Capital Debt Affordability Committee Begins Review

At the first of three major annual meetings of the Capital Debt Affordability Committee, the Committee began to review the state’s debt projection with analysis from Department of Treasury and Budget and Management staff.  They also heard reports from the Maryland Stadium Authority, the Maryland State Department of Transportation and the Maryland Department of Environment on major projects.

A few topics discussed include:

  • Progress on Baltimore City School Construction: The Maryland Stadium Authority has everything that they need with regard to Baltimore City School Construction projects and the projects are moving forward.
  • Savings associated with two refunding issues in FY 2015: These refunding issues generated $80.1 million in debt service savings on a net present value (NPV) basis. One of these was related to the State’s Calvert Street Parking Garage.
  • Upgrades to waste water treatment plants: By the end of 2017, all of these upgrades will be complete, helping the State to achieve a positive mid-term watershed implementation plan (WIP) review by the US Environmental Protection Agency. The State’s progress on sewage, which is advancing ahead of schedule, will help accommodate areas that are behind schedule, including stormwater and septics. All of the debt associated with these projects will be retired before 2030.

Analysts presented three scenarios for the Committee’s consideration, one with an additional $75 million through 2020, which the Committee approved last year for planning purposes, one without the additional $75 million, and one based on the Governor’s proposed FY 2016 Capital budget. Following the Governor’s proposed FY 16 capital budget would leave to $541 less in issuances through FY 2020 than would following the plan approved last year by the Committee.

As described by the Maryland Manual, the Capital Debt Affordability Committee annually reviews a broad swath of information before making its recommendation to the Governor.

Annually, the Committee submits to the Governor and the General Assembly its estimate of the maximum amount of new general obligation debt that prudently may be authorized for the ensuing fiscal year. In making this estimate, the Committee considers:

  1. the amount of general obligation debt that will be issued and outstanding during that next fiscal year;
  2. the amount of general obligation debt that will be authorized but unissued during such fiscal year;
  3. the capital program plan prepared by the Department of Budget and Management for the ensuing five fiscal years;
  4. projections of school construction and capital improvement needs prepared by the Interagency Committee on School Construction for the ensuing five fiscal years;
  5. projections of debt service requirements for the ensuing ten fiscal years;
  6. other factors relevant to the ability of the State to meet its projected debt service requirements for the ensuing five years;
  7. criteria established or used by recognized bond rating agencies in judging the quality of State bond issues;
  8. other factors relevant to the marketability of State bonds; and
  9. the effect of additional debt authorizations on each of the factors enumerated above. The Committee’s estimate is advisory and not binding upon the Governor, the Board of Public Works, or the General Assembly.

For more information, see the presentations made to the Committee here. The next meeting of the Committee is on September 16.