In order to have an efficient Debt Management program, the county should develop a multi-year debt budget for all the related debt service funds the county manages. The budget should include the most recent prior year’s audit, the current year’s operation and then extend annually until the final payments are made on the county’s remaining debt. The budget will become a useful tool in analyzing the needed revenue to support the existing debt obligations. The budget should reflect revenues, expenditures and fund balances over the term of the county indebtedness. The fund balance can then be monitored to see if this balance is consistent with the county fund balance policy, if one exists. The fund balance, upon reaching an optimal level, can then be maintained by showing an adjusted property tax rate each year. Even though a county may have other revenue sources that support the debt service funds, the property revenue estimate is the ultimate benchmark of activity. If revenue is shifted from another fund, there is still a cost of the indebtedness that is best measured by the property tax levied.
In developing a multi-year debt budget, the county will gain a better understanding of its current outstanding debt and the debt instruments (interest rates, projects, when the debt was originally issued and whether the debt has been refunded). By reviewing your multi-year debt budget, you will begin to understand future available debt capacity or a potential future debt financial crisis. The Multi-Year Budget must be viewed in conjunction with the Capital Budget and future borrowing should be planned accordingly.
Sample county multi-year debt budget. From this sample multi-year debt budget, Sample County Debt is created reflecting the tax rate overtime with the existing debt, along with adding $14 million bonds straight-line amortized. We can draw a number of conclusions from our exhibits and graphs:
Recommended Practice: Development of a Multi-Year Debt Budget
Recommended Practice: Development of a Fund Balance Policy for the Debt Service Funds