Chesterfield County, Virginia Chesterfield Behind the Mic, 23 Aug 2022

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From YouTube: Episode 26: Bond Referendum 101

Description

On the latest episode of Chesterfield Behind the Mic, we talk to Deputy County Administrator Matt Harris to get the background on Chesterfield's upcoming bond referendum this fall. We dive into the basics of what a referendum is, how bonds work, what savings they can present, how the projects in the Community Facilities Bond Plan were chosen, and much more. Find out more at http://chesterfield.gov/bond.

Credits:
Director: Martin Stith
Executive Producer: Susan S. Pollard
Co-Executive Producer: Teresa Bonifas
Producer/Writer/Host: Brad Franklin
Director of Photography/Editor: Matt Boyce
Producer/Camera Operator: Martin Stith and Matt Neese
Graphics: Debbie Wrenn

Promotions and Media: J. Elias O’Neal

Music:
Hip Hop This by Seven Pounds

Inspiring Electronic Rock by Alex Grohl

Guest:
Matt Harris, Deputy County Administrator for Finance and Administration

Filmed in-house by the Department of Communications and Media

Chesterfield.gov/podcast

Follow us on social media! On Facebook, like our page: Chesterfield Behind the Mic. On Twitter, you can find us at @ChesterfieldVa and on Instagram it’s @ChesterfieldVirginia. And you can also watch the podcast on WCCT TV Thursday through Sunday at 7 p.m. as well as on weekends at noon on Comcast Channel 98 and Verizon Channel 28.

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Good morning, good evening, good afternoon, whatever is that you are wherever you may be. Thank you very much for making us a part of your day. I am Brad Franklin the creative content writer here in Chesterfield and I'm very glad to tell you that Chesterfield on the mic is on the air. Once again summer is winding down the fall will be here before you know it, and one of the things coming up this fall is a general election. um Voters will go to the polls on November. The 8th early voting begins in September.

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One of the things voters here in Chesterfield will be considering is a bond referendum. The community facilities, Bond plan will be on the ballot. Voters will be deciding whether or not the county should um issue 540 million dollars in general obligation, bonds to cover 26 different Capital Improvement projects that will be paid for over eight to ten years. um Those projects are broken into four different categories. You got schools, you got Parks and Rec, you got um libraries and you've also got Public Safety.

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Now we are going to get into the ins and outs of all those different projects. In a later podcast down the road, but for today's purposes we thought it would be a good thing to sort of start out with a look at what a bond referendum is, how they work, what they aren't, how they're paid for how they're structured all that fun stuff and to do that, we got Matt Harris back on the podcast Deputy County Administrator here in Chesterfield Matt. Welcome back to the show.

A

How are you I, like the fact that you said back on the show you like that yeah, the the first return guest we've had? um Let's start there Matt what what is a bond referendum, because I think there probably are some people who are kind of not really sure you know how it works or whatever we'll get into, but in its most basic level. What's a bond referendum.

B

Yeah, so it's we only do these every you know eight to ten years. So it's it's a good point. It's a natural reality that people don't necessarily know what it is, but at its Essence, it's really at uh the referendum. Piece just means it's on a ballot. So when folks go into the uh voting booth, you know this November, actually starting as early as September 23rd, which makes this year. You know a little bit different right right, just go in there to vote on candidates or other measures.

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There will be a question on there uh specifically relating to Capital Improvements in Chesterfield County, and it's a it's a common occurrence used in every jurisdiction throughout the Commonwealth, and so basically, all we're putting in front of the voters is. Do you approve? You know this long-range Capital plan for Chesterfield County.

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You know and we'll, like you said, you'll go through all the specific projects, but police stations, Fire Station schools. Do you approve us or allow us to build these things over? You know and I think a really important thing. Is we don't do it overnight right? You know, we've been out doing these uh town halls and other things, and you know I, think people get a little. You know they're supportive in general, about Capital Improvements and everybody wants nice facilities in their Community. But you know if 540 million dollars sounds like a.

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Lot of money, price tag, yeah.

