Q. Why are capital projects needed?
A. Much of Arlington County was built during the middle of the last century when Arlington evolved from a rural to suburban and now urban community. As our infrastructure has aged, substantial reinvestment in schools, roads, community centers, libraries, parks, Metro, and water and sewer infrastructure is critical and necessary to sustain Arlington as a modern urban community.
Q. How does the County identify and prioritize capital projects, and what capital projects has the County undertaken in the past?
A. Arlington develops a biennial capital improvement program (CIP) that identifies and prioritizes all capital project needs across the County. The County Board recently adopted the FY 2013-2022 CIP. Citizen input into the CIP is widely solicited:
The following link contains a list of projects completed by the County over the last ten years.
List of Projects Financed 2002-2012
Q. How does Arlington finance capital projects?
A. The County uses a variety of debt instruments to finance large projects; the most significant source is the sale of General Obligation (GO) bonds as approved by the voters. Four general obligation bond referendum questions are on the ballot in November.
On smaller projects, particularly those for rehabilitation / renovation of existing infrastructure and those with a shorter useful life, the County uses pay-as-you-go (PAYG) financing. PAYG funds are generated through local taxes, fees, charges, outside funding or similar sources and are appropriated annually as part of the County’s operating budget. The adopted FY 2013 General Fund operating budget includes $12.3 million in pay-as-you-go financing for a variety of projects, including facility improvements, roads and pedestrian improvements, and park improvements, among others. Other sources of funding include state and federal grants and water / sewer user fees.
Q. Where do I find information on projects that are not included on the referenda?
A. The adopted CIP includes information on information on all County capital projects, including those projects that are not funded with general obligation bonds such as transportation, stormwater, and utility projects?
Q. How can projects be added to future CIPs?
A. As noted earlier, the County updates the CIP every two years and new projects can be added at that time. County staff and the County Board engage in an extensive community process to understand changing priorities and economic conditions that could impact future CIPs.
Q. Why does Arlington issue bonds for large capital projects?
A. Bond financing allows Arlington to spread the cost of building large public facilities over a period of time, ensuring that all who benefit from the improvements over the years share the costs of building them. Because of the County’s Aaa / AAA / AAA bond ratings and the ability to issue tax-exempt debt, we get the lowest interest costs available in the market.
Q. What have been the interest rates the County has been paying?
A. Since 1987, the interest rate (or true interest cost) on the County's GO bond issues has fluctuated from a low of 2.7 percent to a high of 6.7 percent. The County also aggressively monitors existing bonds for refinancing opportunities, and in the past 3 years, refinanced several bond issues for net present value savings of over $17 million. A chart of the historical interest rates can be seen here.
Q. How does the County determine how much debt it can safely carry?
A. The County uses a number of metrics to determine debt limits that will allow us to preserve our outstanding credit ratings.
These measures determine how much debt we can safely carry, are recognized by the bond rating agencies as an important component of maintaining triple-A ratings, and are included in financial policies adopted by the County Board in 2008.
Q. Is the County near the limit of debt it can assume?
A. The County is currently within the debt limits discussed above and is projected to remain within those limits over the next ten years. Based on forecasts in tax base growth ranging from 3% – 4% , debt service is estimated to peak near 9.4% beginning in FY 2018, just below the 10% limit.
Q. What is the difference between “debt” and “deficit”?
A. A “deficit” is when liabilities exceed assets on the balance sheet; “debt” is money that is owed to someone else, e.g., an investor. By law, Arlington cannot be in a deficit and never has been.
Q. Do debt levels & the CIP impact the County's operating budget?
A. Yes. Debt service payments must be made each year, similar to a homeowner's mortgage payment, and are included in the County’s annual operating budget. In addition, many new capital projects add new operating costs to the budget, as summarized in the CIP.
Q. What is the County's debt service budget for FY 2013?
A. The County’s debt service budget is $57 million for FY 2013; the Schools' debt service budget is $40 million. These amounts are all planned for and included in the FY 2013 adopted budget.
Q. What is the total operating budget for the County and Arlington Public Schools for FY 2013?
A. The total budgeted general operating expenses for the County and Arlington Public Schools is $1.05 billion.
Q. What is the term or maturity of the County's bonds?
A. The County typically issues bonds with a final maturity of 20 years. However, because the County structures its repayment schedules conservatively, the average maturity (or “life”) of the County’s bonds is 10-11 years.
Q. What does General Obligation mean?
A. General Obligation refers to debt that is secured by the full faith, credit and taxing power of the County. General obligation bonds issued by local units of government are typically secured by a pledge of the issuer’s ad valorem taxing power. Such bonds constitute debts of the issuer and often require approval by election prior to issuance. In the event of default, the holders of general obligation bonds have the right to compel a tax levy or legislative appropriation.
Q. Is there any limitation on referenda approved by the voters?
A. The total amount of bonds requested in a given referenda year is restricted by the County's financial debt and management policies, as well as by the potential impact new referenda will have on the nationally recognized measures used by the three major rating agencies to assign credit ratings to issuers. There is no statutory limit on debt for Virginia counties. The total amount of bonds requested in any given referenda is based on the County's desire to preserve our triple-AAA credit ratings.
For additional questions or comments, please contact Jason Friess in the Department of Management and Finance.