit card company” if they
authorize the increased potential spending limit
through bond question approval. Whatever
amount is borrowed must be repaid.
Explaining Bonds
Bonds are a means of financing projects when
cash is not available. Bonds are loans the County
may take out to pay for capital projects.
There are two traditional types of municipal
bonds:
A general obligation bond is a municipal bond
secured by the full faith and credit of the municipality, which generally refers to the taxing and
borrowing power of the municipality. There are
other funding alternatives but since the County
has a strong credit rating, general obligation
bonds might be a less expensive funding means.
A revenue bond is a bond issued generally in
cases where the bond will fund a project that will
itself generate revenue upon completion (and
effectively pay for the bond), or the bond is to be
repaid from a pledge of specific revenueproducing undertakings. This bond does not generally require a referendum for issuance.
When is the money spent?
Bond authorization does NOT automatically
translate into bond issuance or appropriation. The Board of Supervisors examines economic conditions, the budget and other factors when
weighing and voting on individual bond issuance
decisions. Approval of a bond referendum question is only the first step of the process, which
may or may not move forward.
All projects in the referendum will be up for discussion and consideration on an annual basis as
part of future budgets and Capital Improvements
Plans (CIPs) before the Board authorizes any
bond sales. The time frame for issuance of the
2014 referendum bonds is over the course of the
8 years from Fiscal Year 2016, with a 2-year Court
extension possible.