HomeMy WebLinkAbout28-04 - Res. Adopting County Debt Policy Exhibit A
BEFORE THE BOARD OF COUNTY COMMISSIONERS
MASON COUNTY, WASHINGTON
In the matter of. )
Adoption of County ) Resolution No . 28 - 04
Debt Policy )
WHEREAS , in accordance with RCW 36 . 48 . 070, the County Finance Committee shall adopt a
Debt Policy; and
WHEREAS , the Debt Policy shall be reviewed and updated at least every four years ; and
WHEREAS , the County Finance Committee shall make a recommendation to the Board of
Commissioners on all requests for action on financing as recommended by the County Treasurer, and
WHEREAS , the County Finance Committee and the County Treasurer recommend the adoption of
the aforementioned Debt Policy by the Board of County Commissioners ; and
WHEREAS, the Board of County Commissioners has reviewed the Debt Policy and finds it to be
in the best interest of the public,
NOW, THEREFOR, BE IT RESOLVED that the aforesaid Debt Policy is hereby approved, and
the Chair of the Board of County Commissioners is authorized to sign the same on behalf of the full Board.
DONE IN OPEN SESSION this )U day of Y I , 2004
BOARD OF COUNTY COMMISSIONERS
MASON C OUNTY, WASHINGTON
Attest:
Becky Rogers Chair
Clerk of the Board
Member
ZZZ
Me er
A roved as to rm: T
Michael E Clift
Chief Prosecuting Attorney
WashingtonMason County ,
PolicyDebt
March 2004
INTRODUCTION
The foundation of any well - managed debt program is a comprehensive debt policy . A
debt policy sets forth the parameters for issuing debt , managing a debt portfolio and
providing guidance to decision - makers . The debt policy should recognize a long -term
commitment to full and timely repayment of all debt as an intrinsic requirement for entry
into the capital markets . Adherence to a debt policy helps to ensure that a government
maintains a sound debt position and that its credit quality is protected . A debt policy is
beneficial because it enhances the quality of decisions , rationalizes the decision - making
process , identifies objectives for staff, demonstrates a commitment to long -term
financial planning objectives and is viewed positively by the rating agencies .
1 . Roles and Responsibilities
The Board of Commissioners shall , in accordance with applicable statutes , ordinances
and policies initiate all debt issuance .
As the Board of Commissioners addresses issues and elements of the County' s Debt
Policy the following objectives will be considered :
EQUITABILITY To be reasonable and equitable to current and future taxpayers
when distributing the cost of government by issuing debt and when allocating the debt
service to the appropriate revenue sources .
RESPONSIBILITY To act responsibly and appropriately when issuing debt , to maintain
or enhance the County' s credit worthiness and reputation , and to ensure the trust of
those who have or will purchase the County' s debt .
FLEXIBILITY To maintain the County' s ability to choose financing options that
optimize the changing municipal financial markets and to achieve established objectives
at the best possible cost consistent with the long -term interests of the county .
DUE CARE To adhere to and comply with all of the agreements , laws ,
contracts , covenants , policies and obligations that relate to the current Policy .
The County Treasurer shall provide the services required for the issuance of debt , in
consultation with required professionals and other service providers . The Treasurer
shall inform the County' s Finance Committee of all debt issuance plans and the status
of financing in process . Additionally , the County Treasurer shall be responsible for the
payment of the County' s debt service pursuant to RCW 36 . 29 . 010 .
The Board of County Commissioners shall be responsible for coordinating the annual
update of the Capital Facilities Plan , forwarding a copy of the updated Capital Facilities
Plan to the Finance Committee for use as a resource to make recommendations on
debt financing .
II . Debt and Capital Planning
The County shall develop a Capital Facilities Plan that is included in the Capital
Facilities Element of the Comprehensive Plan .
Priorities shall be established based upon ( 1 ) the need for the project , as determined in
the adopted Capital Facilities Plan and the Mason County Comprehensive Plan , in order
to provide required County services , (2 ) availability of funding or debt repayment
source , and ( 3 ) availability of staff to carry out the project in the time frames specified .
The plan shall be updated and priorities reviewed annually . Based upon the projects
and priorities listed in the Capital Facilities Plan , the County Treasurer will develop a
plan of finance and calendar of debt issuance to address the financing needs , identified
in each year for presentation to the Finance Committee , and further recommendation to
the Board of Commissioners .
III . Credit Objectives
Credit Ratings
The most recent credit rating for Mason County was a Municipal Bond Insurance rating
of AAA , with an underlying rating of A- , as of May 1998 .
The County will seek to maintain the highest possible credit ratings for all categories of
debt , without compromising delivery of basic County services and achievement of the
County's policy objectives . It shall be the County' s goal to maintain a long-term bond
rating in the "A" category .
