Agenda - Council - 07/28/1981 - Laserfiche WebLink

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M E T R O P O L I T A N C O U N C I L Suite 300 Metro Square Building, St. Paul, Minnesota 55101 D R A F T METROPOLITAN WASTE CONTROL COMMISSION COST ALLOCATION STUDY A. DEBT Public agencies issue bonds to pay for sewers, streets, storm drainage, water systems and public buildings. These types of expenditures are for equipment, buildings and land improvements that are not consumed annually. Debt allows payment for them over the lifetime of the project. Beause capital projects are always likely to be financed this way, it is important in the planning process to anticipate future bonding needs and costs and add those to annual operating costs. 1. Metropolitan Investment Framework In 1977, under the authority of MSA 473.145, the Metropolitan Council adopted the Investment Framework chapter of the Metro- politan Development Guide. Policies 5 and 6 concern the debt of the metropolitan agencies. In policy 5, the Metropolitan Agency Debt Indicator has been estimated as the point at which the Region may have its bond rating reduced „ an outstanding indebtedness of $650 million. This reduction would cause an increase in the interest cost of the debt. The existing indebtedness of the agencies exceeded $300 million only at the end of 1979 at which time it stood at 46.5 percent of the Indicator. Figure 1 shows the current debt related to the Indicator throughout its projected life. Assuming no changes in existing schedules, the current debt would be retired in 2005. Policy 6, the Debt Service Policy, provides a guide in the planning of regional bond issues so that the annual debt service payments of the metropolitan agencies do not exceed .25 percent of the Regional Income Index. This means that the Metropolitan Council and the metropolitan agencies will attempt to plan bond issues so that the total of all annual principal and interest payments will not exceed one fourth of one percent of the Regional Income Index.. ' (The Index is defined as the total of all individual income and 10 percent of the market value of all taxable property in the Region. The two variables in the formula (the Index and the annual debt service payments) are subject to many changes in the regional economy. Projecting the historical individual income (8.9 per - cent)Tand market value (7.6 percent) increases per household until 2015 provides an estimated Index of $460.0 billion compared.., to $8.4 billion in 1971. To modify this projection somewhat,. 72 . �.� � �. ... NOW NW