HomeMy WebLinkAboutCity of Tamarac Resolution R-2003-269Temp. Reso. #10284
November 4, 2003
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CITY OF TAMARAC, FLORIDA
RESOLUTION NO. R-2003- �,/ i
A RESOLUTION OF THE CITY COMMISSION OF THE CITY
OF TAMARAC, FLORIDA, ADOPTING A DEBT
MANAGEMENT POLICY; PROVIDING FOR CONFLICTS;
PROVIDING FOR SEVERABILITY; AND PROVIDING FOR
AN EFFECTIVE DATE.
WHEREAS, the City of Tamarac desires to develop and follow sound
financial policies; and
WHEREAS, rating agencies consider debt management a critical factor in
determining financial strength; and
WHEREAS, the National Advisory Council on State and Local Budgeting
recommends maintaining a prudent level of financial reserves to protect against
reducing service levels or raising taxes and fees because of temporary revenue
shortfalls or unexpected one-time expenditures; and
WHEREAS, the Government Finance Officers Association recommends
municipalities adopt a formal Debt Management Policy; and
WHEREAS, the City has established prudent ranges to maintain in funds
containing operating expenses, after reviewing predictability of revenues,
volatility of expenditures, availability of resources in other funds, liquidity,
designations and legal and regulatory restrictions; and
WHEREAS, the City Manager and Director of Finance recommend the
adoption of the proposed Debt Management Policy; and
Temp. Reso. #10284
November 4, 2003
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WHEREAS, the City Commission of the City of Tamarac deems it to be in
the best interest of the citizens and residents of the City of Tamarac to adopt the
proposed Debt Management Policy.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF
THE CITY OF TAMARAC, FLORIDA:
SECTION 1: The foregoing "WHEREAS" clauses are hereby
ratified and confirmed as being true and correct and are hereby made a specific
part of this Resolution.
SECTION 2: The Debt Management Policy hereto attached as
Exhibit 1 is hereby adopted.
SECTION 3: All resolutions or parts of resolutions in conflict
herewith are hereby repealed to the extent of such conflict.
SECTION 4: If any clause, section, other part or application of this
Resolution is held by any court of competent jurisdiction to be unconstitutional or
invalid, in part or application, it shall not affect the validity of the remaining
portions or applications of this Resolution.
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Temp. Reso. #10284
November 4, 2003
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SECTION 5: This Resolution shall become effective immediately
upon its passage and adoption.
PASSED, ADOPTED AND APPROVED this 261h day of November, 2003.
ATTEST:
MARION SWENSON, CMC
CITY CLERK
I HEREBY CERTIFY that
I have approved this
RESOLUTION as to form.
MITCHELL S. KRAFT
CITY AT`FORNEY
r'
JOE SCHREIBER, MAYOR
RECORD OF COMMISSION VOTE:
MAYOR SCHREIBER
DIST 1: COMM. PORTNER
DIST 2: COMM. FLANSBAUM-TALABI"
DIST 3: COMM. SULTANOF
DIST 4: V/M ROBERTS
N
EXHIBIT 1 - TEMP. RESO. 10284
CITY OF TAMARAC
DEBT MANAGEMENT POLICY
I. Purpose
The purpose of the City of Tamarac debt management policy is to manage the
issuance of the City's debt obligations and maintain the City's ability to incur debt
and other long term obligations at favorable interest rates for capital
improvements, facilities and equipment beneficial to the City and necessary for
essential services.
II. Comprehensive Capital Planning and Financing System
The City plans long and short-term debt issuance to finance its capital
improvement program based on its cash flow needs, sources of revenue, capital
construction periods, available financing instruments and market conditions. The
Director of Finance oversees and coordinates the timing and issuance process.
III. Authority to Issue Bonds
The City of Tamarac Charter Article Vll. Financial Procedures Section 7.16
Bonds and Municipal Borrowing authorizes the City to issue municipal bonds or
to borrow funds for municipal purposes. Article V. City Manager Section_ 5._0_4_
Powers and Duties of the City Manager Part (e) Bonds, Contracts, and
Issuance of Checks, allows the City Manager to execute bonds on behalf of the
City pursuant to actions and directions of the Commission.