Consistent with maintenance of an "A" rating , the County shall maintain an
undesignated balance in its general fund (or any related reserve fund that may be
created for this purpose ) . To this extent the Board of County Commissioners has
passed Resolution #42 -98 designating a $ 1 , 000 , 000 . 00 unencumbered cash balance
be held for such purposes .
Additional policies intended to support the maintenance of the County' s current ratings
are contained throughout this Debt Policy and include :
1 ) Length of debt and payback goals ,
2 ) Purpose , type and use of debt , and
3 ) Capital planning
Credit Enhancement
For all bond issues , the County will consider municipal bond insurance to reduce net
interest costs . Credit enhancement will only be used when the projected present value
benefit is greater than the cost of insurance . The projected present value benefit will be
determined by comparing the expected interest cost for the financing both with and
without insurance , when discounted by the expected interest rate on the bonds .
Generally , the County will not purchase more than one bond rating for insured debt .
For negotiated sales of bonds , the County will pay the bond insurance premium from
bond proceeds when a benefit is demonstrated following analysis .
For competitive sales of bonds , the County will make insurance available at the option
and expense of bidders . Bidders may choose to purchase additional bond ratings at
their own expense .
® Purpose ,
Type and Use of Debt
Berl Obligation Debt
General Obligation Debt is backed by the full faith and credit of the County and is
payable from General Fund revenues and taxes collected by the County .
Limited Tax General Obligation Debt ( LTGO ) is payable from regular tax levies and
revenues , and includes all types of obligations whether lease- purchase , financing
contracts , loans , bond or other payment obligations . Rental leases are not considered
debt , but financing leases are . LTGO debt is subject to a statutory limitation of 1 . 5 % of
the County's assessed value .
Limited tax debt will be used for general county purposes , when a specified repayment
source has been identified through new revenue sources , expenditure reductions or
increased revenue base , or in the event of an emergency . The amount of limited tax
debt outstanding will not exceed 35 % of the statutory debt limitation , unless required to
meet an emergency requirement caused by natural disaster , legal judgment or similar
unplanned events .
Unlimited Tax General Obligation Debt ( UTGO ) is payable from excess tax levies
and is subject to voter approval . Any proposition for UTGO debt must be approved by
60 % of the voters casting a vote , and the total number of ballots cast must be at least
equal to 40 % of the total number of voters voting in the last general election . Total GO
debt ( including limited and unlimited tax) is subject to a statutory limitation of 2 . 5 % of
the County's assessed value .
Unlimited tax debt will be used for county capital purposes , when the project has broad
approval by the County's residents , or the use of an excess tax levy is necessary for
debt service payments .
Revenue Obligations
Revenue Obygations are used to finance construction or improvements to facilities of
enterprise systems operated by the County , in accordance with a system and plan of
improvements . The enterprise systems must be an established system legally
authorized for operation by the County .
There are no legal limits to the amount of revenue bonds the County can issue , but
there are practical limits to the County` s ability to repay obligations .
Revenue bonds are generally subject to certain tests and requirements , including ( 1 )
establishment and maintenance of a debt service reserve fund (generally equal to
average annual debt service ) , (2 ) rates and charges must provide net revenue after
payment of operating expenses equal to a multiple between 1 . 1 and 1 . 5 times the debt
service requirement , depending on the type and purpose of the enterprise and debt .
Additional covenants and pledges must be made for the benefit of bondholders .
The County will not incur Revenue Obligations without first ensuring the ability of an
enterprise system to consistently meet any pledges and covenants customarily required
by investors in such obligations , during the term of the obligation .
ssess mentmbacked Obligations
Assessment-backed obii_gations are used to finance projects that will provide special
benefit to certain property owners . The benefiting property owners are charged an
assessment , based upon a formula developed to fairly reflect the benefit received by
each property owner in the assessment district . There are detailed statutes for the
formation of assessment districts and assessing property , which contain specific
timeframes for notice and conducting public hearings .
The County will form road improvement districts ( RIDS ) or local improvement districts
( LIDS ) upon petition of benefiting property owner, unless the County Commissioners
determine to establish the districts by resolution . The County Commissioners will
provide the County Treasurer with each proposed resolution forming an assessment
district prior to its consideration at a public meeting .
The Treasurer shall be provided with enough detail to determine the size , timing and
characteristics of the project and any contribution the County is providing to the cost of
the improvements .
The County Treasurer , in consultation with the appropriate county department , will
develop specific policies and procedures relating to financing for assessment districts ,
for recommendation to the Finance Committee .
Lease Purchase or other Financing
Lease purchase or financing contracts are payment obligations that represent
principal and interest components , for which the County receives the property after all
payments are made . These represent general obligations of the County .
