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 4 The City will use the following criteria to evaluate pay-as-you-go financing: 1. Current revenues and adequate fund balances are available so project phasing can be accomplished. 2. Adding additional debt to existing debt levels may adversely affect the City’s credit rating. 3. Would not require current citizens to pay fees or taxes over long periods of time in order to accumulate reserves sufficient to pay for capital projects. The City will use the following criteria to evaluate long-term financing: 1. Revenues designated as security for Debt Service are deemed to be sufficient and reliable so that long-term financing can be marketed with investment grade credit ratings. 2. The project securing the financing is of the type that will support an investment grade credit rating, 3. Conduit Financing and Land Secured Financing which have unique minimum credit criteria as described in their respective debt policies to be developed. 4. Market conditions present favorable interest rates and acceptance for City financing. 5. The life of the project or asset to be financed will exceed the term of the debt. DEBT LIMITS The City will keep outstanding debt within the limits prescribed by State of California statutes and at levels consistent with credit objectives. There is no statutory restriction on the amount of revenue bonds that can be outstanding at any given time. However, each proposed financing will be individually assessed by the City Manager, Finance Director and Treasurer and subject to the approval of the City Council. The three primary borrowing purposes are summarized below: A. Long-Term Capital Improvements Since the aggregate cost of desired capital projects generally exceeds available funds, the capital planning process prioritizes projects and identifies the funding needs. The City will initially rely on internally-generated funds and/or grants and contributions from other governments to finance its capital needs. Debt will be issued for a capital project only when it is an appropriate means to achieve a fair allocation of costs between current and future beneficiaries and if a secure revenue source is identified to repay the debt. The Finance Department, working with City departments within the context of the Capital Improvements Program, oversees and coordinates the timing, processing, and marketing of the City’s borrowing and capital funding activities. Close coordination of capital planning and debt planning will ensure that the maximum benefit is achieved with the limited capital funds. The debt management process will determine the availability of funds which can be raised through debt based upon the debt capacity/affordability analysis. B. Essential Vehicle and Equipment Needs In addition to capital projects, the City routinely finances certain essential equipment and vehicles. These assets range from public safety vehicles and specialized trucks to information systems. The underlying asset must have a minimum useful life of five years.