IV. Criteria
The City will issue debt only for the purposes of acquiring or constructing capital
improvements, and for making major renovations to existing capital
improvements, for the good of the public. Exceptions to this rule will be
considered on a case -by -case basis to determine if the contemplated debt is in
the best interests of the City.
Before issuing any new debt the City will consider the following factors:
• Global, national and local financial environment
• Current interest rates
• Expected interest rate changes
• Robustness of local and broad economy
• Cash position
• Current debt position
• Availability of funds to repay
Flexibility to cover future needs
Urgency of current capital needs
V. Limitations on Indebtedness
The City will maintain a conservative debt position based on the criteria listed
above. Pay-as-you-go and replacement programs will be utilized whenever
feasible to avoid financing costs. Debt will be issued only if the benefits outweigh
the costs of the debt.
VI. Types of Debt
Long_Term Debt:
Depending on the specific circumstances, the City may use the following types of
long-term (long-term is defined as having a term of more than one year) financing
instruments:
A. General Obligation Bonds: The City may issue bonds payable from ad
valorem taxes when approved by vote of the electors. The City may also
issue non -ad valorem bonds and covenant to budget and appropriate legally
available funds to pay debt service for those bonds without voter approval.
B. Revenue Bonds: The City may issue bonds secured by a specific revenue
stream other than ad valorem taxes.
C. Master Lease Agreements: The City may enter into a lease agreement with a
provider or bank to lease equipment. The terms of the lease should coincide
with the life of the equipment to be leased and a tax-exempt rate shall be
sought. The City will strive to obtain the lowest rate possible using competitive
bidding or current market analysis.
D. Pooled Financing: If it is financially or strategically beneficial, the City may
participate in debt pools with other entities and low -interest loans from state
agencies or other organizations on either a long-term or short-term basis.
Short -Term and Interim Debt:
Short-term obligations (those due in less than one year) may be issued in
anticipation of particular revenues such as taxes or grants, and such revenue
may be pledged for repayment of the debt issuance. Short-term debt may also
be issued to finance projects or portions of projects for which the City ultimately
intends to issue long-term debt. Short-term and/or interim financing shall not
exceed ten percent (10%) of outstanding long-term debt, unless there is a
situation that needs immediate attention in order to address an emergency or to
allow for significant cost savings. Under certain other circumstances, short-term
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obligations may be warranted upon the recommendation of the Director of
Finance.
Interim financing may be appropriate when long-term interest rates are expected
to decline in the future. In addition, some forms of short-term obligations can be
obtained quicker than long-term obligations and thus can be used in urgent
situations until long-term financing can be obtained. Short-term obligations
include:
A. Line of Credit: The City may establish a tax-exempt line of credit with a
financial institution or other provider. Draws shall be made on the line of
credit when the need for financing is so urgent that time does not permit the
issuance of long-term debt or the need for financing is so small that the total
cost of issuance of long-term debt would be prohibitive.
B. Pooled Financing: If it is financially or strategically beneficial, the City may
participate in debt pools with other entities and low -interest loans from state
agencies or organizations on either a long-term or short-term basis.
C. Interfund Borrowing: Interfund borrowing, a short-term cash lending from
one fund to another fund, shall be discouraged. However, the use of this type
of interim financing may be considered if it is in the City's best interests to do
so as determined by the Director of Finance.
D. Internal Interim Financing: Should the City desire to issue bonds for large
capital projects, the City can, upon passage of an intent -to -issue resolution,
use non -restricted reserve funds as interim financing to pay a portion of
project costs that will then be paid back with bond proceeds. This type of
financing will be reviewed by Bond Counsel to ensure the City is in
compliance with applicable federal tax rules.
E. Other types: The City may consider the use of Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, derivatives or other such
structured borrowings if it is in the best financial interests of the City to do so.
Conduit Debt:
The City may sponsor conduit financings for those activities that have general
public purpose, are in the best interest of the City, and adhere to Florida
Statutes. All conduit financings must insulate the City completely from any credit
risk or exposure and must be approved by the City Commission.