B

So, first and foremost, we would never do that uh with with cash. So we we go out and just like folks who I think the simplest metaphor for all this is a you know: a household mortgage. You know you buy a 350 000 home you're, not going to pay cash more than likely and uh so you're gonna go to the bank. You're gonna ask for a loan and you pay back over. You know 30 years right same thing for us here, a couple subtle differences.

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uh We pay ours down over 20 years and instead of 30, but basically we are going to the voting public and saying. Okay, we need these improvements, these buildings, there's no people, there's no operation.

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Right now, yeah yeah.

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This is all the bricks and mortar uh kind of stuff that you see when you're driving around the streets Chesterfield County, do you approve us to build 540 million dollars worth of physical plant right over the next decade? Essentially, so we will borrow against that. 540 million dollar total, if approved, but again we do it over over 10 years.

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Not going out day one and putting 540 million dollars on the credit card right, passing that bill through right.

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Now one of the things about the bond referendum I think that might be you reference like buying. You know, buying a house. We don't do it necessarily with bonds, though, and that's I think the part for some people that causes some confusion. So what exactly is a bond, and why is you know a general obligation Bond? Why is that such an important uh part of the whole structure here.

B

Yeah I mean a bond, for us is just essentially a loan again just putting it back in those terms, so we go out and in the open market for us- and you know it's essentially large insurance companies and large financial institutions and.

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Large banks that right.

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It's it's a open and Fair competition and it's the lowest rate. You.

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Know it wins today, and so we.

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uh That's how we borrow money, we don't go to Banks directly. We have a competitive process, we put out a you know, essentially an RFP or a request. Here's what we want right.

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We want to borrow for these improvements.

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Know it all happens in about a 30 second time. We all the bids are revealed, lowest cost wins a day right. So that's that's. How we borrow money, we just call it a bond, but it essentially again it's a it's. A government loan.

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The go piece which is just you know again: government speak. uh That is the the best kind of of obligation that we can get ourselves into. It's all. It means is the Full Faith and Credit of Chesterfield County, okay, not to get make this super nerdy more nerdier than it already is. uh You know, there's lots of different kinds of ways that we can borrow right.

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General obligation just means that Chesterfield County stands behind us 100 and we will pay this right. uh You know this loan back to whoever the the financial part.

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So, that's again, that's that's the the Crim dollar Crim of of of Public Finance, but we can only access. You know that uh that kind of financing, if.

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The voters approved, if approved, right right.

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So that that's the that's, why we put it on the ballot, so we put on the ballot. Do you approve this long-range Capital plan and you allow us to use this special kind of financing, that's full faith and credit and the other piece that goes along with that. That means we get the low, and this is I think where people really start to park back up. uh It allows us to get the lowest cost of of.

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Issuance so for.

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We talk a lot about our you know: credit rating as a county again very comparable to somebody at home. They've got you've, got Equifax and all those folks.

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Right that rank.

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You you got three different scores and.

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You can keep track on all that stuff. Same thing happens for us, Chesterfield county is amongst the the rare uh localities in the country, there's only about 30 or 40 of us that have a perfect credit rating from all three agencies, but that you really get to utilize that the most in this instance.

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When you're going through, you know, a Geo sale means we can get in that highest tier right of of security. We can also get the lowest rate in that highest tier.

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Lowers the borrowing costs.

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Why it matters when we're paying out on this loan.

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Next, how many, every years, the least amount of money is going to go towards interest more towards principal and that that has a couple of things. Obviously paid interest is not a fun thing for anybody right, but it keeps taxes as low as you know they can be, and it frees up other money for operational things right. You know: Staffing Pay, Teachers, cops, firefighters, all of that apple pie, type, stuff, right.

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Not diverting more money that is needed into paying interest on these bonds, so getting the Geo approval and having that perfect credit rating keeps the interest cost low allows us to put the improvements on the ground. uh You know in an efficient manner without you know, sort of uh putting that saddle on the rest of the organization or, ultimately, of course, most importantly, the taxpayer.

