Problem - Legal Debt Margin and Direct and Overlapping Debt
In preparation for a proposed bond sale, the city manager of the City of Appleton requested that you prepare a statement of legal debt margin and a schedule of direct and overlapping debt for the city as of December 31, 2013. You ascertain that the following bond issues are outstanding on that date:
Convention center bonds $3,600,000
Electric utility bonds 2,700,000
General obligation serial bonds 3,100,000
Tax increment bonds 2,500,000
Water utility bonds 1,900,000
Transit authority bonds 2,000,000
You obtain other information that includes the following items:
1. Assessed valuation of real and taxable personal property in the city totaled $240,000,000.
2. The rate of debt limitation applicable to the City of Appleton was 6 percent of total real and taxable personal property valuation.
3. Electric utility, water utility, and transit authority bonds were all serviced by enterprise revenues. By law, such self-supporting debt is not subject to debt limitation.
4. The convention center bonds and tax increment bonds are subject to debt limitation.
5. The amount of assets segregated for debt retirement at December 31, 2013, is $1,800,000.
6. The city's residents are also taxed by Clyde County for 25 percent of school district and health services debt. The school district has $15,000,000 in outstanding bonds, while health services have $8,000,000 in debt. Finally, one- third of the $2,400,000 of regional library outstanding debt is paid by taxes assessed on Appleton residents.
Prepare a statement of legal debt margin and a schedule of direct and overlapping debt for the city.