Spokane County's long-term debt includes both Governmental Activities debt and Business type activities debt. Governmental Activities long-term debt consists of general obligation bonds, other general obligation liabilities, and special assessment bonds with governmental commitments. Special assessment bonds are guaranteed for payment from resources of the Road Improvement Guaranty Trust Fund. Business-type Activities long-term debt consists of general obligation bonds and other long-term liabilities that are accounted for in the enterprise funds.
Types of Bonds
General Obligation Debt
General obligation (G.O.) bonds are the most common form of state and local government debt. G.O. bonds provide maximum security to bondholders because the full faith and credit of the government provide security for the bonds. In Washington a limited amount of bonds can be issued without voter approval. The County issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligations bonds have been issued for both governmental and business-type activities and are repaid from the applicable resources. These bond generally are issued as 20-year serial bonds with varying amounts of principal maturing each year.
Special Assessment Bonds With Government Commitments
Special assessment bonds are a combination of general obligation and revenue bonds. Proceeds from special assessment bonds finance public improvements, such as roads, water, sewer, or street lighting systems within a defined benefit area. The government levies special assessments on the property in the benefit area to repay the related debt service. The County has issued special assessment bonds for the construction of roads and like improvements. These bonds will be repaid from amounts assessed against the property owners benefited by this construction. In the event that a deficiency exists because of unpaid or delinquent assessments at the time a debt service payment is due, the County must provide the resources to cover the deficiency until other resources, for example, foreclosures proceeds, are received.
Tax Increment Financing (TIF) Bonds
Tax increment financing bonds are commonly issued to encourage economic development in a defined benefit area, such as a downtown redevelopment area. Resources for payment of interest and principal on the bonds result from the tax increases in the defined area. These bonds usually carry a higher interest rate due to the risk of economic downturn or limited tax revenue growth in the defined TIF area.
Spokane County has two component units, Moran Prairie Library District and Liberty Lake Transportation Benefit District with outstanding bonds. The County is not financially responsible for this debt, however the Board of County Commissioners does have a majority vote on these boards making the entities component units of Spokane County.
Advance Refunding of Debt
From time to time the County had defeased various bond issues by creating separate irrevocable trust funds. When this happens generally new debt is issued and the proceeds are used to purchase U.S. Government securities that are placed in the trust funds. The investments and fixed earnings from the investments are sufficient to fully service the defeased debt until the debt is called or matures. For financial reporting proposes, the debt has been considered defeased and therefore removed as a liability from the County's government-wide financial statements.