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Long-Term Debt Program

The City of Raleigh continues to construct, upgrade and maintain its infrastructure to a highly satisfactory level. The

use of federal grants in earlier years along with regular use of pay-as-you-go current resources and debt financing

for capital improvements has allowed this high level of facility and public improvement work to be done. The

incremental incurrence of debt by the City has supplemented other capital resources, providing sufficient funding to

permit necessary improvements to the infrastructure. The payback of borrowed funds over multiple years allows

the cost of the asset to be spread equally over the life of the item.

The City of Raleigh manages its debt program along with its 10 year Capital Improvement Program (CIP) on a

long-term basis in order to have the opportunity to structure debt events well in advance of specific need. This

process also allows for a proper funding plan for debt service requirements before maturities must be met. In so

doing, specific revenue sources are identified and dedicated to the debt retirement program, including new property

taxes as appropriate. The objective realized is the avoidance of spontaneous funding of debt service and

consequently, a much smoother channeling of funds to debt and related annual taxation adjustments.

The general obligation debt of the City is composed of both general and utility debt obligations. The full faith and

credit of the tax base of the city secures this debt. However, the debt service funding resources for the general debt

are the general revenues of the City, including property taxes, while the utility debt is funded totally from water and

sewer service revenues. Part of the general debt is for parking improvements and is funded mostly by parking fees

of the off-street and on-street programs.

The City has also issued water and sewer revenue bonds. The net revenues of the combined utility enterprise

system are the security for the revenue bonds.

The legal debt limit imposed by State Statute is 8% of assessed valuation. For the fiscal year 2015-16, the

assessed valuation was projected at $53,563,827,450 yielding a legal debt limit of $4,285,106,196. As a matter of

internal policy, the City maintains a debt position far below its legal debt limit. At December 31, 2015, the City’s net

debt position was $1,117,483,344 (net of allowable deductions) or approximately 2% of assessed valuation. A

significant portion of the City’s debt matures within 10 years and the retirement of debt naturally creates more

capacity.

Also included in the gross debt obligation amount noted above are the City’s outstanding principal obligations for

various installment purchases, certificates of participation, State Bond Loan and State Revolving Loans.

At this time, additional debt activity anticipated for 2016-17 includes the issuance of additional Combined

Enterprise System Revenue Bonds and a biennial financing of the City’s rolling stock equipment needs.

The City has earned a AAA credit rating on its general obligation debt since 1973 and currently is rated Aaa by

Moody’s, AAA by Standard and Poor’s, and AAA by Fitch, IBCA. The City’s utility revenue debt is rated Aa1 by

Moody’s, AAA by Standard and Poor’s and AAA by Fitch. There is good reason to believe that such ratings will

continue into the foreseeable future.

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