Finance Committee Agenda and Packet 2021 07 19

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City Council Finance Committee Meeting Minutes 06/14/21 Page 2 of 6 APPROVAL OF THE MINUTES FROM THE MAY 17, 2021 MEETING The Finance Committee approved the May 17, 2021 minutes as presented. NEW MEMBER ORIENTATION — DEBT POLICY & OUTSTANDING DEBT Kevin Watson, Director of Finance, presented an overview of the City's Debt Policy. Director Watson noted that the City's Debt Policies do not apply to the Urban Revitalization District, metropolitan districts within the City's boundaries, or to "pooled financing" arrangements with other entities. Director Watson reviewed each section of Debt Policy, which included: • Use of Debt Financing. o Factors that favor pay-as-you-go (cash financing) versus those that include pay -as -you -use (debt financing) Limitations and Constraints on Debt Financing. o Calculation of Legal Debt Limit and Debt Margin Structure of Debt Financing. o City debt will be structured: ■ To achieve the lowest possible net interest cost given market conditions, the urgency of the capital project, and the nature and type of any security provided. ■ To minimize impacts on future financing flexibility. ■ To rapidly recapture credit capacity for future use. o City debt will be amortized for the shortest period consistent with a fair allocation of cost to current and future beneficiaries of the project being financed, and in keeping with other related provisions of this policy. o The City shall normally issue general obligation bonds or revenue bonds with a maximum life of twenty years or less. o The City will normally seek to amortize general obligation bonds and revenue bonds with level payments (principal plus interest) over the life of the issue. Pushing higher debt service costs to future years will only be considered under special circumstances. o The City will avoid repayment schedules that consist of low annual payments and a large payment of the balance due at the end of the term. o There shall always be at least one interest payment in the first fiscal year after a bond sale and principal repayment shall start no later than the second year after the bond issue. o Call provisions for bond issues shall be made as short as possible, consistent with the lowest interest cost to the City. Unless specific compelling reasons exist, all bonds shall be callable only at par. o Credit enhancements may be used if the costs of such enhancements are lower than the reduction in net debt service payments or if they provide other significant financial benefits to the City. 3