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A
My
name
is
Kelly
Flannery
and
I'm,
the
chief
financial
officer
for
the
City
of
Charlotte,
my
primary
duties,
including
those
prescribed
in
the
North
Carolina
local
government
finance
Act,
include
keeping
the
accounts
of
the
city,
dispersing
funds
and
compliance
with
state
requirements
receiving
and
depositing
all
monies
of
the
city,
financial
reporting,
risk
management,
supervising
the
investment
of
funds
and
the
focus
of
this
learning
module
managing
the
city's
debt.
This
informative
session
will
provide
an
overview
of
the
types
and
appropriate
uses
of
debt,
including
the
credit
rating
process.
A
Additionally,
I
will
discuss
the
city's
use
of
long
term
financial
instruments
and
provide
an
overview
of
outstanding
long
term
debt
and
the
debt
management
process,
including
a
review
of
the
metrics
that
are
contemplated
prior
to
the
issuance
of
debt
and
provide
an
overview
of
those
current
metrics
for
the
city.
Finally,
I
will
discuss
the
city's
continuous
improvement
efforts
to
maintaining
fiscal
stability.
A
The
city
maintains
a
balanced
mix
of
financing
strategies
for
funding
capital
projects
without
a
reliance
on
any
one
source
strategies
include
pay-as-you-go
or
pay-go
grants,
and
the
issuance
of
debt
debt
is
a
source
that
provides
the
city
with
access
to
low-cost
capital
for
important
infrastructure
projects.
The
city's
distinction
of
having
the
highest
credit
rating
assigned
to
the
bonds
contributes
significantly
to
the
lower
cost.
The
city
generally
uses
long
term
bonds
to
provide
financing
for
capital
needs
in
bond
anticipation,
notes
to
provide
interim
short-term
funding
during
project
construction.
A
These
short-term
programs
are
retired
over
time
upon
the
issuance
of
long
term
bonds
or
an
annual
budget
allocation.
The
city's
utilization
of
interim
financing
allows
the
city
to
realize
interest
cost
savings,
while
new
capital
projects
are
constructed.
The
city
regularly
evaluates
its
existing
bond
portfolio
for
refunding
opportunities
as
a
means
of
providing
interest.
Cost
savings
similar
to
refinancing
a
home
mortgage
or
refunding,
is
when
the
city
refinances
outstanding
bonds
by
issuing
new
ones
at
lower
interest
rates.
A
Each
time
a
refinancing
is
contemplated,
a
savings
analysis
evaluating
the
savings
and
present
value
is
prepared
that
identifies
the
dynamic
effects
of
any
refunding.
The
city
aims
for
a
minimum
present
value
savings
on
a
refunding
candidate
of
at
least
three
percent
of
the
refunded
debt
and
does
not
extend
the
maturity
date.
A
We've
talked
about
why
the
city
issues
debt
and
now,
how
do
we
do
it?
There
are
multiple
financing
vehicles
available
when
contemplating
project
funding
the
most
common
is
fixed-rate
long
term
debt
generally
in
the
form
of
municipal
bonds.
Typically,
municipal
bonds
have
final
maturities
of
20
to
30
years
from
the
date
of
issuance
and
provides
certainty
for
long
term
financial
planning.
Approximately
90%
of
the
city's
outstanding
long-term
debt
is
fixed-rate.
A
Short-Term
debt
is
appropriate
for
certain
capital
equipment
purchases
and
to
satisfy
the
cashflow
needs
of
the
city
on
a
limited
basis.
Short-Term
debt
may
be
issued
with
either
fixed
or
variable
interest
rates.
The
city
may
use
short
term
debt,
including
bond
anticipation,
notes
or
bands
commercial
paper,
also
known
as
CP
lines
of
credit
or
notes.
The
use
of
interim
short-term
debt
allows
the
city
to
only
pay
for
projects,
as
construction
is
being
contemplated,
rather
than
borrowing
all
of
the
money
upfront.
A
From
time
to
time,
the
city
has
used
derivative
products
on
various
transactions
such
as
swaps,
to
realize
lower
all-in
costs
on
a
new
debt
issuance
or
to
receive
an
upfront
payment
based
on
currently
outstanding
bonds.
Currently,
the
city
has
three
outstanding
swaps,
where
installment
purchase
or
lease
financing
would
prove
more
economically
beneficial.
A
The
city
will
consider
entering
into
long-term
capital
asset
obligations,
the
useful
life
of
the
capital
facility
or
equipment,
the
terms
and
conditions
of
the
lease
and
the
direct
impact
on
debt,
affordability
and
budget
flexibility
will
be
evaluated
prior
to
the
implementation
of
a
lease
program.
