The debts of local cities are ultimately secured by the city's taxing authority. This means bond levels are an indirect imposition on the property of the people of the city who may be taxed to pay the debts of the city. As a result, the level of debt held by a city may impact future decisions about taxes and spending levels. For these reasons we evaluated the level of bonded debt held by cities as part of the Private Property category.
- General Obligation (GO) Bonds: These bonds are backed by the full faith and credit of a city under the theory that the city has the ability to levy taxes to pay its debts and will therefore always make good on its obligations. These bonds are subject to a state-imposed debt limit.
- Revenue & Special Assessment Bonds: These bonds are used for specific projects that can be funded with a specific revenue source. For this reason, they can be secured by that specific revenue source instead of the full faith and credit of the city. If a city defaults on its payments, the creditors will have a claim on all the revenues from that specific source. For example, if a city recieves a portion of sales taxes dedicated to transportation, it can issue revenue bonds based on the revenue it recieves from that tax source in order to pay for the transportation project.
A special assessment is a specific tax or "assessment" levyed on property in a specific geographic area where the property recieves direct benefits from the service or infrastructure provided by the revenue from the assessment. For example, a water district may serve a specific geographic area and therefore charge a special assessment to the properties in that area. Thus, a city may issue special assessment bonds to pay for improvements to the water district infrastructure and the bondholders will have a claim on the revenue from those special assessments in the event of a default.
Because revenue and special assessment bonds are issued based on revenues from specific sources and not the general tax revenues of the entire city, they are not subject to the same debt limit as general obligation bonds. This means cities can avoid utilizing their debt limit by using revenue bonds instead of general obligation bonds where applicable.
- Debt Limit: Cities have a debt limit under state law equal to 12% of the market value of taxable property in the city. This limit applies to general obligation bonds but not to revenue or special assessment bonds. For this metric we looked at a city's debt utilization as a percentage of their allowable debt limit. Because some cities can avoid issuing general obligation bonds by using other types of bonds, we also calculated total debt, including revenue and special assessment bonds, as a percentage of this same debt limit.
While cities can interpret market value in different ways, for a better comparison, we used the same consistent measure for each city's "market value" by looking at the previous year's total assessed property value as reported by the Utah State Tax Commission. Data for the total outstanding bonds was taken from city financial statements as reported annually to the State Auditor.
- Total Assessed Value: Value of all taxable property in a municipality as reported by the Utah State Tax Commission for the certified tax rates (available at: taxrates.utah.gov). We used the grand total of real, personal, and centrally assessed value as reported in report 510.233b "List of Final Values." Tax years 2013-2014 are what yield revenues for budget expenditures in 2014-2015 (however, the values for those years are assessed in 2012-2013). We used the figures as reported for tax years 2013-2014.
- Debt Limit Utilization--GO Bonds: This is our first measure which evaluates each city based on a two-year average of the percent utilization of the calculated debt limit for general obligation (GO) bonds. This is a ratio variable calculated using the formula: [ Total Outstanding GO Bonds / (0.12 * Total Assessed Value) ] The percent utilization was found independently for each year studied and then averaged together. This measure was normalized using a statistical z-score and counted for 25% of the metric score.
- Debt Limit Utilization--All Bonds: This is the second measure which evaluates each city based on a two-year average of the percent utilization of the calculated debt limit for all bonds. This includes general obligation, revenue, and special assessment bonds which under Utah law are not held to the same debt limit. However, in order to understand the total level of all debt for a particular city, we used the same 12% limit as a way to compare cities to one another.
This is also a ratio variable and was calculated using the formula: [ Total Outstanding Bonds (GO+Revenue+Special Assessment) / (0.12 * Total Assessed Value) ] This measure was normalized using a statistical z-score prior to totaling with the other measure. Because this measure is more comprehensive for all types of debt, it counted for 75% of the total Bonded Debt metric score.
This metric counted for 15% of the overall Private Property category score.
To see a specific city's laws for this metric, click on its name in the right column, then find the = Bonded Debt ?> row in the table below the Private Property category.