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Now, in terms of you mentioned, you know that going this route means the county can essentially do it at the lowest cost. Do you have an idea of how much the county would save by going this route to to essentially to achieve these goals versus another route to to do it in a different path? How much would the county save doing it this way yeah? So you.

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Know we just try to put that in context, because again these are Concepts that right, you know unless you're in this space, they're.

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Little before and I understand that, so we just looked at somebody with our credit rating and somebody with basically a notch below.

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And so borrowing the same amount of money on either one of those scenarios. It would say between 20 and 25 million dollars of Interest over the duration of.

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Eight to ten year period that we're talking about so.

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You know that that's real money right and we can equate that to you, know basically two of our projects on the county side, the entire cost of those right. So it it really does matter. You're, not just stand up, say well: AAA and low cost, a 20 25 million dollars.

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People like yep that that's that's a significant yeah. That's a significant and I'm curious too. Like you know, we I think we. We have a general census as a as a public of what Capital Improvements are right. These are Big Ticket items. These are things that the like you said, brick and mortar. You know they're not Staffing. They are big picture stuff, but I'm curious. How?

A

How did the county gonna go about picking these projects again we're going to get into the ins and outs of what all they are down the road but I'm just curious? How? How did this list of these 26 come to come to be.

B

So yeah first thing I think it's important to point out. We only borrow for stuff that has a useful life that far exceeds the the borrowing period. So we don't borrow money for operations for paychecks light bills. For you know your beautiful Studio here.

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That things that are, you know legitimate physical things. You can walk into right buildings that are going to have a useful life of you know. In some instances some of these schools we're talking about replacing are at or over 100 years. So you don't want to borrow or put money out for something that has its useful. Life is less than the period of time, which you would borrow so.

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That's that's the first criteria. It's got to meet that test or it's not something we are going to borrow, for. There are a lot of local governments that borrow just to kind of keep the lights on right, so we just make that distinction for folks we we are only talking about you, know, Capital stuff, that you.

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Tangible things you can go touch and feel so picking the projects. uh You know we thought we'd be doing this in November of 2020 right obviously covered.

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uh Had other thoughts on that, so we've had a two to three year period where we've been out talking to the community about. You know: here's kind of the list of projects the eligible projects. So it's been a long dialogue with folks trying to dial that list in because.

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Know there's our Capital needs far exceed 540 million.

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So how do you fit the ones that are in there? uh So we've had a long period of time to be able to do that, and so some of those criteria, obviously public feedback. A public dialogue is going to be at the top of the list right we have a lot of analytics. You know that we do when we're talking about kind of forecasting future demand. Where are people going to live tomorrow? uh That you know, can we put facilities in to try to stay?

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At least you know on Pace, with where service demands are going to be, there's been a big push on revitalization again we got two schools as part of this package that are effectively 100 years old right.

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Think they've, you know: they've they've served uh their their purpose. So right.

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Sure that we have parity and that all the facilities, no matter where in the county you kind of get an even uh you know, experience when.

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Go into them so that that's really important and then there's economic considerations. You'll have uh you know Gerard or Joe, or somebody here talking about a specific project but in the police incidents where you're in long-term leases and we're looking to convert those to county home facilities, so that will pay for itself right. You know pretty quickly so.

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Always look for opportunities where it makes sense from a you know: physical plant perspective, but also if it's got that payback from you know we're getting out of leases across the board. This is really sort of the last things, but that's another consideration uh that we certainly have in there now.

A

One of the things too is and with all I think all Bond referendums. You know there's always a an idea of like you know how much each you know each bucket, so to speak right each each category, yeah right goes and I'm just curious. If you can break down for us. The schools versus County um projects that are in this and and again we're going to go through the ins and outs of each individual project.

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In terms of each one of those categories, I'm just curious, if you can kind of break those down.

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For you so again, just some background stuff. We have one credit card. If you will right.

