2018-009 - City of Santa Santa Ana Debt Management Policy

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Debt Restrictions The Santa Ana issuers wilt keep outstanding debt within the limits of applicable federal and state law. Specifically and In accordance with section 602 of the City Charter, the Issuers' total general obligation bond Indebtedness shall not exceed 10 percent of the "total assessed value of real property within the City". As such, the City will keep outstanding general obligation debt within the specified limits. The successor Agency, in particular, will Issue debt to refund its outstanding debt consistent with applicable taw. More specifically, in the event that the City Issuer. a, a general obligation bond: the debt service payments, In the aggregate, shall not exceed 10%ofGeneral fund revenues; b, a lease revenue bond or certificates of participation: the debt service payments shall be limited by debt service coverage ratio (e.g., annual net pledged revenue to annual debt service) of at leasta 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. DEBT57 ti URe 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 bythe 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: Resolution No. 2018-009 Page 6 of 9