Early Bond Payoff to Deliver $1.55 Million in
Taxpayer Savings Smart Debt Management Strategy
Driving Down Costs
Smart Debt Management Strategy Driving Down Costs
Poughkeepsie, NY… Dutchess County Executive Marcus Molinaro has announced the County is again planning to do an early payoff of callable bonds to take advantage of more than $1.5 million in savings, pending approval of the Dutchess County Legislature. The Department of Finance plans to pay off $8,595,000 in debt principal on bonds originally issued in 2014, with payments scheduled through 2034. The early payoff will provide for $1,552,142 in interest savings. The early retirement of debt is part of Dutchess County’s smart, fiscally sound debt management strategy to save tax dollars and deliver those dollars back to residents.
“Our conservative fiscal policies and smart debt management practices have ensured we can accomplish important projects, maintain and improve our infrastructure to better serve our residents,” said County Executive Molinaro. “In 2022, we will spend less money for debt service than we did in 2019 and 2020 and those dollars go back to our residents with more than $20 million in sales and property tax relief.”
Debt service is utilized to finance capital expenditures such as road and bridge projects, equipment acquisition, building construction and renovations, and other authorized activities. The County’s operating budget includes annual payment of principal and interest through “debt service.” As the County issues new debt, older debt is retired, helping to keep the County’s annual operating expenditures stable. Dutchess County remains fiscally conservative with its use of debt – utilizing only 8.8% of the County’s total constitutional debt limit. According to a 2020 New York State Comptroller Report, Dutchess County’s debt per capita is 50% lower than the statewide average.
Standard & Poor’s (S&P) Rating Services recently reaffirmed Dutchess County Government’s AA+ bond rating – the highest S&P rating of any county in New York State – for the County’s most recent debt issuance, which totaled $70.2 million. This issuance finances numerous critical projects and investments approved by the County Legislature including highway and bridge improvements, Partnership for Manageable Growth, HVAC projects, Urban Trail project, the Dutchess County Justice & Transition Center and more. Although interest rates have been rising over the past few months, rates are still at historically low levels and the County was able to issue this debt at favorable rates ranging from 2.64% to 3.00%.
The County’s enviable bond rating was an important component in securing the low interest rates for the new bonds. S&P has consistently recognized Dutchess County’s strong management, strong economy and strong budgetary practices and performances as key factors in its continued assignment of an AA+ bond rating. In its most recent rating, S&P highlighted the County’s very strong general fund reserves and low overall net debt, noting “manageable additional capital needs.”
The following is an excerpt from S&P’s rating report:
“The rating and outlook reflect Dutchess County’s history of balanced operations and very strong budgetary flexibility and liquidity, supported by the county’s robust economy centered on technology, tourism, and local attractions. …. Dutchess County has performed well throughout the COVID-19 pandemic, with balanced operations in fiscal 2020 and an expected surplus for fiscal 2021 according to unaudited results. Specifically, when the pandemic started, the county took steps to reduce expenses in anticipation of a slowdown in certain revenues. As a result, it was able to reduce fiscal 2020 expenditures by about $11 million relative to the previous year, maintaining close-to-balanced operations for the year. In addition, in fiscal 2021, …. economically sensitive revenues bounced back significantly and came in well above budget, which, combined with expense cuts, made by the county and conservative budgeting, helped lead to a sizable unaudited surplus for the year. Furthermore, we believe the county remains well positioned in the current year. As a result, we expect performance will remain strong and reserves will remain very strong.”
As noted in the S&P report, the County’s 2020 Year End Audited Financial Statements demonstrate the County’s strong fiscal foundation, including an unassigned fund balance of just over $60 million, an increase of more than $3 million from 2019. The County’s Fund Balance Policy states the goal of maintaining an undesignated/general fund balance of 1-2 months of general fund operating expenditures in the general fund balance as a means of maintaining financial stability, which would range from $38 to $76 million. With the unassigned fund balance well within this target range, the County has been taking proactive steps to pay down or avoid indebtedness as well as provide property tax relief.
The 2022 County Budget included a historic $20 million in cumulative tax relief, including the 8th consecutive property tax reduction as well as the elimination of the sales tax on clothing and footwear items costing less than $110 per item. Additionally, over the past several months, the County has been paying off existing debt when allowable (or callable) and funding capital purchases utilizing fund balance rather than issuing additional debt.
Recent examples include:
• Annual vehicle purchase for 2021 totaling $1.4 million was paid utilizing fund balance rather than a capital bond as has been past practice, saving $50K in interest costs.
• $1.25 million in various Dutchess Community College capital projects including plumbing and repairs paid utilizing fund balance rather than a capital bond, resulting in $388K interest savings.
• Early payoff of $4.9 million in remaining principal from bonds issued in 2012-2013, resulting in $470K interest savings and $4.9 million in overall debt reduction including $1 million debt service reduction for 2022.
• Recently approved Emergency Response vehicle purchases totaling $2.1 million to be funded from fund balance rather than capital bond financing, saving $476K in interest costs.
• Recently approved countywide Radio Communication System Project to be funded utilizing fund balance (as well as American Rescue Plan and New York State SICG grant funding) rather than capital bond financing, saving $907K in interest costs.
• Bus facility improvements and building roof projects paid utilizing fund balance rather than a capital bond – saving $636K in interest costs.
Michael Polasek, Dutchess County Legislature Budget, Finance, and Personnel Committee Chair, said, “By capitalizing on these savings opportunities, we can put dollars back into our residents’ pockets. I am grateful to my fellow County Legislators for their continued support of County Executive Molinaro’s fiscally responsible debt management policies and commitment to providing quality assets and services to our residents that enhance their quality of life.”
The resolution authorizing the early payoff will be reviewed at the County Legislature’s Budget, Finance, and Personnel Committee this afternoon (Thursday, March 10th.) The full County Legislature will then vote to authorize the payoff at the March 14th board meeting.
