County of Ulster, NY

The issuance of debt is an important revenue source for many County projects and purchases. Equally important is the strategic use of the power to issue debt which is why municipal jurisdictions must adhere to legally adopted debt contracting limits and various other State and Federal laws which set parameters on debt issuance.

Exhibit DB-I below summarizes the County’s outstanding debt obligations and its authorized but unissued debt:

Financial Organization – Debt.  The New York State Constitution limits the power of the County (and other municipalities and school districts of the State) to issue obligations and to contract indebtedness.  Supervision of the County’s outstanding debt obligations is the responsibility of the County’s Commissioner of Finance, who is both the Chief Fiscal Officer and the Chief Accounting Officer. However, the County Legislature authorizes the issuance of any new debt. This is generally completed through the formal adoption of a bond resolution.

Allowable Debt Limit.  The County has the power to contract indebtedness for any lawful County purpose so long as the combined principal amount of all debt issued shall not exceed seven per centum of the five-year average full valuation of taxable real estate of the County and subject to certain enumerated exclusions and deductions such as water and certain sewer facilities and cash or appropriations for current debt service. The constitutional method for determining average full valuation is calculated by taking the assessed valuations of taxable real estate for the last five completed assessment rolls and applying thereto the ratio which such assessed valuation bears to the full valuation; full valuation is determined by the New York State Office of Real Property Services or such other State agency or officer as the State Legislature shall direct. The Legislature also is required to prescribe the manner by which such ratio shall be determined by such authority.

Exhibit DB-II sets forth the debt-contracting limitation of the County as of October 25, 2022.

FSMS – Statewide 2020 Findings.  The Office of the New York State Comptroller (“OSC”) released a set ranking for municipal jurisdictions operating on a calendar year basis in September of 2021. The scores were based on 2020 operating results and marked the sixth release by OSC since the commencement of its Fiscal State Monitoring System (“FSMS”) program.

Below is an illustration of how the County’s debt levels compared to all rated/reporting State Counties, Mid-Hudson Region Counties and Medium Downstate Counties. The data for the tables have been extrapolated directly from OSC’s FSMS search tool which can be accessed through the below link:

http://wwe1.osc.state.ny.us/localgov/fiscalmonitoring/fsms.cfm

Cash flow financings are a type of borrowing in which a loan made to bridge a forecasted financial gap due to the timing of real property tax and/or other revenue (including Federal and State aid) receipts.  The most common types of cash flow financings for municipal governments similar to the County are tax anticipation notes and revenue anticipation notes.  

Since cash flow financings can be (but are not always) indicative of structural deficiencies, they sometimes carry with then negative associations.

CMA Finding – Cash Flow Financings.  The County has not found it necessary to issue debt obligations for cash flow purposes since 1998.  Despite not issuing for such purposes, County officials have indicated the County annually adopts resolutions authorizing the issuance of tax anticipation notes and revenue anticipation notes in the event of an emergency. For 2022, the amounts authorized for tax anticipation notes and revenue anticipation notes were $15.0 million and $20.0 million.  The County presently anticipates that resolutions for similar amounts will be presented to the Legislature for consideration in connection with the 2023 fiscal year.  In addition, County officials also indicated they will continue to closely monitor the cash positions in light of forecasted economic conditions. Not having to issue cash flow notes is deemed a credit positive event.

As of October 25, 2022, the County had $36,453,925 in outstanding bond anticipation notes. 

CMA Finding – Bond Anticipation Notes Maturing in November / Serial Bonds.  The 2023 Proposed Budget indicated the outstanding bond anticipation notes of the County are scheduled to mature in November of 2022.  As of the date of the review of the 2023 Proposed Budget, the County was in the process of issuing debt obligations, including both long-term serial bonds and short-term bond anticipation notes.  After certain payments, a portion of the currently outstanding notes will be converted into long-term serial bonds, while the remining portion will be renewed.  The tentative sale date for the issuance is November 3, 2022 with tentative closings scheduled for November 16, 2022.  Since the November issuance will be sold prior to the adoption of the budget, the Legislature should confirm with the Commissioner of Finance that the debt service appropriations have been revised to reflect payments correlating to the issuance of debt in November of 2022.

The proposed budget of the County includes authorized but unissued debt in the amount of approximately $135.4 million. Many of these authorizations correlate to projects that have yet to be closed out by the County or will not be borrowed for.  As such, although a large amount, several of these authorizations will likely not be utilized by the County.  CMA noted that the County has authorized but unissued debt dating back to 2010, 2014, 2015 and 2016.

CMA Finding – Authorized but Unissued Debt.  To add further transparency to the budget document, CMA recommends an estimate of future borrowing related to actual spending should be included with the capital information and in the chart for Debt Authorized and Unused and to make the Capital Improvement Plan more informative and useful. In addition, with or without a debt management policy, authorizations should be sunset after a specified period of time if not used or anticipated not to be used. In addition, the County should periodically review unused authorizations to determine if purposes or needs for borrowing still exist. If the need for an authorization no longer exists then the authorization should be considered for cancellation, by resolution if appropriate.  This would ensure that capital and borrowing needs for authorized items that are many years old and stale are scrutinized and continuously evaluated and that only viable projects and items remain authorized and qualified for borrowing purposes.

Administrative Process.  In accordance with the provisions of the County Charter and applicable State law, it is the responsibility of the County Executive to prepare and file the annual Capital Improvement Program for consideration by the Legislature. This process is completed as part of the budget process.

CMA Finding – 2022 Proposed Capital Improvement Program.  The intent of the annual budget message is to summarize and explain the main features of the County’s budget, including the Capital Improvement Process.   Pursuant to the County Charter, the budget message should “outline the existing and any proposed financial policies of the County relating to the capital program, including a description of each capital improvement proposed to be undertaken in the preceding fiscal year and not yet completed.” Although separate, the Proposed 2023 Capital Improvement Program has been filed along with the Proposed Budget, the Proposed Budget message should include summaries of the Capital Improvement Program.

Capital Improvement Program Summary.  The County’s Proposed Capital Improvement Program for the fiscal years 2023 through 2028, inclusive, totals $355.8 million, of which $78.0 million is for general governmental purposes, $61.3 million is for educational purposes, $20.7 million is for home and community services purposes, $23.3 million is for public safety purposes, $121.4 million is for transportation purposes, $2.5 million is for health and $48.5 million is for recreational, economic development and planning purposes.

A summary of the County’s Proposed Capital Improvement Program for the years 2023 through 2028 is presented below.