Mike McGinn, Mayor
3/14/2013 2:30:00 PM
Robert Cruickshank (206) 684-4000
Mayor, City Budget Office announce new policies for managing issuance of debt to finance city projects
City takes proactive steps to better manage cash flow needs, looks across departments to strengthen debt management practices
SEATTLE - Today Mayor Mike McGinn and the City Budget Office announced new policies and practices to strengthen the city of Seattle's debt management for city-financed projects. The City Budget Office and the Department of Finance and Administrative Services first identified the need for stronger policies in order to better manage the City's cash flow needs and have already begun to implement new management practices at the direction of the mayor.
The new practices and policies include:
- A new semi-annual and centralized review by the City Budget Office of city spending on a project-by-project basis to ensure that each project is in alignment with the overall spending plans within a department. These reviews will inform the structure of the City's annual bond sale and will be shared with the City Council;
- New quarterly reporting metrics to support the City Budget Office's tracking of departmental cash flow plans;
- Reduce borrowing costs by using a City cash pool to cover contingency costs. This practice will be strictly governed by policy guidance and will save taxpayer dollars by reducing interest payments on bonds and better aligning City spending with actual project costs; and
- A team comprised by the City Budget Office and the Department of Finance and Administrative Services will examine these new practices and develop policies for Council adoption in advance of the 2014 proposed budget.
The City Budget Office first identified the opportunity for stronger policies and practices after conducting a review of the Seattle Department of Transportation's (SDOT) annual capital budget and debt issuance from 2007 to the present. In 2011, it became clear that the existing policies were not leveraging taxpayer dollars as efficiently as possible. In 2012, the City took action by substantially reducing the amount of debt issued for SDOT projects in order to better utilize the funds previously borrowed by SDOT. In 2013, the City took a similar action. The main contributors to this issue were changing project schedules, SDOT's success in attaining non-City funds like Federal grants, lower contractor costs due to the Great Recession, savings in planned contingencies and a conservative approach to managing the budget for each project. A more detailed analysis of the City Budget Office's review of SDOT's project finances can be found on their website.
At the mayor's direction, a similar review will be conducted for other departments that managed city-financed projects in order to better implement the new policies and practices described above.
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