Model Debt Policy September 22, 2011 Model Debt Policy January 1, - - PowerPoint PPT Presentation

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Model Debt Policy September 22, 2011 Model Debt Policy January 1, - - PowerPoint PPT Presentation

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Model Debt Policy September 22, 2011 Model Debt Policy January 1, 2012 - All public entities incurring debt must adopt a debt management policy. Improve financial decisions; Provide clear objectives; Demonstrate strong financial

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September 22, 2011

Model Debt Policy

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Model Debt Policy

January 1, 2012 - All public entities incurring debt

must adopt a debt management policy.

  • Improve financial decisions;
  • Provide clear objectives;
  • Demonstrate strong financial practices; and
  • Distinguish policy decisions.
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Model Debt Policy

Signals that the City is using a disciplined approach to financing capital needs.

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Model Debt Policy

Process 1) Approval of Policy in Advance of Issuance 2) Bond anticipation, capital outlay, grant anticipation and tax anticipation notes require approval before issuance – prescribed forms. 3) Refunding of debt issues also must be approved prior to issuance. 4) Capital leases forwarded to Comptroller w/in 45 days.

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Model Debt Policy

Four Requirements: 1) Transparency 2) Professional Selection and Qualifications 3) Conflicts of interest; and 4) Review

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Model Debt Policy

Transparency –

1) Public Notice

a. Customary and Websites

  • b. Open Disclosure

c. Place, Time and Terms

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Transparency

Understanding the Transaction

  • Why Debt is Necessary
  • All Costs Clearly presented
  • Terms and Life of Debt – Clear and Disclosed
  • Debt Schedule – Open and Disclosed
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Transparency

Role of Debt:

  • Long-term debt – Minimize short-term borrowings
  • Capital purchases or construction.
  • The maturity of the underlying debt will not be

more than the useful life of the assets – up to 30 years

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Transparency

Types and Limits of Debt:

  • Decision - The City establishes a limit on total debt
  • bligations using a limit defined by the City – % of

assessments, per capita amount, etc., excluding Overlapping, Revenue and Enterprise Debt.

  • The City may issue General Obligation, Revenue,

and TIF debt as it determines most appropriate.

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Transparency

Types and Limits of Debt:

  • The City will seek to structure debt with level or

declining debt service payments over the life of each individual bond issue.

  • No exotic debt or terms - backloading, use “wrap-

around” techniques, derivatives or balloon payments.

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Transparency

Refunding/Refinancing

  • Establish Criteria
  • Substantial Benefit
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Model Debt Policy

Professional Services:

  • Written letters of Engagement
  • Requirements for Advisors and Ability to Bid

Conflicts:

  • Professionals involved required to disclose all

relationships

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Model Debt Policy

Review

  • Annually with Budget
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Model Debt Policy

Next Step

  • Provide Requirements to Advisor

OR

  • IPS Agencies to help develop custom policy

MTAS – (865) 974-041 http://www.mtas.tennessee.edu/

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Questions?