VII. Structural Features of Debt
Taxable and Tax-exempt Debt: The cost of taxable debt is higher than the cost of
tax-exempt debt. However, the issuance of taxable debt is mandated in some
circumstances, and may allow flexibility in subsequent contracts with users or
managers of the improvement constructed with the bond proceeds. Therefore,
the City will usually issue obligations tax-exempt, but may occasionally issue
taxable obligations when there is an expected benefit from doing so.
Maturity: The term of City debt issues shall not exceed the useful life of the
project or equipment financed. The repayment of principal on tax supported debt
should generally not extend beyond 20 years unless there are compelling factors
which make it necessary to extend the term beyond this point.
Bond Insurance: Bond insurance is an insurance policy which can be purchased
by the City, which guarantees the payment of principal and interest. This security
provides a higher credit rating and thus a lower borrowing cost for an issuer.
Bond insurance shall be acquired for all bonds issued by the City unless it is not
in the best interests of the City.
Surety and Debt Service Reserve Funds: Surety and Debt Service Reserve
Funds are used to provide a ready reserve to meet current debt service
payments should monies not be available from current revenues for the
protection of the bondholders. The City shall utilize the methodology that best
serves it's needs on a case -by -case basis.
Coverage Requirements: Coverage is the ratio of pledged revenues to related
debt service for a given year. For each bond issue, the Finance Department, in
conjunction with the financing team, shall determine the appropriate coverage
requirements, if any.
Use of Variable -Rate Securities: When appropriate, the City may choose to
issue securities that pay a rate of interest that varies according to a
predetermined formula or results from a periodic remarketing of the securities.
Validation: The City may seek judicial validation if it is deemed in the best
interests of the City and if there is risk of a legal challenge.
VIII. Investment of Bond Proceeds
Investment of bond proceeds will be consistent with those authorized by existing
state law and by the City's investment policy and applicable bond covenants.
When financially in the best interests of the City, bond proceeds shall be invested
and tracked separately from other investments.
IX. Refinancing of Outstanding Debt
Advance Refundings: The City may issue advance refunding bonds (as defined
for federal tax law purposes) when advantageous, legally permissible, prudent
and a net present value savings of at least three percent (3%) is provided.
Exceptions to the requirement shall be made only upon the recommendation of
the Director of Finance.
Current Refundings: The City may issue current refunding bonds (as defined for
federal tax law purpose) when advantageous, legally permissible, prudent and
net present value savings equal or exceed three percent (3%).
Restructuring of Debt: The City may choose to refund outstanding indebtedness
when existing bond covenants or other financial structures impinge on prudent
and sound financial management. Savings requirements for current or advance
refundings undertaken to restructure debt may be waived by the Director of
Finance upon a finding that such a restructuring is in the City's overall best
financial interests.
X. Credit Obiectives
The City's goal is to maintain or improve its bond ratings. To that end, prudent
financial management policies will be established and adhered to in all areas.
Full disclosure of operations will be made to the bond rating agencies. The City
will strive to achieve an underlying rating in the double "A" range from one or
more of the major rating agencies.
XI. Ongoing Disclosure
In accordance with the Securities and Exchange Commission (SEC), Rule 15c2-
12, the City will provide financial and operating information to the Nationally
Recognized Municipal Information Repositories (NRMSIRs) designated by the
SEC. The City will also provide its annual financial statements and other relevant
information to rating agencies, paying agent banking institutions, and as required
by Continuing Disclosure Requirements within all debt documents.
XII. Method of Sale
There are three ways the City may sell bonds: competitive (public) sale,
negotiated sale and private placement.
The City, as a matter of policy, shall seek to issue its debt obligations in a
negotiated sale unless it is determined by the Director of Finance that such a
sale method would not produce the best results for the City.
Negotiated Sale: Bonds may be sold through an exclusive arrangement between
the City and an underwriter or underwriting syndicate. At the end of successful
negotiations, the issue is awarded to the underwriters. This method offers
flexibility for the City. In a negotiated sale, the underwriter shall be selected
through the Request For Proposal (RFP) process. The criteria used to select an
underwriter in a negotiated sale should include, but not be limited to the
following: overall experience, marketing philosophy, capability, previous
experience, underwriter's discount, and expenses.