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One referendum: it's one question, counting schools, they don't have their own debt capacity. Actually, you know by law. The school board can't enter into indebtedness, only the board supervisor. So it's right. It's it's managed. Collectively, it's one effort. It's one question! It's one website working closely with the schools to put this whole thing together, um so you know it just want folks to understand. With you know, the abort survivors has the taxing power. They also have the power of indebtedness, and so that is kind of how that all comes together. Right.

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Four categories are education or schools, public safety parks and libraries. Those are the four that we're looking at here. Schools has the Lion's Share of that 375 million dollars, and that's really just because of the unit cost of what they're dealing.

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Mean a middle school nowadays is going between 90 and 100 million dollars, so it's not that they have more projects necessarily than.

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The other categories.

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It's just that building a school the size of it and all the intricacies of that it's just more expensive.

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So that's why they have the larger piece and then the other categories are really kind of evenly split, around 40, plus or minus for Parks, 40, plus or minus for libraries.

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And then Public Safety is split: 40 40 for police and fire. Okay.

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And then in the bigger picture, as as this thing works forward, right, um I think that they're, you know, because Bond referendums only come around every once in a while, and people don't see him as often as they go to vote right. I. Think one thing that we've seen at least in terms of some uncertainty right is is how how the um the vote matters to the bond right in the sense that like will the county be able to you know essentially, is this the one vote?

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Is this the one voice, and certainly you know in jurisdictions around us? There have been lots of different things, whether it's casinos, whatever and I'm, just curious. If you can put that one to rest, it's like you know is this going to be. You know an approval or rejection all at once in one vote. Well,.

B

I can put one thing to uh to arrest Brad.

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No Casino, it's part of this referendum, let's clear that up.

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So yeah, no, it's it's! You go in it's one question: do you approve right? You know in layman's terms approval of this long-range Capital plan to be financed by these kind of.

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That we've talked about before.

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Vote Yes you're approving if you vote no, you know, obviously, so that's what that means, but these questions can be weirded or worded kind of weirdly. So right you know we do point that as we go through right. If you vote Yes you're saying yes, I want these projects to be paid for by this uh special type of financing.

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Right and then um last one before we wrap up I I know that there's a lot of.

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Work just getting started, I think.

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It's gonna be warmed up.

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I mean look: if you want to break down every every project, I mean hey, but no I'm, just curious. You mentioned 2020 and, and the dialogue and stuff I'm just curious. The amount of work that went into this entire process of putting this whole thing together.

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I'm just curious like how that works, and if you can shed some light sort of on the intricacies of it um and and the amount of time right that you guys have put into figuring out what was the best way to do it and how to how to put it all together for the voters in November.

B

Oh I mean it it's a it's an in-depth process. We do a capital process as part of the budget every single year right, so we're always sort of evaluating our long-range Capital needs, but again every eight to ten years. You gotta package them together, you go out and you get this authorization and it helps to plan. You know it's when you're doing things. uh You know with a dollar figures that are like this. We want to make sure that we can think multiple years in advance, whereas the operational budget is much more flexible. It.

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Changes your conditions.

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Are much more you know up and down when you're doing a capital plan? There's all you know from the design to the bid to the construction Windows you got to layer. All that stuff out. You really have to think in a 10-year block is, is very reasonable.

B

So right, it's really just a culmination of you know several years of work, but we're always kind of working on that long-range plan and and a couple other disclaimers that I that I have to make while I'm with you Brad is first and foremost, this is not representative of every project. So when you have the uh the next two guests talk about specifics, this is really things that we've documented. We know exactly. We need these there's going to be things that come up and I.

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Think one of the big questions we get is what about my project or what about this? Or what about that? There's always ways for us to come back as conditions change and fit in other projects, and we've got a really good track record, particularly on the school front of.

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Being able to do.

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That so I don't want folks that think this.

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Is the only thing right here? Yeah I got you, you know build.

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Or construct for the next 10 years? That's that's not true. uh You know we leave flexibility in there, but these are things that we know today we can Bank on. These are good projects.

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Year old, school's not going to get any.

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Younger any younger right exactly right.

