Vermont Business Magazine In what the mayor calls an important step for the stability of the city’s financial future, on Monday, September 24, the Burlington City Council voted unanimously to adopt a first-known debt policy for the city, just as $100 million in bonding will go to voters. The policy outlines a target and a maximum for the amount of General Obligation debt that the city can incur, as well as for the amount of “overlapping debt,” or the total amount of combined General Obligation Debt incurred between the city and the Burlington School District.
The city will ask the voters in November to approve two significant bond issues: $30 million for wastewater system improvements to reduce polluting Lake Champlain and $70 million to upgrade Burlington High School.
The new debt policy has been in development by the Administration and Board of Finance since January 2018 when PFM, the City’s financial consultant, recommended its creation as part of a memo advising the City on additional actions the City could take to improve its credit rating. Chief Administrative Officer Beth Anderson summarized the significance of a debt policy in her September 24, 2018 memo to the City Council:
“A debt policy is designed to enhance the quality of decisions related to debt issuance by providing consistency, continuity, order and discipline; clear guidelines for the type and structure of debt; parameters for the amount of debt to be undertaken; and a process to ensure cost effective issuance. A debt policy should articulate the City’s policy goals, which include a continued commitment to improving and sustaining the City’s financial position, increasing the City’s credit rating, and ensuring an affordable cost of borrowing for taxpayers. These actions are generally positively viewed by the rating agencies in reviewing credit quality.”
The updated debt policy proposes setting a capacity for total outstanding overlapping debt at the levels specified by Moody’s for an A rating, which is the City’s current rating level.
“Overlapping Debt” includes debt that is issued as a general obligation of the City and results in an increased overall debt burden on taxpayers. It includes City General Obligation and
Burlington School District Debt. General Obligation (GO) debt is debt payable from tax levy, relative to the full value of the City's tax base.
In response to the vote, Mayor Miro Weinberger released the following statement:
“This policy was crafted with our community’s infrastructure needs, best practices for responsible financial management, and the high property-tax burden that Burlingtonians currently face in mind. This new policy is intended to continue our financial progress as a City, support much-needed and historically important levels of community investment, and reassure our taxpayers that we are nearing the limit that they will be asked to invest in our infrastructure. I am deeply appreciative of the hard work that Chief Administrative Officer Beth Anderson and the members of the Board of Finance put into developing this policy, and I hope that it will prove to be an important part of our administration’s ongoing work to balance investment in our public goods, affordability for Burlingtonians, and responsible financial stewardship.”
For more information on the debt policy, please see the documents linked below:
Memorandum from CAO Beth Anderson: “Proposed Debt Policy”
Full Debt Management Policy: “Debt Management Policy”
Memorandum from PFM: “City of Burlington, VT: Rating Review/Policy Samples and Benchmarking”
Source: City of Burlington 9.26.2018