Page 453 - FY 2021-22 Proposed Budget

Debt

The estimated City debt service requirement for 2021-22 is $568.1 million,
which is $5.9 million more than 2020-21, excluding debt service on the Tax
and Revenue Anticipation Notes (TRAN). A total of $119.3 million of this
amount is for principal and interest payments on the City’s $772 million in
outstanding General Obligation Bonds (GOB). GOBs are general obligations of
the City payable from ad valorem taxes levied on all of the taxable property
of the City. The remaining debt service covers the Municipal Improvement
Corporation of Los Angeles (MICLA), Wastewater, Solid Waste Resources,
Site-Specific Tax, and Judgment Obligation Bonds.

In total, debt service is projected to be 4.97 percent of projected 2021-22
General Fund receipts, well under the 15 percent limit set by the City’s Debt
Policy.

General Fund Cash Flow

Annually, the Controller estimates an amount of borrowing needed to meet
the City’s short-term cash flow requirements in the first half of the following
fiscal year. Based on revenue and expenditure patterns, the likely cash flow
borrowing requirement in 2021-22 is between $450 and $550 million.

In addition to the TRAN, the Controller is authorized to enter into short-term
borrowing from the Reserve Fund when cash flow is required. However, this
can cause concern when the Reserve Fund balance is close to the five percent
target set by the City’s financial policies. In order to balance this concern
against cash flow needs and legal caps on the TRAN, the Controller will work
closely with the City Administrative Officer to determine the most appropriate
amount to borrow, and to explore alternatives to the TRAN, including internal
sources of funds.

421