Loudoun County officials are considering scaling back planned construction projects over the next five years to keep from hitting the county’s borrowing limits.
The Department of Management and Financial Services projects that about $380 million will have to be cut from the county’s capital improvement plan from fiscal 2011 through fiscal 2014 to keep debt service within county-imposed guidelines. The new debt issued during the four years is projected at about $970 million, while the county’s goal is to issue no more than $200 million of debt each year.
“Some of those projects are going to have to come off the [five-year] plan,” said Supervisor Eugene Delgaudio, R-Sterling. The Board of Supervisors has not decided which projects would be cut.
Debt service is one factor credit-rating companies such as Standard & Poor’s and Moody’s use to determine counties’ bond ratings — the higher the bond rating, the lower the interest rate the county must pay on its debt.
The county’s highly coveted AAA rating was key to securing a low interest rate on $168 million in bonds issued in March, said county debt manager Suzanne Lane. Those bonds will provide $132.6 million for public school projects, including two new high schools, and more than $18.9 million for public safety projects, including two new sheriff substations and three fire and rescue stations.
She estimated that the AAA rating saved the county $4 million versus a lower AA rating, and $20 million versus an A rating.
Despite the county’s high rating, the credit-rating agencies are concerned with Loudoun’s debt-service levels, said Mark Adams, the county management and financial services director. Factors that determine the ratings include the county’s fiscal policies, economic development prospects and managers.
Board of Supervisors Vice Chairwoman Susan Buckley, D-Sugarland Run, was also concerned.
“My impression … is that this is a very serious matter,” she said.
Jim Burton, I-Blue Ridge, said the finance committee also was watching the debt situation, but added that he was less concerned about specific ratios than others. He said that the ratio of debt service to expenditures, for example, is misleading, because the county cut spending during its recent budget season.
