R-002-17 Adopting the City of Colton Debt Policy and Procedures

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City of Colton Debt Policy and Procedures Adopted by City Council February 7, 2017 3 GENERAL POLICY GUIDELINES INTRODUCTION The primary objectives of this debt policy are to establish guidelines for the use of various categories of debt; create procedures and policies that minimize the City’s debt service and issuance costs; retain the highest practical credit ratings; and to provide full and complete financial disclosure and reporting. The City’s Debt Policy is also designed to: ■ Establish parameters for issuing and managing debt; ■ Provide guidance to decision makers related to debt affordability standards; ■ Document the pre- and post-issuance objectives to be achieved by staff; ■ Promote objectivity in the debt approval decision making process; and ■ Facilitate the actual financing process by establishing important policy decisions in advance. A review of the Debt Policy will be performed on a periodic basis and any changes to the Debt Policy will be brought forward for City Council consideration and approval. Further, in the event there are any deviations or exceptions from the Debt Policy when a certain bond issue is structured, those exceptions will be discussed in the staff reports when the bond issue is agendized for City Council’s consideration. LONG RANGE FINANCIAL PLANNING The City shall integrate its debt issuance with its Capital Improvement Program (CIP) spending to ensure that planned financing conforms to policy targets regarding the level and composition of outstanding debt. This planning considers the long-term horizon, paying particular attention to financing priorities, capital outlays and competing projects. Long term borrowing shall be confined to the acquisition and/or construction of capital improvements and cannot be used to fund operating or maintenance costs. The City’s Capital Improvement Program is a multi-year financial planning and management tool that identifies public facility and equipment requirements. It identifies a full range of capital needs, provides for the ranking of the importance of such needs, and identifies the funding sources that are available to cover the costs of the projects. When the CIP identifies project funding through the use of debt financing, financial analysis and projections will have already been completed which demonstrate the feasibility of issuing the debt. The City Manager and Finance Director will evaluate capital project requests and recommend the CIP to the Finance Committee for recommendation to the City Council for approval. The City may consider financing the capital needs of its revenue-producing enterprise activities, electric, water and wastewater, through the issuance of revenue-secured debt obligations. Prior to issuing such debt, the City will develop financial plans and projections showing the feasibility of the financing, including an analysis of the required rates and charges needed to support the financing and the impact on ratepayers, property owners and other affected parties.