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 5 Short-term financings, including private placement loans and capital lease purchase agreements, are executed to meet such needs. C. Refinancings/Refunding of Existing Debt The Finance Director and/or Treasurer will periodically evaluate its existing debt and execute refinancings when economically beneficial. A refinancing may include the issuance of bonds or other debt to refund existing bonds or refunding existing bonds and borrowing additional funds for new project. DEBT STRUCTURE The City will normally use fixed rate debt with annual or semi-annual interest payments that allow for reasonable prepayment provisions. The City will consider fixed rate, short or long-term financing for the acquisition, replacement, or expansion of physical assets, including land. Generally, no debt will be issued for periods exceeding the useful life or average useful lives of projects to be financed. For short-term financing, the asset must have a minimum useful life of five years; for long-term financing, the physical asset must have a minimum useful life of ten years. The debt structure should approximate level debt service for the term of the loan where it is practical. Debt service will be structured in such a way as to avoid increasing debt service over the life of the loan, with the exception of the initial year of debt service or where multiple series of debt has been issued and all series debt service is approximately level. Variable rate debt may be considered when it is determined to be in the best interest of the City. CREDIT OBJECTIVES The City of Colton seeks to maintain the highest possible credit ratings for all categories of long- term debt that can be achieved without compromising delivery of basic City services and achievement of City policy objectives. Accordingly, the City seeks to achieve a rating no lower than investment grade for obligations of the City or its component units. This objective may be obtained by the use of bond insurance or other credit enhancement. The City may seek to use credit enhancement (letters of credit, bond insurance, surety policies, etc.) when it proves cost-effective or provides additional security for the payment of debt service. Generally, when practical, selection of credit enhancement providers will be subject to a competitive process developed by the City’s municipal advisor. Credit enhancement may be used to improve the credit rating on City debt or to provide supplemental security for debt service on non-City debt as long as the use of such credit enhancement meets the City's debt financing goals and objectives and is cost effective. REFUNDING DEBT Periodic reviews of all outstanding debt will be undertaken by the Finance Director, Treasurer and/or the City’s Municipal Advisor to determine refunding (refinancing) opportunities. The purpose of the refinancing may be to: 1. Achieve Debt Service savings. 2. Update or revise loan covenants on an outstanding debt issue. 3. Restructure Debt Service when additional funds are needed for expansion or improvements for