Agenda 02/09/1999 - Laserfiche WebLink

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~. 222 THURSDAY, JANUARY 21, 1999 that many communities his firm has studied and worked with could not support such debt without tax increases, and that the analysis clearly indicated that Martinsville is not only in a strong financial and debt position currently, but that the City would remain extremely competitive even if it assumed the level of debt proposed to meet its needs. Mr. Rose then stated that the role of his firm was to provide the information and tangible tools Martinsville needed to do the things the community needed to do. Vice-Mayor Teague then noted that the figures on the Debt Ratio graph did not reflect Meals Tax funds within self support figures. Mr. Rose stated that since this is a dedicated revenue item it is not pledged as part of the full faith and credit of the City, versus the Real Estate property tax, which is part of the full faith and credit pledge. Mr. Rose went on to show the City's very low debt, its relatively low fund balance, and the fact that some expenditure areas were higher than average. Vice-Mayor Teague pointed out the comparatively low fund balance figure as a potential problem. Mr. Reynolds responded1 that the comparison information illustrated the fact that some communities chose to finance projects through debt and were able to retain monies to create fund balances, as opposed to expending cash reserves to pay for projects, thus showing low fund balances and commensurately low debt obligation, in a pay-as-you-go manner. Mr. Reynolds stated that Martinsville had typically used in-house funds for projects in the past, resulting in both a low debt ratio and a low fund balance. Mr. Rose added that as a city Maztinsville had been able to accomplish more with limited resources than virtually any other jurisdiction of its size in the comparison group, and stated that the bond rating agencies would see tax levels that were competitive now and would remain so, while the City was fully able to do key projects through debt financing. In addition, Mr. Rose noted that the potential for interest earnings on cash held in reserve can also contribute to the advantage of capital debt financing. Further discussion then occurred regarding representations of the City' s General Fund health and fund balances, funds held in escrow for landfill closure and post-closure, tax exempt finance rates, and arbitrage earnings potential. Council Member Roop pointed out that it was likely that some of the other localities in the comparison analysis had funded projects using local reserves, not debt financing, and still had strong fund balances.