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REGULAR MEETING February 11, 2019
<br /> One(1)way to look at it is how much you have on-hand as a percentage of your expenditures. We
<br /> are at about eighty-five percent(85%) of the total amount of money that flows through the City at
<br /> any given year. We have about eighty-five percent(85%)of that amount sitting on-hand.As you'll
<br /> see (referencing a table in a slide of the presentation), from communities like Terre Haute and
<br /> Carmel that are less than a third (1/3) to a handful of communities that, for their own reasons,
<br /> maintain more cash than one(1) years' worth of cash flow. You don't want to have too much cash
<br /> because then you're missing opportunities to invest in the City. We definitely needed to have
<br /> enough that we're confident of our liquidity even if there is a surprise, shock or problem.
<br /> Mayor Pete continued, Now, the other side of our financial position, of course, is the debt held by
<br /> the City. I won't take you through every corner of this chart(referencing a slide in the presentation)
<br /> but this gives you a sense of the two (2) main sorts of debt. When we say business-type, we are
<br /> talking about City operations. So, that is where the debt is secured by charges for services. Think
<br /> of something like the utilities. So, financially, the debt is secured because there is the knowledge
<br /> there will be future revenue sources for charges. There is also governmental debt which can be
<br /> secured with revenue sources that are tax-based as opposed to charge-based. So, the Parks Bond
<br /> would tend to fall into that governmental category. Where do they go? Half of our debt has to do
<br /> with economic development when it comes to the governmental style. The vast majority of what
<br /> we would call our business-type debt, which comes to about $100 million in total, is waste water.
<br /> Again, this is connected to the LTCP, the CSO project and the fact that we are doing generational
<br /> investments, but you have to fund them all at once. So, you take out a bond, make the investment,
<br /> and we'll be paying that for many years.
<br /> Mayor Pete went on, In Per Capita terms, that means we are at about $2,500 in debt, per resident.
<br /> Again, it is a little hard to gauge what that means without comparing it to our peers. Basically, it
<br /> puts us smack in the middle or a little bit on the low end compared to peer cities. This can be a bit
<br /> misleading, too. So, Terre Haute has virtually no debt per capita and that is largely a consequence
<br /> of the fact that they've had some very serious financial problems and I think have been less able
<br /> to get finance for projects where it wouldn't make financial sense. Basically, you don't want to be
<br /> too low on this list because that means you're missing opportunities to take advantage of the low
<br /> interest rates today. And you also don't want to be too high on this list because that means you are
<br /> building up more debt than you might be able to service. We are comfortable being right among
<br /> our peers and we're, again, a little bit on the low end. In terms of what that does in our budget, I
<br /> think the best way to look at this is to think about the percentage of our yearly expenditures that
<br /> have to go with debt service. Right now, it is basically hovering around ten percent (10%) and
<br /> actually a little lower.Again,if you look our peers,this is a common place to be.We do have some
<br /> communities that have a remarkably high percentage. For reference, I believe the Federal
<br /> Government is somewhere in the neighborhood of one hundred percent (100%) but we do not
<br /> structure our debt like the Federal Government.
<br /> Mayor Pete continued, If you want to look at where that will take you in the future, that is what
<br /> the chart on the right is about. Basically, what it's saying is if we didn't add any more bonds or
<br /> debt load, you would see that go down year by year as various commitments mature. That also
<br /> gives you a sense of the head room we have to add because it is probably prudent to remain
<br /> somewhere in that ten percent (10%) neighborhood as time goes on. Onto my favorite slide, for
<br /> the eighth (8t") time out of eight (8), we have great news on this front. Once again, the City of
<br /> South Bend has a double A (AA) bond rating. Among second (2nd) class cities in Indiana, there
<br /> are only three (3) others that have an equivalent or higher bond rating, all of them are
<br /> comparatively wealthy suburbs of Indianapolis. So, I think this is really a tribute to the discipline
<br /> and difficult decisions made by the members of this Council and by this Administration and those
<br /> going before us. The single best way to understand our fiscal position as a City are those two (2)
<br /> letters because that tells you what outside agencies independently see when they look at our books,
<br /> our finance, our revenue, debt, expenditures and economy. Again, it is very unusual for a
<br /> community with relatively low-income to have such a high bond rating. I want to thank the Council
<br /> for your help in that. It has allowed us to do things like get a three percent (3%) rate on the most
<br /> recent Parks Bond which saves a lot of tax payer dollars compared to servicing what the bond
<br /> payments would be if we had a triple B (BBB) or double B (BB) bond rating.
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