Bond Referendum FAQs
What are bonds?
Will these bonds cause a tax rate increase?
Can the bonds on the Nov. 3 ballot be used for other purposes?
What is the cost of borrowing?
What are the benefits from the county’s triple-A rating?
What percentage of my taxes goes toward paying for the bonds?
What is the county’s total bonded indebtedness?
Why not pay for bonds on a pay-as-you-go basis?
Why put forth additional referenda if there are still unsold bonds?
A: Bonds are a form of long-term borrowing used by most local governments to finance public facilities and infrastructure. Bond financing makes it possible to build facilities and infrastructure based on future population estimates and to spread the cost equitably over the useful life of the facilities. This kind of financing allows the cost of a facility to be spread over a number of years so that each generation of taxpayers contributes a proportionate share for the use of these long-term investments.
A: The bond program is designed not to contribute to an increase in your tax rate. Fairfax County has adopted a prudent financial management policy designed to protect its triple-A bond ratings. Under the program, the county’s net long-term debt is not to exceed 3 percent of the total market value of taxable real and personal property in the county. It also provides that annual debt service (the cost of principal and interest payments) be kept below 10 percent of annual combined general fund spending, and that bond sales shall not exceed an average principal amount of $275 million per year or $1.375 billion over 5 years.
For FY 2016, the county’s projected actual net long-term debt is 1.25 percent of the market value of all taxable real and personal property. Debt service costs in FY 2016 are projected to be 8.8 percent of the combined general fund disbursements. The FY 2016-2020 Capital Improvement Program adopted by the Fairfax County Board of Supervisors on April 21, 2015, anticipates issuance of an average of $275 million of general obligation bonds per year. Of this amount, approximately $155 million (56%) is for the Fairfax County Public Schools and $125 million (44%) is for the County. This policy is expected to keep debt service at approximately 9 percent of general fund disbursements, which will maintain a balance between operating expenses and long-term capital needs.
A: Proceeds of the sale of bonds authorized for a specific purpose may not, by law, be used for any purpose other than the purpose specified in the referendum question. In other words, the proceeds of the sale of public safety bonds may not be used to finance other projects, such as transportation or storm drainage projects. Although the county has current plans for the use of the bond proceeds, the county would be permitted to issue bonds for any purpose described in the ballot question.
A: Virginia law requires that voters in Fairfax County approve general obligation bonds through a referendum. You have the opportunity to vote either YES or NO on the question. If the majority votes YES on a question, then the Fairfax County Board of Supervisors will be authorized to sell bonds for the purpose described in the ballot question. If the majority votes NO on a question, the county cannot issue general obligation bonds to finance the purpose described in the question.
A: Borrowing always entails interest costs. Since the interest earned by holders of municipal bonds is usually exempt from federal taxes, interest rates for these bonds generally are lower than the rate charged for private loans. Since our county has a reputation for sound financial management, Fairfax County has the highest credit rating possible for any government: triple-A from Moody’s Investors Service Inc.; from Standard & Poor’s Corp.; and from Fitch Ratings. As of July 2015, Fairfax County is one of only 10 states, 40 counties, and 30 cities to hold a triple-A bond rating from all three rating agencies. For this reason, Fairfax County’s bonds sell at relatively low interest rates compared to other tax-free bonds.
A: The County’s triple-A bond ratings lower the county’s borrowing costs. The county’s policy of rapid debt retirement and strong debt management guidelines serves to keep debt per capita and net debt as a percentage of estimated market value of taxable property at low levels. Since 1978, the county has saved over $702.51 million on bond and refunding sales as a result of the triple-A ratings when compared to industry benchmarks of other municipal bond issuers.
A: During the past 20 years, the share of taxes used to pay debt service has fluctuated from 7.5 percent to a high of 9.3 percent. For FY 2016, it is projected to be 8.8 percent and is projected to remain at or slightly above 9.0 percent based on current market and revenue forecasts even assuming passage of the public safety bond referendum.
A: As of July 2015, the total of general obligation bond and other tax-supported debt from FY 2016 through FY 2042 is $2.964 billion in principal and $1.097 billion in interest. During the next five years, $1.539 billion, or approximately 38 percent of the total debt, is scheduled to be paid off.
A: If capital construction were financed on a pay-as-you-go basis out of current tax revenues, expenditures would be paid for in a much shorter timeframe, which could necessitate tax rate increases or a significant reduction in other county services. Bonding spreads the cost of major projects of general benefit to the county over future years and ensures that both current and future residents and users share in the payment. Without bond funding, capital improvement budgeting is less predictable.
A: Fairfax County bond packages are planned to fund specific projects. This means that all previous bond authorizations were planned for or are obligated to specific projects. These projects often take a number of years to complete. Bonds are sold only as the money is needed, resulting in substantial amounts of authorized, but unissued, bonds. Prudent financial management dictates that the proportionate amount of bonds be sold to coincide with the annual cash flow requirements for construction costs associated with the respective capital projects.