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So I think that's a that's a really important Point. uh You know on the paying for this. Just a quick note in previous the last time we went out with a referendum, it did have a meal Stacks component, that's not included here and we we don't feel like. We need that to be able to pay for this baggage. But that begs the question mark. Well then, uh you know Mr Harris.

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How are you going to pay for these, and so it really goes back to the way that we handle our business right and we're talking about paying down debt. We pay uh all of our loans. If you will our mortgages on level principle. That means that you know when you're you get your mortgage payment every month or you see the bill come in it's a it's an even payment for.

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Pay we take the entire principal amount and we chop it up and we pay that same amount every month, so that means it's much higher at the beginning and it starts to tailor off by the end of that 20-year term right. So that gives you this slope effect where we are paying down debt much more aggressively than a lot of our peers, certainly than uh any any folks in Washington, DC, whatever comprehend, and what that.

B

But that gives us an opportunity, and so we talk about we're able to pay for this because of that structure, as that slant begins to emerge, we can then put in more debt on top of that, in that space, that's created by retiring other loans, right that fall off the books. We then add a new one and our total cost. Our total principal and interest payment really doesn't change that.

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Much right because.

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We are paying stuff off so aggressively, we're getting it off the books and you create capacity within that same. You know, Bank of of dollars to add more debt to do more projects, as opposed to just stacking on top of what's already there, and then you see your debt cost. You know Skyrocket over time. We we do it very very differently. So that's that's kind of the secret sauce that allows us to be able to go out. Tell the public yep.

B

We want you to entrust us with 540 million dollars of debt over 10 years, but it's not going to put you know pressure on your taxes. It's not going to require a new tax, such as a meals tax. And thirdly, it's not going to crowd out. You know. Everybody wants to. You know, have teachers and police officers whatever paid more and pay attention to those core Services right.

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Perspective, it doesn't crowd out those opportunities either so.

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That part's really really important cool.

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Well, where, where should people go? If they have questions, they want to learn more about the community yeah.

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We're we're we're a little bit everywhere right.

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From from Billboards to uh to ads in the newspaper, and really it's it's, it's not an advocacy position right. You know so I'd say that for the uh for the lawyers here today, uh but we wanted to give information. So uh we've got our blogs the podcast again we we are taking advantage of billboards out there. You can go to chessfield.gov bond. All of this information is there. All of our social media accounts have stuff uh we're going to have a Facebook live Town Hall.

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That folks, can you know if you have questions and you want to get a hold of a live person? Unfortunately, it'll probably be me, you can you can do that, we're going to go out and do meetings in each of the magisterial districts and have sort of Live question and answers and I think a really interesting, unique opportunity.

B

We have our speakers Bureau, where you can go on chesterfield.gov or just Google speakers, Bureau, Chesterfield right and you can sign up and we will send out a a handsome team of speakers to talk to you and your neighborhood association, Civic group, Church, whatever it is. If you want a special, you know sort of presentation to your group and we're getting a lot of those requests. So we you know, we uh we do make house calls as well good.

A

Deal well Matt. Thank you very much for joining us today. I appreciate you. Thank you Brad all right now you make sure you check us out on social media on Twitter it's at chesterfieldva on Instagram at Chesterfield, Virginia, all one word, and on Facebook you can check out our podcast page, just search chessfield on the mic. Make sure you like that patreon keep up with us as we go forward now. Let me tell you about all the ways you can check us out.

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You can watch us on our YouTube channel as well as on our website at chesterfield.gov, podcast and audio. Only version of the show is available there, as well as on Apple podcast, Spotify, Google, podcast, overcast and a whole host of other services. You can also watch the podcast on wccct Thursday through Sunday, at 7, on the weekends at noon. That's Comcast, channel, 98 and Verizon Channel, 28 and Lassen. You can check out chesterfield.gov connect with us one ways for us to get in touch with you and you get in touch with us.

A

My thanks to my director, Martin Stith and all the good folks here in Communications and media for making this fossil my thanks to you for joining us today, so from all of us here in Chesterfield. Thank you very much for joining us have a good day.

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