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8 <br />Policy Issues, continued <br />In worst-case scenario, district may default on its bonds, causing <br />potential problems for the residents, bondholders, and City. <br />Statutory debt and mill levy limitations and other requirements <br />enacted to address impacts of default <br />Limited tax nature of bonds authorized under most service plans are <br />intended to mitigate this risk (no default occurs so long as the district <br />is imposing a “required mill levy”) <br />But still important that service plan include limitations and provisions <br />to ensure financial viability of the district and reduce the risk <br />associated with bond default <br />Note that bond default by a metro district within the City is not a <br />City default, but City reputation is a consideration <br />Some Financial Issues <br />Statutes require service plan to include a financial plan <br />Statutes also provide City Council “shall disapprove” <br />proposed service plan unless satisfactory evidence is <br />presented to the City Council that the area to be included in <br />the proposed district has, or will have, the financial ability to <br />discharge the proposed indebtedness on a reasonable basis <br />This required finding raises some considerations for the City <br />What standard of care applies? <br />Can City Council simply rely on the proponent’s statements <br />that the financial plan is sound? <br />Should the City Council utilize its own consultants to review <br />the financial plan and any market projections? <br />22