Finance Committee - 4/4/2018 Page 8
Alderman O’Brien
And if | may Mr. Mayor, to me it is a dangerous situation where eventually you are going to be last person
receiving the old style benefit and then you have a whole bunch of people who basically had a lot taken away
from them. It’s going to be difficult as it goes on into the future.
Alderwoman Kelly
Yes | was wondering if you could just go over quickly on Page 38 where you talked about the issue of bonds
and then also the repayment. How are we doing as a City? How do we compare to other cities?
Mr. McIntire
Just before | address that question, Page 38, | talked a little about how there is really two perspectives of
accounting in here. There is long-term perspective or the full accrual basis of accounting and short-term
perspective which is modified accrual or essentially cash. On Page 38 in basic terms reconciles the two
different income statements or Statements of Revenues & Expenditures. The question here talks about
repayment of debt and how it deals with new issues as well. About a third of the way down the page you start
seeing some numbers in the millions. And | have on my notes here a couple of numbers circles. About a third
of the way down, Issuance of General Obligations Bonds and it’s in parenthesis, of $12.3 million dollars. Very
simply, in Fiscal Year 2017 you issued $12.3 in new general obligation bonds. Two rows below that you have
the repayment of debt. Debt issuances that go back some point in the past you are paying back $15.5 or you
paid back $15.5 during Fiscal Year 17. Very simply, you are paying off more debt in 2017 than you took on.
Another way to look at this and | realize that this wasn’t part of the question, but the third number down from
the top on this page is your depreciation expense. How much did the assets that in all likelihood were acquired
by issuing bonds, those assets depreciated at about $16.5 million dollar and again referencing back to the
repayment of debt, slightly further down the page of $15.5. You see a nice relationship there, certainly there is
approximately $1 million dollar difference, but | have seen in other statements where the assets are
depreciating at a much faster rate than they are actually being paid off. There is some nice balance here that
you see on this page.
Now comparing it with other communities, that is extraordinarily difficult because communities are of all shapes
and sizes. A comment that | might add that hopefully might address some of your question deals with how
rapid communities pay off their debt. And again, this disclosure in here on that somewhere in the footnotes
and in general credit rating agencies will look at how much you have but more importantly how much of that
debt are you paying off in the next 10 years. | don’t have that number at my fingertips but | think you are quite
high, | think you are in the 70% to 74% in being paid off in 10 years. That | think would be viewed from a credit
rating agency standpoint as a rapid payout of your long-term bonds payable.
Alderwoman Kelly
Thank you very much.
Mayor Donchess
Are there any other questions?
Alderman Klee
I’m not sure if you can answer this but going back to Page 130 when we were talking about the 100% funding
of the pension plan and so on — | know that the State wants to do 100% for whatever the reasons are, for good
credit ratings and so. But what would be common for most businesses or municipalities or States? Is it like
85% or 90%, what would be good practice?
