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Observations / Items for Discussion ORANGE COUNTY <br /> NORTH CAROLINA <br /> • Orange County has formalized a series of Financial Policy Guidelines and has a formal CIP process in place. <br /> • Orange County has historically managed its debt in a conservative fashion, as evidenced by a strong 10 year Payout Ratio. <br /> — Note: This conservative debt structure contributes to a higher Debt Service to Budget Ratio. <br /> • Based on a series of conservative CIP projections/ assumptions, the 2017 CIP Alternative #1 results in a projected cash flow shortfall (after the <br /> FY 2018 borrowing) and the County is projected to exceed its Debt Service to General Fund Revenues Policy (after the FY 2020 borrowing). <br /> • The County has a number of options to consider as it relates to exceeding its policy and/or addressing cash flow shortfalls: <br /> — Consider delaying projects until they can be funded within the confines of the adopted policies. <br /> — Consider requesting alternative debt structuring flexibility from the LGC in order to fund the currently scheduled CIP projects within current <br /> policy limits and/or reduce cash flow shortfalls. <br /> — Implement tax rate adjustments to minimize/ eliminate cash flow shortfalls. <br /> — Consider amendments to County policies: <br /> — Change Policy Targets or Ratios. <br /> — Add provisions that allow for policy exceptions subject to Board review/ approval. <br /> DAVENPORT&COMPANY <br /> May 9,2017 Orange County, NC 25 <br />