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Debt Affordability Committee July 17, 2013

Debt Affordability Committee July 17, 2013. Debt Affordability Committee’s Charge.

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Debt Affordability Committee July 17, 2013

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  1. Debt Affordability CommitteeJuly 17, 2013

  2. Debt Affordability Committee’s Charge • “On or before September 10 of each year, the committee shall submit to the governor and the general court the committee’s estimate of the total amount of new commonwealth debt that prudently may be authorized for the next fiscal year” • “The committee shall review on a continuing basis the size and condition of the commonwealth tax supported debt as well as other debt of any authority of the commonwealth…The estimate shall be made available electronically and prominently displayed on the official website of the commonwealth.” -Massachusetts General Laws Chapter 29 Section 60B

  3. Meeting Topics • Introductions – April 26, 2013 • Tax Supported Debt – May 17, 2013 • Tax Supported Debt Part 2 – May 31, 2013 • Debt Ratio Comparisons – June 20, 2013 • Debt Service and Authorizations – July 17, 2013 • Public Hearing – July 17, 2013 • Preliminary Recommendation – July 30, 2013 • Recommendation – August 15, 2013 • Final Report – September 5, 2013

  4. Today’s Agenda • Introduction of attendees • Vote on Minutes of June 20, 2013 Meeting • States for Consideration • Projected Debt Service • Outstanding Authorizations • General Obligation Debt • Component Unit Debt • Next meetings

  5. Minutes • June 20, 2013 – VOTE

  6. States for Consideration For Consideration • Colorado • Georgia • Indiana • Maryland • Michigan • Missouri • New Jersey • North Carolina • Virginia • Wisconsin Required • Connecticut • Maine • New Hampshire • Rhode Island • Vermont • New York

  7. States for Consideration with Ratings For Consideration • Colorado (AA) • Georgia (AAA) • Indiana (AAA) • Maryland (AAA) • Michigan (AA-) • Missouri (AAA) • New Jersey (AA-) • North Carolina (AAA) • Virginia (AAA) • Wisconsin (AA) Required • Connecticut (AA) • Maine (AA) • New Hampshire (AA) • Rhode Island (AA) • Vermont (AA+) • New York (AA)

  8. Pertinent Debt Ratios • Statute • Debt service to General Fund revenues • Debt to personal income • Debt to estimated full-value of property • Debt per capita • Other • Debt as a % of GDP • Debt service as a % of total budget • Debt service as a % of tax levy

  9. Debt Service Projection Based on FY2013-FY2017 Capital Investment Plan

  10. Debt Service Projection Based on FY2013-FY2017 Capital Investment Plan

  11. Debt Authorized and Unissued • As of July 3, 2013: • $13.595 B • As Proposed by the Administration • Capital Supplemental - $375 M • General Government - $928 M • IT - $869 M • Energy & Environment - $912 M • Military - $177 M • Housing - $567 M • Transportation - $19 B • $13.7 billion for projects identified in the Way Forward • $5.3 billion for projects identified in the FY13 to FY17

  12. General Obligation Debt $3,607,275 $15,244,263 Total GO Debt = $18,851,538 Source: June 30, 2012 CAFR

  13. Variable Rate GO Debt 1.4% 7.1% 4.5% $000’s % of Total GO 1.0% 2.1% Source: June 30, 2012 CAFR Total Variable Rate GO Debt = $3,607,275,000

  14. Special Obligation Bonds $183,080 $2,398,935 Total SO Debt = $2,582,015 Source: June 30, 2012 CAFR

  15. Variable Rate SO Debt $000’s Dedicated Tax Revenue Total Variable Rate SO Debt = $183,080,000 Source: June 30, 2012 CAFR

  16. Hedging Contracts • Entered into to hedge volatility in interest rates by synthetically fixing the interest rate • Variable rate plus swap costs still lower than fixed interest rates • Varying final maturities, some match associated bonds, others only a portion • Fair value balance of negative $564 million as of 6/30/12 • the negative fair value of swap contracts is offset by lower interest rates on the swapped debt

  17. Hedging Contracts • 16 outstanding contracts on GO bonds with a notional amount of $3.1 billion • 4 outstanding contract on SO bonds with a notional amount of $183 million • Overall of the $3.6 billion variable rate bonds, $3.3 billion are swapped to fixed rate • There are no fixed-to-floating rate swaps in the portfolio • All swaps are deemed effective hedges pursuant to GASB 53

  18. Outstanding Swaps Source: June 30, 2012 CAFR

  19. Contingent Liabilities * MassHousing is actively redeeming bonds in this program

  20. Contract Assistance

  21. FY12 Component Units of the Commonwealth • Massachusetts School Building Authority (MSBA)* • $5.2 billion • Massachusetts Department of Transportation (MassDOT)* • Includes the MBTA and 15 RTAs, which are component units of MassDOT • DOT = $2.1 billion • MBTA = $5.4 billion • RTAs = $160 million, collectively • Massachusetts Water Pollution Abatement Trust (MWPAT)* • $3.3 billion • MassDevelopment* • $184 million • Massachusetts Housing Partnership (MHP)* • $392 million • Massachusetts Convention Center Authority • Commonwealth Corporation • Commonwealth Health Insurance Connector • Massachusetts Clean Energy Center (CEC) • Massachusetts Growth Capital Corporation (MGCC) • Community Economic Development Assistance Corporation (CEDAC) • Massachusetts Life Sciences Center • Massachusetts Technology Collaborative • Commonwealth Zoological Corporation • *Had debt outstanding as of 6/30/12

  22. UMASS, State Universities and Community Colleges • UMASS, the State Universities and Community Colleges and their component units, some of which issue debt, are shown in the Commonwealth’s financial reports separately as “business-type activities” – i.e., they provide services in exchange for fees. These institutions are Commonwealth departments and not separate legal entities, and their component units are therefore component units of the Commonwealth. • UMASS has 4 component units, including the UMASS Building Authority and the Worcester City Campus Corporation, both of which have issued debt. The State Universities (formerly the state colleges) include the State College Building Authority, a component unit that has issued debt, and each of the 9 State Universities and 15 Community Colleges has a foundation that is a component unit, the primary function of which is fund raising, though some foundations have also issued debt. • Debt of these institutions and their component units is not the Commonwealth’s liability, except where that debt is guaranteed, in which case for financial reporting purposes it becomes a contingent liability of the state.

  23. UMASS and State Universities

  24. Community Colleges

  25. Next Meeting Topics • July 30th • Preliminary Recommendation Discussion • August 15th • Pension/OPEB • Other Considerations • Final Recommendation

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