A
direct
borrowing
is
a
privately
placed
loan
to
the
city
from
a
banking
institution
or
another
lender.
A
Direct
loans
allow
the
city
to
negotiate
beneficial
terms
directly
with
a
financial
partner
rather
than
going
into
the
public
market
city
council
approval
is
required
for
each
of
the
debt
mechanisms
just
described
in
addition
to
city
council
approval,
the
states,
local
government,
commission
or
LGC
approves
the
city's
borrowing
transactions.
The
LGC
is
a
nine
member
state
body
within
the
Department
of
the
State
Treasurer
that
approves
most
local
government
borrowing
transactions
in
issues
bonds
on
behalf
of
local
units.
A
The
LGC
examines
whether
the
amount
being
borrowed
is
adequate
and
reasonable
for
the
projects
and
is
an
amount
that
the
city
can
afford
to
repay.
As
previously
discussed
when
contemplating
the
issuance
of
debt
to
fund
capital,
the
city
primarily
issues
long-term
fixed-rate
debt,
the
city's
long
term
debt
profile
is
comprised
of
three
types
of
financings
general
obligation,
bonds,
revenue,
bonds
and
certificates
of
participation.
A
General
obligation
bonds
are
issued
to
fund
general
capital
needs
of
the
city.
The
city
agrees
to
repay
the
bonds
with
all
available
general
fund
revenues
and
pledges
its
full
face
credit
and
taxing
power
to
pay
a
principal
and
interest.
The
North
Carolina
Constitution
generally
requires
that
the
city
hold
a
successful
voter
referendum
before
issuing
bonds.
A
Revenue
bonds
are
issued
to
fund
facilities
for
the
airport,
water
and
sewer
systems
and
stormwater
system
revenue.
Bonds
are
payable
from
a
specific
source
of
revenue
to
which
The,
Full,
Faith
and
Credit
of
the
city
is
not
pledged.
For
example,
Airport
bonds
are
payable
from
airport
revenues
and
water
sewer
bonds
are
payable
from
water
sewer,
user
fees.
General
city
revenue
is
not
obligated
to
pay
principal
and
interest
on
revenue
bonds.
A
No,
voter
approval
is
required
prior
to
the
issuance
of
revenue,
bonds,
certificates
of
participation
or
cops
are
debt
instruments
that
share
in
a
revenue
stream,
usually
installment
purchase
payments.
The
city
has
used
cops
to
fund
cultural
and
tourism
projects
as
well
as
cats
projects.
Cops
payments
are
included
in
the
annual
budget
in
are
subject
to
annual
appropriation.
A
Cops
do
not
require
voter
approval
city
council
approval
is
required
for
each
of
the
financings
just
described
the
city
issues,
debt
across
multiple
credits,
most
cities
have
general
capital
needs
that
are
funded
through
long-term
debt,
but
not
all
cities
also
have
water,
sewer
and
stormwater
systems,
airports
and
transit
systems
also
known
as
enterprise
systems.
An
enterprise
system
is
a
revenue
generating
facility
or
a
system
that
provides
funds
NASA,
sorry
to
pay
debt
service
on
the
securities
issued
to
finance
construction.
A
A
The
City
of
Charlotte
has
a
history
of
sound
financial
policy
and
practices
and
has
consistently
held
triple-a
ratings.
The
highest
municipal
government
ratings
available.
The
city
first
received
a
triple-a
rating
for
general
obligation
bonds
over
42
years
ago.
In
1977,
the
city
relies
on
key
financial
policies.
To
ensure
needs
are
met
in
fiscally
responsible
ways.
A
The
city
adopts
a
comprehensive
set
of
financial
policies
in
benchmarks
to
ensure
the
financial
resources
are
managed
in
prudent
manner
and
to
provide
a
foundation
for
financial
sustainability
when
contemplating
financial
sustainability.
The
city
strives
to
achieve
the
lowest
cost
of
borrowing
retain
the
highest
credit
ratings,
comply
with
regulations
and
maintain
best
practices.
A
Affordability
for
capital
projects
is
reviewed
throughout
the
year
using
comprehensive
debt
models.
These
long-range
financial
plans
evaluate
future
revenue
and
expenses
dedicated
to
capital
and
future
debt
service
requirements
and
contemplate
the
ability
to
fund
future
projects.
The
models
specify
the
ability
to
issue
debt
that
can
be
fully
repaid
with
existing
or
planned
revenues.
A
Appropriate
debt
limits
can
have
a
positive
impact
on
bond
ratings,
particularly
if
the
government
demonstrates
adherence
to
such
policies
over
time
as
reflected
in
Charlotte's
long-standing
triple-a
ratings.
Financial
limits
often
are
expressed
as
ratios.
