55D - RESO DEBT MGMT POLICY - Laserfiche WebLink

Home Browse Search

Debt Management Policy Page 4 service) of at least a 2.00, preferably higher; as well as additional bond provisions contained In the bond covenants; and c. a conduit debt: subject to approval based on the borrower's creditworthiness, purpose of the borrowing issue, and subject to a comprehensive review conducted by the City. Furthermore, it is generally recommended that any costs of issuance associated with the debt shall not exceed 5% of the principal amount of the debt, unless it can be determined that the public benefit outweighs the cost. DEBT STRUCTURE All capital projects financed through the issuance of debt will be financed for a period not to exceed the useful life of the project. Debt will be structured for a period consistent with a fair allocation of costs to current and future beneficiaries of the financed capital project and, consideration will be given, so that the maturity of the debt issue is consistent with the useful life of the capital project to be financed. Ultimately, however, market conditions at the time of sale will inform the City on its decision regarding debt service structure. Certain types of financings such as certificates of participation and other lease -secured financings may require the use of capitalized interest from the issuance date until the City has beneficial use and occupancy of the financed project. Interest rate shall not be funded (capitalized) beyond a three-year period, or a shorter period if further restricted by the governing bond documents. The City may require that capitalized interest on the initial series of the bonds be funded from the proceeds of the bonds. Fixed and Variable Interest Rate The Santa Ana Issuers can make a determination to utilize either a variable or fixed interest rate debt based on the market conditions. In general, in order to maintain a predictable debt service burden, the City shall give preference to debt that carries a fixed interest rate. However, the City may consider variable rate debt in certain instances, such as: a) during a high interest rate environment; b) if the source for repayment fluctuates, and is anticipated to move in the same direction as market -generated variable interest rates, or the dedication of revenues allows capacity for variability; and c) if financing structure and budgetary safeguards are in place to prevent adverse impacts from interest rate shifts Moreover and in accordance with rating agency guidelines, the percentage of variable rate debt outstanding shall not exceed 20% of the City's total outstanding debt. DEBT ISSUANCE Service Providers During the course of a debt issuance, the City must select several professional services providers. The Santa Ana Issuers will utilize the services of independent financial/municipal advisors, underwriters, and pertinent legal counsel on all debt financings as well as other parties depending on the type of financing. Additionally, the City will require that all providers have the highest ethical standards as it relates to 55D-16