Debt Structure The credit agencies regard debt service exceeding twenty percent of operating revenues as a potential problem, however, credit agencies regard ten percent or less as acceptable (Maher & Nollenberger, 2009). Since the city of Ponderosa has debt ratio values of less than .5, the credit agencies regard Ponderosa as possessing reasonable debt ratio values. The debt service fund accounts for resources that require governments to accumulate to pay debt service in the future (Allison, 2000). In the case of Ponderosa, the tax base supports general debt issued by the government. Since Ponderosa possesses low per capita debt ratio relative to its comparison cities, the low per capita debt with the high median housing value indicates that additional debt can be supported by the city. Moreover, the time-interest-earned suggests minimal interest payments on the current debt (see Figure 6). Therefore, if the city acquires additional debt, it must counteract that with additional sources of revenues obtained through increased fees and taxes, especially property taxes. In the case of return on net position, the calculations indicate that the net position is about 3%. However, the…show more content… In the past two consecutive years, the city of Ponderosa lost revenue in their enterprise funds (see Figure 7). The majority of Ponderosa’s enterprise fund assets remains in capital assets, thus, the capital investments could generate revenue benefits over time to alleviate cash problems and operating losses of the enterprise funds. Nonetheless, the low debt ratio data indicates a negative situation, especially in the last two years. The city of Ponderosa should consider alternatives to alleviate the cash flow problems indicated in the low debt ratios. Currently, the cash flow of the general funds meet the needs of the enterprise
