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County holds debt management workshop

Washington County officials discussed which ratios would be the most beneficial to include in the county’s new plan during a Nov. 9 debt management workshop.
Investors and financial analysts often refer to debt ratios when reviewing a municipality’s credit worthiness.
While there are approximately 100 different ratios that could be considered, Mayor Dan Eldridge reviewed a priority list identified by Moody’s Investors Service with Commissioners Joe Grandy, Mark Larkey and Mitch Meredith during the meeting.
“We would need to narrow down to a half dozen metrics that would be the most meaningful to look at on an annual or more frequent basis,” he said.
The state comptroller is requiring any public agency that issues debt to submit a debt management policy before the end of the year.
Washington County’s current net debt is approximately $152 million.
Eldridge said the Government Finance Officers Association also recommends ratios counties should monitor. Those identified for possible inclusion in Washington County’s plan are debt per capita as a percent of per capita income, debt service as a percent of general governmental expenditures, and percent of total debt to be retired after 10 years.
Debt per capita as a percent of per capita income is a measure of the capacity of citizens to finance tax-supported debt. A low ratio means that taxes required to repay debt represent a smaller portion of the average citizen’s income.
Debt service as a percent of general governmental expenditures is a measure of the county’s ability to repay debt without hampering other services. A small ratio indicates a lesser burden on the operating budget.
A high ratio in the percent of total debt to be retired after 10 years indicates a conservative structure on the debt portfolio allowing, among other things, more flexibility on future debt issuance and shorter repayment schedules.
“This will keep up disciplined,” Eldridge said.
Another ratio recommended by the GFOA is dedicated revenues to debt service for revenue supported bonds, which Washington County already monitors. This ratio indicates the ability to service debt on revenue supported bonds. The higher the ratio the better.
A debt affordability ratio, which looks at debt service as a percent of operating expenditures, was also considered. This ratio measures debt liability relative to total budget resources.
“I certainly think this is something we would want to look at on an annual basis, but it’s also a great indicator as to whether we can take on debt,” Eldridge said.
Though there are no plans to issue additional debt, Larkey asked where the county is positioned on borrowing.
“From the standpoint of a rating agency, we have plenty of capacity,” Eldridge said. “But from a cash-flow standpoint, we have very little without a tax increase.”
Eldridge said the policy should also include the maximum debt life for an individual transaction.
“None of ours are now over 30 years, but we may want to allow 40 years for Rural Development loans,” he said.
Eldridge also proposed compiling an annual debt report that would be submitted to the county legislative body at the end of the fiscal year.
“From the standpoint of being transparent, I think it’s the right thing to do,” he said.
A first draft of the Debt Management Policy will be presented during the Budget Committee meeting on Wednesday, Nov. 16.