Debt Service on Trolleys Not Included in County Debt Ratios

The County’s proposed ten year capital budget (CIP) allocates over half a billion dollars for the Crystal City and Columbia Pike trolleys. This represents more than half the transportation capital budget and 19 percent of the total capital budget of $2.7 billion. Yet according to the Underlying Assumptions section of the Debt Capacity Analysis (B-15), the debt ratios utilized to determine the County’s bond rating do “not include revenue bonds anticipated to be issued for transportation projects [including the trolleys] and supported by the commercial real estate tax or the Crystal City TIF.”

In effect the debt service on $137 million worth of bonds to be issued to finance the Crystal City and Pike trolleys is off budget. Why?

What is the distinction between debt supported by regular real estate taxes, which are included in the debt ratios and debt supported by surcharge taxes like those described above that are excluded from these ratios? Either way bond ratings must reflect the county’s ability to repay the bonds issued, and that depends on revenue streams generated by taxes. A debt ratio that excludes debt service on a lot of tax supported capital expenditures doesn’t seem like a meaningful number.

The CIP further indicates that only about $576 million of the $1.372 billion allocated for transportation initiatives is available from leveraging the TIF and TCF funds. $267 million is projected to come from federal and state sources that have yet to be identified. If these sources of capital don’t materialize, the projects will have to be scrapped or taxpayers will be left holding the bag. Meanwhile because the debt used to leverage the trolley projects is off budget, the county will continue to claim a triple A bond rating regardless whether they can fund them or not. This is certainly not a transparent way to do business.

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