In preparation for a proposed bond sale, the city manager of the City of Appleto
ID: 2460117 • Letter: I
Question
In preparation for a proposed bond sale, the city manager of the City of Appleton requested that you prepare a statement of legal debt margin and a schedule of direct and overlapping debt for the city as of December 31, 2016. You ascertain that the following bond issues are outstanding on that date: Convention center bonds $ 3,600,000 Electric utility bonds 2,700,000 General obligation serial bonds 3,100,000 Tax increment bonds 2,500,000 Water utility bonds 1,900,000 Transit authority bonds 2,000,000 You obtain other information that includes the following items: 1. Assessed valuation of real and taxable personal property in the city totaled $240,000,000. 2. The rate of debt limitation applicable to the City of Appleton was 6 percent of total real and taxable personal property valuation. 3. Electric utility, water utility, and transit authority bonds were all serviced by enterprise revenues. By law, such self-supporting debt is not subject to debt limitation. 4. The convention center bonds and tax increment bonds are subject to debt limitation. 5. The amount of assets segregated for debt retirement at December 31, 2016, is $1,800,000. 6. The city’s residents are also taxed by Clyde County for 25 percent of school district and health services debt. The school district has $15,000,000 in outstanding bonds, while health services has $8,000,000 in debt. Finally, one-third of the $2,400,000 of regional library outstanding debt is paid by taxes assessed on Appleton residents. Prepare a statement of legal debt margin for the city as of December 31, 2016.
Prepare a schedule of direct and overlapping debt for the city as of December 31, 2016. (Round Percentage answers to 2 decimal places.)
Explanation / Answer
Answer
Answer 1
Computation of Debt margin
Figures in $
Particulars
Amount
Assessed valuation of real and taxable personal property
a
2400,00,000
rate of debt limitation applicable to the City of Appleton
b
0.06
Debt limit (a*b)
c
14400000
Bonds are subject to debt limitation
Convention centre bonds
d
36,00,000
Tax increment bonds
e
25,00,000
Total bonds are subject to debt limitation (d+e)
f
61,00,000
Assets segregated for debt retirement
g
18,00,000
Net debt subject to limitation (f-g)
h
43,00,000
Debt margin (c-h)
101,00,000
Answer 2
Schedule of Direct And Overlapping debt for City as of December 31, 2016
Figures in $
Particulars
Amount
Direct Debt
Electric utility bonds
a
27,00,000
General obligation serial bonds
b
31,00,000
Water utility bonds
c
19,00,000
Transit authority bonds
d
20,00,000
School district outstanding bonds
e
37,50,000
15000000*0.25
health services Debt
f
20,00,000
8000000*0.25
Regional library outstanding debt
g
800000
2400000/3
Total Direct debt (a+b+c+d+e+f+g)
h
162,50,000
Overlapping debt
Convention center bonds
i
36,00,000
Tax increment bonds
j
25,00,000
Total overlapping debt (i+j)
61,00,000
Computation of Debt margin
Figures in $
Particulars
Amount
Assessed valuation of real and taxable personal property
a
2400,00,000
rate of debt limitation applicable to the City of Appleton
b
0.06
Debt limit (a*b)
c
14400000
Bonds are subject to debt limitation
Convention centre bonds
d
36,00,000
Tax increment bonds
e
25,00,000
Total bonds are subject to debt limitation (d+e)
f
61,00,000
Assets segregated for debt retirement
g
18,00,000
Net debt subject to limitation (f-g)
h
43,00,000
Debt margin (c-h)
101,00,000