Debt Management

The Town issues debt to fund General Governmental and business-type capital needs. Total outstanding debt as of June 30, 2022 totals $43,353,370. This includes general obligation bonds (voter approved debt), revenue bonds (electric) and installment purchase agreements. Also included this year are leases as a result of the implementation of GASB 87. The chart below provides the breakdown of debt type at the end of the fiscal year.

Town’s Credit Ratings

The Town benefits from its outstanding credit ratings. A priority of the Town is to maintain public trust in the sustainability of the Town’s financial system. This commitment has resulted in the Town receiving the following credit ratings:

n Standard & Poor’s AAA n Fitch Ratings AAA n Moody’s Aaa Another priority of the Town is to maximize return on Town funds. Maintaining or improving bond ratings results in lower interest rates on debt.

During 2022-2023, the Town plans to issue installment debt to purchase replacement vehicles and equipment for the police department.

Debt Issuance

The Town’s total debt decreased by $4,588,907 (9.6%) during the fiscal year. Along with retiring debt during the year, the Town issued the following debt:

Installment Purchase Agreements:

n $798,510 – Vehicles and Equipment,

September 2021, 3-year term, 0.89% n $964,750 – Police Vehicles – March 2022 3-year term – 1.25%

Also, as result of the Fire Department’s merger with the Town, two outstanding Fire Department installment notes were assumed by the Town. One note was retired in 2021. The remaining Fire Department note with an outstanding balance of $350,411 was retired during the year.

Breakdown of Debt

Year Ended June 30, 2022 $43,353,370

General Obligation Bonds Installment Purchase Agreements

Leases $27,178,000 62.7%

$15,051,468 34.7%

$582,451 1.3%

Debt Policy Compliance

The Town actively monitors and manages its debt capacity and affordability. In keeping with the goal of enhancing fiscal strength identified in the strategic plan, the Town has a formal policy which provides guidance and direction when considering the impact of future debt.

How the Town’s Debt Compares to Policy

Town’s Current Debt 0.5566%*

Town’s Policy for Debt 2%*

North Carolina State Statute

*of assessed valuation 8%*

Future Debt Issuance

The Town utilizes a debt model to plan the issuance of future debt. At the Board of Commissioner’s annual planning retreat in January 2022, staff received approval to move forward with debt modeling and planning for a November bond referendum with projects totaling $75 million. The debt model was completed and presented in May 2022 with an estimated impact on the tax rate of up to 3 cents.

A debt service fund with specific revenues including a portion of the tax rate, vehicle fees and downtown municipal service district tax funds are earmarked to repay general fund debt.

In November 2022, voters approved issuing $75,000,000 in general obligation bonds for roadway and transportation, parks and recreation facilities, greenway improvements and parking facilities. The Town plans to issue these bonds in three installments over the next seven years with the planned issuances tentatively scheduled for 2024, 2026 and 2028 or 2029.

During FY 2022-2023, the Town plans to issue $1,023,000 in installment debt to purchase replacement vehicles and equipment for the Police, Fire, Public Works, Engineering and Planning departments.

During 2022-2023, the Town plans to issue installment debt to purchase replacement vehicles and equipment for the Police, Fire, Public Works, Engineering and Planning departments.