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BACKGROUND The City has had the following debt policies for several years that have guided the City's debt issuances ® The City will limit the use of debt so as not to place a burden on the fiscal resources of the City and its taxpayers e The City will limit long-term borrowing to capital improvements or projects that cannot be financed from current revenues e When capital projects are financed, the City will amortize the debt within a period not to exceed the expected useful life of the project e The City will attempt to limit the General Fund annual debt service payments to 10% of the total General Fund revenue e Whenever possible, the City will investigate the use of special assessment, revenue or other self-supporting bonds to limit the General Fund obligation for debt service payments e The City will not use long-term debt for current operations ® The City will not use short-term borrowing to support routine operations, provided however, that it may be used to meet temporary cash flow needs O The City will utilize inter-fund loans when possible to reduce the cost of financing capital improvements However, the City has not had policies or guidelines related to debt management including selection of the financing team, the types of debt it will issue, performance standards, market relationships, or on-going debt administration All of these areas have become standard for public sector entities to include in a debt policy In addition, SB 1029 adopted in September of 2016 requires local agencies that issue debt to adopt a comprehensive debt policy that promotes the professional management of debt Specifically, SB 1029 requires an adopted debt policy that includes a The purposes for which debt proceeds may be used b The types of debt that may be issued c The relationship of the debt to, and integration with, the issuer's capital improvement program d Policy goals related to the issuer's planning goals and objectives e The internal control procedures that the issuer has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use The proposed Debt Policy incorporates the City's previous debt policies and adds the areas related to debt management that SB 1029 requires but were not included in the City's existing debt policies DISCUSSION As previously stated, the proposed Debt Policy includes the previous broad policies regarding debt issuance and adds other provisions related to debt management including (1) delegation of authority of the financing team selection to the Finance Director, (2) the types of debt the City can issue, (3) a performance standard that the City will maintain investment grade ratings with the municipal market, and (4) on-going debt administration including reporting requirements The proposed Debt Policy adheres to the requirements Page 2 of 3