Different
financial
limits
are
used
for
different
types
of
debt.
A
When
contemplating
the
general
government
debt
program,
the
city
commits
to
maintain
adequate
cash
in
fund
balance,
reserves
at
levels
required
to
maintain
top
tier
credit
ratings.
The
city
maintains
the
municipal
debt
service
fund
balance
at
an
adequate
level
to
cover
debt
cause.
The
ratio
of
debt
service
fund
balance
to
actual
debt
service
costs
will
be
approximately
50
percent.
A
Additionally,
the
city
maintains
a
balanced
mix
of
financing
strategies
for
funding
capital
projects
without
a
reliance
on
any
one
source.
Adhering
to
these
debt
management
criteria
has
allowed
the
city
to
enjoy
favorable
ratios
Enterprise.
Our
revenue
debt
levels
are
often
limited
by
debt
service
coverage
ratios.
For
example,
the
annual
net
pledge
revenues
to
annual
debt
service.
A
Additionally,
bond
provisions
contained
in
bond
covenants
and
potential
credit
rating
impacts
are
drivers
of
the
appropriate
level
of
coverage.
Enterprise,
user
fees
are
established
based
upon
the
operating
costs,
debt
service
and
coverage
ratio
of
the
debt
service.
When
contemplating
the
appropriate
debt
management
procedures
for
enterprise
debt,
the
city
seeks
to
achieve
healthy
coverage.
Therefore,
it
has
set
coverage
in
the
range
of
2
times
annual
debt
service,
the
amount
beyond
1
times
coverage
is
available
for
Pago
funding
of
the
enterprise
capital
needs.
A
Each
credit
has
their
own
benchmarks
for
Pago
days
of
cash
on
hand,
is
another
measure
of
a
system's
financial
security
and
estimates.
The
number
of
days
the
system
can
pay
its
daily
operation
and
maintenance
cost.
This
is
a
helpful
measure
of
how
long
a
system
can
operate
if
it
has
a
sudden
and
dramatic
reduction
in
operating
income.
The
higher
the
number,
the
more
protected
the
system
will
be
against
revenue.
Shocks
taken
with
other
financial
ratios
days
of
cash
on
hand,
can
help
understand
a
system's
financial
position
and
make
choices
about
rates.
A
The
city
provides
for
the
issuance
of
additional
debt
at
reasonable
time
intervals
that
sustain
reasonable
ratios
Charlotte's
enterprise
fees
compare
well
to
other
peer
cities.
I
have
spoken
earlier
of
the
importance
of
credit
ratings
to
achieving
a
low
interest
cost
and
ensuring
maximum
access
to
the
bond
market.
There
are
three
credit
rating
agencies
that
rate
municipal
debt
for
each
of
the
city's
credit
entities.
The
rating
agencies
assess
the
credit
quality
of
the
city,
and
the
ratings
reflect
the
likelihood
this
city
will
repay
its
debt.
Each
of
the
credit
rating
agencies
have
similar
rating
criteria.
A
General
government
criteria
include
the
economy
of
the
region,
financial
management,
overall
management
of
the
city
and
debt
and
pension
liabilities.
The
city
enjoys
high
credit
ratings
of
the
general
government,
as
well
as
its
enterprise
credits,
with
the
majority
at
triple-a.
Adherence
to
a
debt
management
policy
signals
to
rating
agencies
in
the
capital
markets
that
a
government
is
well-managed
and
therefore
is
likely
to
meet
its
debt
obligations
in
a
timely
manner.
The
city
engages
in
continual
evaluations
of
the
most
cost,
effective
means
for
providing
city
services,
debt
models
and
affordability.
A
Analysis
are
regularly
updated
to
reflect
changes
in
economic
indicators,
interest
rates
and
project
timelines
as
project
timelines
and
implementation
schedules
are
altered.
Cash
flows
are
also
adjusted.
These
continual
reviews
allow
the
city
to
preserve
flexibility
and
to
use
debt
as
needed,
and
at
the
lowest
cost
achievable.
A
Monitoring
interest
rates
in
the
municipal
market
and
the
Treasury
market
is
required
to
determine
when
refunding
is
economical
and
if
interest
rate
savings
targets
can
be
met.
The
city
regularly
evaluates
its
existing
bond
portfolio
for
refunding
opportunities
as
a
means
of
providing
interest,
cost
savings.
City
staff
is
committed
to
maintaining
the
highest
standards
of
financial
management.
I
would
like
to
commend
the
mayor
and
city
council
for
their
strong
leadership
and
support
in
setting
sound
fiscal
policy
to
ensure
financial
resources
are
managed
prudently
and
to
provide
a
foundation
for
financial
sustainability.