Competitive Sale: When determined appropriate by the Director of Finance, the
City may sell its debt obligations in which any interested underwriter is invited to
submit a proposal to purchase an issue of bonds. The bonds are awarded to the
underwriter presenting the best bid according to stipulated criteria set forth in the
notice of sale. The criteria used to select an underwriter in a competitive sale
shall be the true interest cost.
Private Placement: When determined appropriate by the Director of Finance, the
City may elect to sell its debt obligations through a private placement or limited
public offering. Selection of a placement agent shall be selected through the
Request For Proposal (RFP) process.
XIII. Assembling a Financinq Team„
A Financing Team will be assembled to provide professional services that are
required to develop and implement the City's debt program with the goal of
continuity, quality service and competitive prices.
Bond Counsel: The City Attorney, with input from the Director of Finance, shall
select Bond Counsel. The Bond Counsel's role is to prepare or review and
advise the issuer regarding authorizing resolutions or ordinances, trust
indentures, official statements, validation proceedings and litigation.
Disclosure Counsel: The City Attorney, with input from the Director of Finance,
shall select Disclosure Counsel. The Disclosure Counsel's role is to render an
opinion as to the validity of facts contained in the bond documents as well as
assisting the City in meeting its secondary market disclosure obligations.
Underwriters: The City shall solicit proposals for underwriting services for all
debt issued in a negotiated or private placement sale. The solicitation process
used for these services shall comply fully with City Purchasing Code
requirements.
Financial Advisor: The City shall solicit proposals for financial advisory services
for all debt issued in a negotiated, competitive or private placement sale. The
solicitation process used for these services shall comply fully with City
Purchasing Code requirements.
City Staff: The City Manager shall appoint the Director of Finance and any other
City staff members deemed appropriate to coordinate the efforts of the
contracted consultants and the City. The City Attorney shall supervise all
counsel as necessary, as well as provide any other legal services required for
issuance of debt.
XIV. Arbitra a Liability Management
It is the City's policy to minimize the cost of arbitrage rebate and yield restriction
while strictly complying with the applicable laws.
Because of the complexity of arbitrage rebate regulations and the severity of
non-compliance penalties, arbitrage calculations will be performed by qualified
arbitrage professionals in strict adherence to applicable laws and regulations.
These calculations will be done in accordance with required Internal Revenue
Service reporting dates, which are five (5) years after the delivery date of each
issue, and each fifth year thereafter until the bonds have been matured,
redeemed early or retired.
The Director of Finance will be responsible for identifying the amount of unspent
debt proceeds including interest which is on hand and to the extent feasible,
ensure the oldest proceeds on hand are spent first.
Arbitrage rebate costs shall be charged as negative interest revenue to the funds
in which the related obligation proceeds were originally deposited.
XV. Modification to Policy
This policy will be reviewed annually by the Director of Finance.
Glossary
Ad Valorem Tax: a tax calculated "according to the value" of property. Such a
tax is based on the assessed valuation of real and tangible personal property.
Advance Refunding: a procedure whereby outstanding bonds are refinanced by
the proceeds of a new bond issue. Typically an advance refunding is performed
to take advantage of interest rates that are significantly lower than those
associated with the original bond issue or to remove restrictive language.
Arbitrage: the difference between the interest rate cost of a debt instrument and
the rate of interest earned on the investment of the proceeds. Federal law limits
the amount of interest cities earn on proceeds of debt issuance.
Bond: includes bonds, debentures, notes, certificates of indebtedness,
mortgage certificates, or other obligations or evidences of indebtedness of any
type or character.
Bond Anticipation Note (BAN): a short-term debt instrument issued by a state or
municipality that will be paid off with the proceeds of an upcoming bond issue.
Bond Counsel: an attorney (or firm of attorneys) retained by the issuer to give a
legal opinion concerning the validity of the securities. Bond counsel may prepare
or review and advise the issuer regarding authorizing resolutions or ordinances,
trust indentures, official statements, validation proceedings and litigation.
