FY2011 - FY2015 Capital Investment Plan
Appendix A - Debt Affordability Analysis - Fiscal Year 2011-2015 Debt Issuance Modeling

In analyzing potential levels of debt issuance to fund the Commonwealth’s capital spending plan for the next five years, the Patrick-Murray Administration has made the following conservative and fiscally responsible assumptions:

In setting the annual administrative bond cap, the Administration has established a policy which sets a cap that will ensure debt service does not exceed 8% of annual budgeted revenues.  By keeping total annual debt service within this limit, the Administration will be able to maximize needed capital investments while ensuring that debt service levels remain affordable. 

For purposes of constraining growth in debt, the Administration has placed another restriction on its debt capacity model: growth in the annual bond cap for the regular capital program is limited to not more than $125 million each year (excluding carry forwards of unused bond cap from prior years).  This limit will apply even if in some years the actual revenue growth projection provides capacity to issue a greater amount of debt.  This additional constraint ensures stable and manageable growth and avoids taking on an unaffordable long-term debt burden on the basis of unusually robust short-term revenue growth. 

The table below shows the level of annual bond funding planned to meet projected capital investment needs to be funded within the bond cap and Bridge Program.


Table 7
Capital Spending
Fiscal Years 2010-2015
Fiscal Year Bond Cap Bridge Program
2010 1,650,000206,872
2011 1,625,000293,739
2012 1,750,000492,964
2013 1,875,000604,857
2014 2,000,000564,732
2015 2,125,000425,413


As shown in Table 8, funding the annual bond cap and the Bridge Program in the amounts shown above, together with the existing obligations, results in total annual debt service as a percent of budgeted revenues that is within the 8% limit described above[15].


Table 8
Projected Annual Debt Service as a Percentage of Budgeted Revenues
Fiscal Years 2010-2015
Debt Service
Fiscal Year Total Existing Obligations Cumulative New Debt Service from Annual Bond Cap Less Self Supporting Projects Cumulative New Debt Service from Bridge ProgramTotal Annual Debt Service Budgeted Revenue Growth 2.75% per year after FY11 Less Self Supporting Projects Total Annual Debt Service as % of Revenues
2010 2,125,808-1,64802,124,16029,123,7527.29%
2011 1,901,60931,79214,2111,947,61229,989,5116.49%
2012 2,079,707142,52556,7072,278,93930,804,9867.40%
2013 2,083,408261,93095,7152,441,05331,642,7767.71%
2014 1,996,052390,221131,6192,517,89232,503,7227.75%
2015 1,935,806527,769159,5862,623,16133,388,8387.86%


The annual bond cap amounts reflected in the table above are less than had been previously projected in FY08-12 and the FY09-13 Plans published by the Patrick-Murray Administration.  The reduction in the annual bond caps is a function of the Administration’s disciplined approach to debt management through its formal debt affordability analysis and policy.  The debt affordability analysis and policy ensure that planned borrowing to fund capital investments is periodically adjusted to take into account the Commonwealth’s fiscal condition and capacity to pay debt.  The following table shows the reductions in the annual bond caps from the Administration’s original five-year capital spending plan resulting from the application of the Administration’s debt affordability analysis and policy.


Table 9
Bond Cap Compared with Prior Capital Investment Plans
Fiscal Year FY08-12 Plan FY11-15 Plan Difference Between
FY11 and FY08 Plans
2008 1,661,0001,319,600-341,400
2009 1,625,0001,521,000-104,000
2010 1,750,0001,650,000-100,000
2011 1,875,0001,625,000-250,000
2012 2,000,0001,750,000-250,000
2013 2,000,0001,875,000-125,000
2014 2,000,0002,000,0000
2015 2,000,0002,125,000125,000
Total -1,045,400


The Patrick-Murray Administration will revisit the assumptions underlying this affordability model each year as part of the development of the following fiscal year’s capital plan to adjust the model’s assumptions as needed to reflect new trends in revenue growth, interest rates, and other factors.  The Administration will also reassess the debt capacity model as a whole, including the limitations of keeping debt service below 8% of budgeted revenues and of keeping maximum annual bond cap increases for the regular capital program to the levels prescribed in this report, to ensure that it continues to be an appropriate and responsible model for measuring the Commonwealth’s debt capacity in the future.


[14] The Bond Buyer 11 Index tracks the interest rates of 11 issues of 20-year municipal debt with a double-A credit rating.

[15] Table 8 excludes debt service on infrastructure development projects, fire fighting academy projects and energy efficiency projects which are self-supporting and funded with incremental new tax revenues, assessments and budgetary savings, respectively.  Table 8 also excludes an equal amount from Budgeted Revenue.  (See Table 6.)