Managing Debt Service Expenditures During an Economic Downturn

About the Program

Category: Financial Management (Best in Category)

Year: 2011

During the most recent economic downturn, Henrico County used a number of cost-cutting approaches to mitigate a $91 million drop in general Fund revenues between FY2008-09 and FY2010-11. One of these approaches required an aggressive approach to refunding every possible debt coupon the County had during what was an extremely volatile economic period, but one in which municipal bond rates dropped to lows not seen since the 1950’s. Beginning in February 2009, Henrico County refunded existing debt four times over a 15 month period. This aggressive approach required a coordinated and concise effort between the County’s management, the county’s Financial Advisor, and the County’s external auditors. All aspects of this approach needed to be executed flawlessly as Henrico County maintains AAA/AAA/Aaa bond ratings and some municipalities ratings were downgraded this most recent economic difficulty. In the end, these debt refunding reduced future debt service payments by $17.73 million due to the County’s proactive effort in refunding debt at a time when municipal bond rates were at extremely attractive levels.