Bond Insurance: an insurance policy purchased by an issuer, which guarantees
the payment of principal and interest of an issue. This security provides a higher
credit rating and thus a lower borrowing cost for an issuer.
Capital Improvement Plan: a plan outlining capital needs for a specified time
period.
Capital Lease: an acquisition of a capital asset over time rather than merely
paying rent for temporary use. A lease -purchase agreement, in which provision
is made for transfer of ownership of the property for a nominal price at the
scheduled termination of the lease, is referred to as a capital lease.
Conduit Bonds: conduit financings are securities issued by a government
agency to finance a project of a business, whose activities have a general public
purpose. The business receives all proceeds of the tax-exempt bond issue and
is responsible for payment of the debt in its entirety.
Competitive Bid: a sealed bid, containing price and terms, submitted by a
prospective underwriter(s) to an issuer, who awards the contract to the bidder
with the best price and terms.
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Continuing Disclosure: the requirement by the Securities and Exchange
Commission for most issuers of municipal debt to provide current financial
information to the informational repositories for access by the general
marketplace.
Coverage: the ratio of pledged revenues to related debt service for a given year.
Debt Service Reserve Fund: the fund into which moneys are placed which may
be used to pay debt service if pledged revenues are insufficient to satisfy the
debt service requirements. This is often established with debt proceeds.
Derivatives: a financial product, the value of which is derived from the value of
an underlying asset, reference rate, or index. Typically these agreements are
contracts between a lender/investor and a borrower.
Financial Advisor: a consultant who advises an issuer on matters pertinent to a
debt issue, such as structure, sizing, timing, marketing, pricing, terms and bond
ratings.
Financing Team: the group of professionals consisting of City staff, Bond
Counsel, Disclosure Counsel, Underwriters and Financial Advisors that work
together to issue bonds.
General Obligation Bonds (GO): bonds which are secured by the full faith and
credit and taxing power of the municipality and use funds that are legally
available for payment of debt service. A city can issue ad valorem GO bonds,
which are repaid solely from ad valorem taxes, or non -ad valorem bonds which
are repaid from legally available general fund revenues by a covenant to budget
and appropriate.
Improvement Bonds: special obligations of the municipality which are payable
solely from the proceeds of the special assessments levied for an assessable
project.
Master Lease Agreement: a pre -determined lease agreement between a city
and a provider to lease equipment whose useful life is too short to finance with
long-term debt.
Municipal Securities Rulemaking Board (MSRB): a 15-member self-regulating
organization that is entrusted with the responsibility of writing rules of conduct for
the municipal securities market.
Negotiated Sale: underwriting of a new securities issue in which the spread
between the purchase price paid to the issuer and the public offering price is
determined through negotiation with one or more underwriters rather than
multiple competitive bidding.
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Paying Agent: an agent of the issuer with responsibility for timely payment of
principal and interest to bond holders.
Present Value: the value of a future amount or stream of payments stated in
current dollars.
Project: any capital expenditure the Commission deems to be for a public
purpose.
Reserve Fund: a fund established by the terms of a bond issue into which
money is deposited for payment of debt service in case of a shortfall in current
revenues.
Revenue Anticipation Note (RAN): a short-term debt issue of a municipality that
is to be repaid out of anticipated revenues such as sales tax. When the revenue
is collected, the RAN is paid off.
Revenue Bond: a bond payable from a specific source of revenue and to which
the full faith and credit of an issuer is not pledged. Revenue bonds are payable
from identified sources of revenue and do not permit the bondholders to compel
a jurisdiction to pay debt service from any other source. Pledged revenues often
are derived from the operation of an enterprise.
Tax Anticipation Note (TAN): a short-term obligation of a state or municipal
government to finance current expenditures pending receipt of expected tax
payments.
Underwriter: the firm that purchases a securities (bond) offering from a
governmental issuer for resale.
Yield Restriction: the investment of bond proceeds in financial instruments that
earn interest rates which are not significantly higher than the cost of borrowing.
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