Retiring debt allows for reinvestment
Henrico County has the highest-possible AAA bond rating from all three major rating agencies, which means that it can borrow debt at the lowest possible interest rates. In fact, interest rates today for municipal debt are at historic lows, particularly for AAA-rated debt, which provides Henrico with an affordable opportunity to achieve much-needed infrastructure and infrastructure renovations at the lowest possible cost.
When considering any new debt issuance, Henrico staff complete a thorough analysis to ensure utmost affordability and that any new costs will not impede the county’s service delivery efforts. Critical to this analysis is establishing specific concrete guidelines, as well as infusing flexibility throughout the financing plan. Specifically, the following guidelines have been included in the financing plan for the bond referendum.
- NO TAX RATE INCREASE WOULD BE PROPOSED. Existing revenue sources, such as meals tax revenues collected in excess of budget estimates funding school projects, are sufficient to finance this bond referendum.
- As can be seen in the chart, after paying off nearly one-third of its overall outstanding debt over the past five years, Henrico’s bond referendum proposal ensures that after issuing $419.8 million in new debt over the next six years, outstanding debt levels will remain BELOW levels reached in FY2012. Blue lines indicate existing debt levels and green lines reflect the proposed levels associated with the November 2016 Bond Referendum.The proposed financing plan ensures that Henrico could afford the costs associated with the bond referendum while remaining safely within its existing debt-management guidelines.
- The financing strategy includes a plan to issue all school-related debt within a period of five years, and a plan to issue all debt for libraries, roads, fire, and recreation and parks projects within a period of six years. By issuing all debt over six years, the county has strategically afforded itself the flexibility to extend the debt issuance schedule should economic difficulties arise.
- County expense growth will not exceed the rate of 5 percent, a level that approximately equates to average annual inflation (3 percent) and population growth (2 percent). This premise has been adhered to since the county’s successful bond referendum in November 2000.
- The county has established a reserve for future operating costs associated with the opening of any new facilities, as well as to provide a buffer against any future economic difficulty.
While the financing plan for the bond referendum has been meticulously reviewed for utmost affordability, the individual projects proposed in the coming bond referendum were also carefully selected, with emphasis on renovation of aging facilities, core service delivery enhancement, and economic development opportunities. Renovating aging infrastructure, particularly county schools that are more than 50 years old, is significant for many reasons, not least of which are the added efficiencies that will yield annual cost savings into the future. Further, economic development opportunities such as sports tourism enhancements will yield permanent revenue growth as it relates to hotel/motel tax, sales tax, and meals tax collections, all of which will be generated from visitors to the county and mitigating any impacts to Henrico citizens.