Wednesday, February 18, 2009

Debt Policy/Reserve Fund Jeopardy

A slide presented by Ann Shawver, Director of Finance, at the Council’s budget work session Friday, February 13, revealed a very real possibility that Roanoke City will exceed its own self-imposed debt policy. In fiscal year 2010 the Council’s self-imposed limit of 10% of debt service to general and school fund expenditures ratio increases to 10.1%. This is with the assumption of a 2% decline in expenditures in 2010, followed by the assumption of 2% growth in 2011 and 3% thereafter. To be in compliance with their own policy, City Council would be required to vote on at least a one year allowance for exceeding the 10% limit.
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As we’ve seen these charts through the years – each one (which I have since 2006) has dramatically changed. The first estimates assumed 3 to 4% growth. Projecting growth is not an exact science as Shawver pointed out. Shawver is less concerned with exceeding the !0% debt limit then Council’s (with citizens urging) possible decision to dip into the Budget Stabilization Reserve (better known as the “rainy day fund”). Her warnings seem to be falling on deaf ears with Council. Shawver has repeated ad nauseum when reporting to Council over these many months that bond rating agencies have warned that Roanoke City’s Reserve Fund balance is “not large enough.” Moody’s already has the City’s bond rating on “credit watch.”
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Shawver said “they are watching” like hawks (my emphasis of hawks). Over my many months of conversations with Ann I have never seen her as “concerned” or “alarmed” as she seems now. I hesitate to call it “panic” but that is MY gut feeling when asking her a question. IMO and in my opinion only – Council does NOT get it. I get the feeling from Ann that she is expecting a bond rating reduction to A1. What this means is a higher interest rate on future bond issuance for debt that in turn bites back into future budgets. No financial pundit expects a turnaround for 3 to 4 years. There is NO certainty of the economy getting better anytime soon – Council members better take heed.

Posted By Valerie Garner

Categories: Finance, Roanoke City Politics

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