Private Applications of Local Government Risk Metrics
18
PRIVATE APPLICATIONS OF LOCAL GOVERNMENT RISK METRICS American Society for Public Administration 2014 Annual Conference 14 March 2014 – 355e3b63b69c James P. Howard, II School of Public and International Affairs
-
Upload
james-howard -
Category
Education
-
view
526 -
download
1
description
Transcript of Private Applications of Local Government Risk Metrics
PRIVATE APPLICATIONS OFLOCAL GOVERNMENT RISK METRICS
American Society for Public Administration 2014 Annual Conference
14 March 2014 – 355e3b63b69c
James P. Howard, IISchool of Public and International Affairs
COLUMBIA ASSOCIATION, INC.
About Columbia
◦ Established in Howard County, Maryland in 1967
◦ Fully planned community
◦ Designed by one developer, the Rouse Company
◦ Approximately 100,000 residents
3
About the Columbia Association
◦ Established by the Rouse Company
◦ Provides parks and recreation services
◦ Not a governmental entity
◦ Structured as a membership organization
4
Columbia Association Finances
◦ Annual revenues of approximately $63 million (FY2013)
◦ Used borrowing extensively in early years to fund capital and operating costs
◦ Accessed capital markets initial through private placement
◦ Now borrows directly in lending markets
5
FINANCIAL CONDITION MEASURES
Solvency and Liquidity Measures
◦ Liquidity measures use ratios to identify short-term issues
◦ Solvency measures use ratios to identify long-term issues
◦ Ratios can be compared across different governments
◦ Can be calculated from publically-available data
◦ There are many ratios to choose from, but four stand out1
1Judy Wesalo Temel. The Fundamentals of Municipal Bonds. 5th ed. John Wiley & Sons, 2001, p. 176.
7
Debt Service Burden2
debt service burden =total debt service
revenues(1)
2Steven A. Finkler et al. Financial Management for Public, Health, and Not-for-Profit Organizations. 4th ed. Prentice Hall, 2012, pp. 574–576.
8
Debt Burden3
debt burden =total debt
population(2)
3Ibid., pp. 574–576.
9
Debt Carrying Capacity
debt carrying capacity =total debt
assessed value(3)
10
Debt Finance Capacity
debt finance capacity =per capita debt
per capita income(4)
11
THE CA'S FISCAL HEALTH
Sample Ratios, FY 20064
Howard Annapolis CA
General Obligation Debt 541,323,315 48,264,854 63,035,000Debt Service 67,132,766 2,838,210 12,703,000Assessed Value 29,852,994,080 4,150,982,690 8,034,858,000Revenue 996,345,521 46,079,248 52,923,000Property Tax 353,894,412 23,245,058 26,060,000Operating Expenses 931,195,501 42,951,755 30,775,000Population 276,287 37,300 98,383Per Capita Income 54,924 44,927 54,924
debt service burden 6.74 6.16 24.00debt burden 1,959 1,294 641debt carrying capacity 1.81 1.16 0.78debt finance capacity 3.57 2.88 1.17
4James P. Howard, II et al. Measuring the Financial Health of the Columbia Association. Budget Advisory Committee. Columbia, Maryland:Columbia Association, Inc., February 8, 2007. 13
Debt Carrying Capacity
0.0
2.5
5.0
7.5
2002 2004 2006 2008 2010 2012
Per
cent
Jurisdiction Annapolis CA Rockville
14
Debt Service Burden
10
20
30
40
2002 2004 2006 2008 2010 2012
Per
cent
Jurisdiction Annapolis CA Rockville
15
CLOSING
Conclusions
◦ The CA can use traditional municipal debt metrics
◦ The results can be misleading and out of proportion
◦ This should be applicable to other private corporations that collect leins
17
Acknowledgements
◦ Sean Harbaugh, Columbia Association
◦ Susan Krabbe, Columbia Association
◦ Gavin Cohen, City of Rockville
◦ Melissa S. Leaman, City of Annapolis
◦ Ed Gibson, University of Baltimore
18
