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It is the policy of the BOCC for County debt to be administered according to the following guidelines:

  1. The County shall maintain good communications with bond rating agencies to ensure a complete and clear understanding of the creditworthiness of the County.
  2. Every financial report and bond prospectus will follow a policy of full and complete disclosure of financial conditions and operating results, in conformance with guidelines issued by applicable entities to meet the disclosure needs of rating agencies, underwriters, investors, agencies, and taxpayers. These disclosures shall be reported in appropriate financial documents as enumerated in section 150.9 Appropriate Disclosure Documents.
  3. The County should market its debt issues on a competitive basis, unless specific criteria are met.
  4. If a negotiated sale is advised, the County will competitively select the underwriter(s) needed to accomplish the structuring, marketing, pricing, and sale of the bonds.
  5. A negotiated sale process will only be considered if specific criteria are met, specifically tests relating to unusual credit quality, issue size and market access.
  6. All pricing for negotiated sales will be performed with direct involvement by County staff and the County’s financial advisor. The administration and management of the pricing sessions should always be conducted with the understanding that pricing can be done another day.
  7. For capital needs of enterprise operations, debt financing should be considered so that the ratepayers who utilize the capital improvement over the life of the improvement are required to support the capital financing. Although a pay-as-you-go (cash) strategy for enterprise operations may reduce interest costs, it may also increase user rates well above equitable and affordable levels.
  8. Tax-supported debt for settlements should be used only when payments from the self-insurance fund (Risk Management Fund) are not sufficient to provide for the payment. Payment of litigated judgments against the County shall be reviewed on a case-by-case basis by the Legal Department and Treasury and Financial Management to determine the best strategy for payment and least cost method. Based upon that review, a recommendation will be presented to the Board for consideration.
  9. The County shall identify a reserve level for debt service equal to a minimum of 5% of the annual principal and interest due on outstanding debt in order to ensure adequate debt service liquidity while minimizing the exposure to arbitrage liability, subject to debt covenants requiring a specific reserve in excess of this amount. Specific policies on reserve levels are described in section 110 Reserves for Working Capital.
  10. Proceeds from long-term debt should not be used to fund current operating costs.
  11. The scheduled maturities of long-term obligations should be less than the expected economic life of the capital project or asset(s) financed.
  12. The County shall seek to maintain a minimum of 20% of its statutory debt capacity.
  13. In determining the type of bond to issue, the following factors should be considered:
    1. The direct and indirect beneficiaries of the project. A significantly large proportion of citizens should benefit from projects financed by general obligation bonds.
    2. The time pattern of the stream of benefits generated by the project, and the asset’s useful life.
    3. The revenues that may be raised by alternative types of user charges.
    4. The cost-effectiveness of user charges.
    5. The effect of proposed bond issues on the County’s ability to finance future projects of equal or higher priority.
    6. The interest costs for each type of bond.
    7. The impact on the County’s financial condition and credit ratings.
    8. The impact on statutory debt limit.
  14. In determining when to issue bonds, the following factors should be considered:
    1. The timing of other proposed issues.
    2. The availability of the County’s audited financial statements for the previous fiscal year.
    3. The potential impact on the County’s bond ratings.
    4. The general condition of the municipal bond market.
    5. The need for capital to complete the project.
    6. Call dates of existing debt issues (refinancing opportunities).
    7. Present value interest savings (refinancing opportunities).
    8. Current reserves (refinancing opportunities).
  15. Where debt repayment relies on a limited number of principal revenue sources, the County will review the principal revenue sources with both a profile and a sensitivity analysis. Monitoring these revenue sources will have a positive impact from a credit rating perspective as well as future property tax impact.
  16. Bond proceeds should be used only for the following: construction project costs; acquisition of other fixed assets; bond issue costs; capitalized interest; debt service reserve requirements; judgments against the County; and refunding of outstanding bond issues.
  17. The County will use “true interest costs” as the means to determine the best bid on its debt issues.
  18. The County will consider refinancing outstanding debt when legally permissible and financially advantageous. In addition, the County may consider refinancing outstanding debt for restructuring purposes where revenue streams have declined and it is necessary to avoid default. When refinancing outstanding debt to reduce interest costs, the County shall seek to achieve a net present value benefit of at least 3% of the present value of the refunded debt service. This 3% level is only a minimum target when refinancing to reduce interest costs – the County may elect not to refinance outstanding debt even if the 3% savings target can be achieved.
  19. The County will maintain adequate debt service coverage ratios for the double-barreled bonds or revenue bonds in each applicable fiscal year. The maintenance of the coverage ratios shall be consistent with preserving the credit rating for each particular issue.
  20. The County will establish separate accounts to monitor investment earnings from dept proceeds in order manage potential arbitrage liability. Any investment earnings retained by the County (i.e., not rebated as an arbitrage liability) will be used according to relevant debt covenants, including the financing of debt issuance costs and retirement of outstanding debt. Investment earnings may not be used to finance project costs unless formally approved by the BOCC.