Debt Affordability Metrics
Because the capital budget is funded primarily through bond proceeds, the City must determine the amount of debt they can afford to issue. Knowing the debt affordability helps to manage and prioritize the City’s debt and make informed financing decisions to fund long-term capital needs. These three debt affordability metrics below are used to help the City of Pittsburgh determine its debt capacity.
Tax Supported Debt Burden Principal Divided by Full Taxable Assessed Value
The City of Pittsburgh has planned to limit its tax supported debt burden principal to amount 3.5% of full taxable assessed value. The lower the City’s municipality’s debt is relative to assessed value of its property, the less risky its bonds are deemed to be. A higher ratio could indicate that the City may have difficulty repaying the debt. As you can see below, the tax supported debt burden principal is below 3.5% over the next five (5) years. It ranges from 1.99% to 2.33%. This is assuming $60 million of debt is issued annually from 2018-2022 along with a 1% increase of the Full Taxable Assessed Value each year. The Full Taxable Assessed Value is based upon the amount that is billed for real estate taxes in the City of Pittsburgh.
City of Pittsburgh
Estimated Debt Affordability Metrics
Assumes $60 million per year- 5 Year Projection
Tax Supported Debt Burden Principal / Full Taxable Assessed Value
As of December 31, 2017
| Year | Total Outstanding Principal | Full Taxable Assessed Value | Tax Supported Debt Burden Principal/ by Full Taxable Assessed Value |
|
2018 2019 2020 2021 2022 |
$397,585,000 $425,145,000 $449,225,000 $469,415,000 $485,620,000 |
$20,014,535,861 $20,214,681,220 $20,416,828,032 $20,620,996,312 $20,827,206,275 |
1.99% 2.10% 2.20% 2.28% 2.33% |
Debt Per Capita
As of April 2018, the current debt per capita is estimated to be $1,662.32. This is calculated by taking the total outstanding debt and dividing this by the number of people living in the City of Pittsburgh:
Debt Per Capita $499,007,443/ 305,704* = $1,662.32
* “Current Pittsburgh, Pennsylvania Population, Demographics and Stats in 2017, 2018.” SuburbanStats.org, 2018, suburbanstats.org/population/pennsylvania/how-many-people-live-in-pittsburgh. Accessed April 30, 2018.
This means that if the total indebtedness of the City became due today, each citizen would have to pay $1,662.32. It is important to calculate out debt per capita to analyze if a government is able to continue to pay its debt service costs through current levels of tax revenues. As the debt continues to grow, the liability of every taxpayer also rises. Rating companies use this to compare different debt loads in different states and countries.
Debt Service as a Percentage of Revenues
The debt affordability analysis below is based on the revenue projections that will be available to support debt service. The budgeted revenues include all of the City’s taxes and other revenue streams available to pay operating expenses. The following table shows the existing debt service principal in 2018 and in each of the next five (5) years as a percentage of the budgeted revenue projections for those years. The projected revenues are from the annual operating revenues from the 2018 City of Pittsburgh Operating Budget.
City of Pittsburgh
Estimated Debt Affordability Metrics
Assumes $60 million per year- 5 Year Projection
Debt Service Principal as a Percentage of Revenue
As of March 2018
| Year | Existing Debt Service Principal |
Projected Revenue (from 2018 budget) |
Debt Service as a % of Revenue |
|
2018 2019 2020 2021 2022 |
$397,585,000 $425,145,000 $449,225,000 $469,415,000 $485,620,000 |
$567,221,507 $571,497,380 $587,345,011 $601,859,324 $616,545,380 |
70% 74% 76% 78% 79% |
