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Davenport tells Annapolis council city can afford CIP but borrowing will approach policy limits
Summary
Davenport & Company told the Annapolis City Council that, under conservative assumptions, the city's planned fiscal '27''32 capital borrowing fits within policy ranges but will push debt-service close to the council's 10% target in several years, leaving limited additional capacity without changes to the CIP or expenditure growth.
Jennifer Dirksen, senior vice president at Davenport & Company, told the Annapolis City Council on April 30 that the firm's debt-capacity analysis shows the city can finance its planned capital-improvement program but will be close to policy limits in the coming years.
Davenport presented the city's tax-supported debt picture and projections for new issuances tied to the preliminary FY27'FY32 CIP. Dirksen said the city has about $102,000,000 in outstanding tax-supported debt and that, based on conservative assumptions (4.5% assumed for FY27 and 5% thereafter), cumulative estimated debt service for the proposed issuances would be roughly $151,300,000 over the multi-year plan.
"This analysis is really important," Dirksen said, adding it helps ensure projected debt stays within policy and supports the city's credit ratings. Susan Ostezewski, also with Davenport, explained why new-borrowing debt service appears as zero in FY27 on one slide: because borrowings done late in FY27 typically do not carry an interest payment until the following fiscal year.
Council members pressed Davenport on several details. Alderman Smith Brown asked why the total new-debt column showed zero in FY27; Ostezewski explained timing of first interest payments. Alderman Utley asked why the debt-service-to-expenditures denominator uses only general-fund expenditures; Davenport said that matches the city's policy and rating-agency practice and is a conservative approach.
Davenport and staff also described a $15 million pool of prior-authorized-but-unissued bonds; Davenport said staff conservatively assumed $7.5 million would be issued in each of FY27 and FY28 to cover previously authorized projects that may move forward. Council and Financial Advisory Commission members asked for reconciliation tables and more detailed forecasting to understand how much of that prior authorization will actually be issued.
On credit ratings, Dirksen said the presented plan should not create negative rating pressure: "I don't think it would cause any concerns in terms of, you know, rating, negative pressure on your rating." But several council members, including Alderman Seppert, voiced concern about an upward trend in debt-service ratios over recent CIP cycles and urged the Financial Advisory Commission and staff to explore ways to return to the 10% target rather than relying on higher ceilings.
The consultants closed by observing the analysis is conservative and offers the city some flexibility but leaves limited additional capacity if the council wishes to remain at or below a 10% debt-service policy in all out years. Davenport then took questions from the council and the Financial Advisory Commission before being excused.
