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Debt Capacity <br /> Overview <br /> This section of the CIP discusses the affordability of future bond issues for unfunded projects. <br /> ; There are two ways to look at debt capacity. The first is to look at the capacity to issue debt <br /> under the legal constraints imposed on the City. The second is to look at the affordability of that <br /> j debt recognizing there is a limit to the City's ability to repay obligations. <br /> The City has used only about 13% or $45 million of its $336 million of legal debt capacity for <br /> ~ general obligation bonds as of June 30, 2004. The City's Budget Committee has determined that <br /> it would not be prudent, for the City to issue debt up to that legal limit. The City has Financial <br /> ~ Management Goals and Policies that. include the following debt management guidelines. These <br /> . guidelines were reviewed and approved by the Budget Committee in February 2004. <br /> • Net direct debt as a percentage of real market value shall be a maximum of 1.0%. <br /> • A minimum of 50% of net direct debt shall be retired within 10 years. <br /> • Maximum annual debt service on all General Fund-backed debt shall be limited to 10% <br /> l of General Fund expenditures in the year in which the debt is issued. Of this amount, <br /> r, long-term debt that has.a primary pledge of General Fund resources shall be no more than <br /> 5% of General Fund expenditures. <br /> These limits define the affordable level of debt that could be issued under the CIP. The table <br /> below shows the current levels of the debt affordability ratios. <br /> As of <br /> Debt Affordability Ratio June 30, <br /> 2004 <br /> ~ ` ' Net direct debt as a percentage of real market value shall be a maximum of <br /> 1.0%. 0.4% <br /> _ <br /> A minimum of 50% of net direct debt shall be retired within 10 years. 63% <br /> ; <br /> Maximum annual debt service on all General Fund-backed debt shall be 3.7% <br /> limited to 10% of General Fund expenditures in the year in which the debt <br /> ~ is issued. <br /> r <br /> Net direct debt includes all of the City's general obligation bonds except for the Airport issue <br /> that is paid from Airport revenues and 50% of the Atrium bonds. The City excludes the pension <br /> <br /> . ; bonds from the definition of net direct debt. <br /> r ~ The City's debt ratios have an impact on its credit rating. The City is rated "Aa2" by Moody's <br /> - Investors Service and has maintained that rating since 1957. When Moody's last evaluated the <br /> r City's credit, it noted that one of the City's credit strengths was "a low level of rapidly repaid <br /> debt." In addition, Moody's noted that even after possible issuance of an additional $60 million <br /> for parks purposes and a new police headquarters, the City's debt levels would remain very low <br /> and manageable. <br /> ~~1 <br /> ' City of Eugene 2006 - 2011 Capital Improvement Program <br /> 9 <br /> <br />