Local Option Capital Asset Lending
The LOCAL Program is available by the State Treasurer' s Office . It is an expanded
version of the state agency lease/purchase program that allows pooling funding needs
into larger offerings of securities . This program allows local government agencies the
ability to finance equipment needs through the State Treasurer' s office , subject to
existing debt limitations and financial consideration . Equipment is defined as personal
property with the general rule that the property is not permanently affixed to land or a
building . Effective July 2000 , the State Treasurer has expanded the program to include
certain real estate projects .
Upon adoption of a resolution by the County Commissioners authorizing the acquisition
of equipment and a financing contract prior to its consideration at a public meeting the
Treasurer will provide the State Treasurer with a Notice of Intent and application form
along with a credit form for approval . The Treasurer shall be provided with details
regarding the equipment , cost and financing term for any proposed contract .
Short Term Obligations
Short- term obii_gation will be used for the purpose of cash flow financing or to provide
interim financing in conjunction with the development of a long term financing plan . In
no case , will notes or other obligations be entered into for the purpose of funding deficits
without prior development and review of a longer-term deficit-financing plan by the
Finance Committee upon recommendation by the County Treasurer.
The use of short term financing shall be evaluated by the County Treasurer and
compared with the cost of internal financing or inter-fund loans . All inter-fund loan
resolutions will be reviewed by the County Treasurer to ensure that the appropriate
reimbursable language is included , the correct fund numbers are used , and to develop
the appropriate debt repayment schedule .
V . Structure of Debt
Term of i i
In no case will the term of any financing exceed the life of the asset being financed . In
setting the term of debt , the County will attempt to balance the overall cost of financing
with the annual payment burden . It is the goal of the County to establish a term of
finance that ensures that the residents benefiting from the project are the ones who are
paying over the life of the debt . The term will be structured consistent with a fair
allocation of costs to current and future beneficiaries .
Payback eri
To the extent possible , the County will strive to repay at least 20 % of its long -term debt
within five years and 40 % within ten years . This is consistent with the County' s desire to
structure debt with level payments of principal and interest over the life of the debt .
Back- loading of principal will be considered only when the benefits from the debt
issuance can clearly be demonstrated to be greater in the future than in the present ,
when such structuring is beneficial to the County' s overall amortization schedule , or
when the structure will more closely match debt service to the anticipated repayment
source .
VI . Refunding Obligations
The County Treasurer will continually review the County's outstanding debt and
recommend issues for refunding as market opportunities arise . Debt shall be refinanced
only for the purpose of achieving debt service savings , unless required to achieve
specific debt management goals of the County . The County will not refinance debt for
the purpose of deferring scheduled debt service , unless unique circumstances are
present . The County is aware that refinancing for the purpose of deferring debt service
may have an impact on its credit rating .
Advance refunding transactions will generally be completed when net present value
savings equal at least 3 . 5 % of the amount of debt being refunded . Advance refunding
transactions are those undertaken in advance of the first date on the refunded debt can
be called for optional redemption , and will require the establishment of an escrow
account for the defeasance of the refunded debt . All costs incurred in completing the
refunding shall be taken into account when determining the net present value savings .
Current refunding transactions shall be considered whenever possible . Current
refunding transactions are those undertaken at or after the call date on outstanding
debt , and provide for immediate redemption and replacement of refunded debt . The
savings level required for a current refunding should take into account the number of
years remaining on the bonds , within the following general guidelines .
Years Between
Refunding and Present Value
Final Redemption Savings Target
1 - 2 years 1 %
3 - 4 years 2 %
5 - 6years 2 . 5 - 3 %
7 - 9years 3 . 5 %
The County may purchase its bonds in the open market for the purpose of retiring the
obligations , when cost effective .
VIL Debt Issuance
Method of Sale
The County Treasurer shall determine the method of sale best suited for each issue of
debt . When necessary to minimize the costs and risks of borrowing , the County will
provide for the sale of debt by negotiating the terms and conditions of sale , including
prices , interest rates , underwriting fees and other compensation . For any competitive
sale of debt , the County will award the issue to the underwriter offering to buy the bonds
at a price and interest rates that provides the lowest True Interest Cost (TIC ) . (TIC is the
total interest paid plus underwriters cost in present value . )
Use of Professionals and Other Service Providers
Bond Counsel - All debt issued by the County shall include a written opinion by legal
counsel affirming that the County is authorized to issue the debt , and that all statutory
requirements have been met . The legal opinion and other documents relating to the
issuance of debt will be prepared by nationally recognized private legal counsel with
extensive experience in public finance and tax issues . Bond counsel will be appointed
by the prosecuting attorney to serve as special prosecutor upon request of County
Treasurer .
Financial Advisor - If the County Treasurer with consensus of the Finance Committee
determines that it is in the best interest of the County to retain a financial advisor , then
the Treasurer shall select a financial advisor consistent with the County' s general
authority to contract . The financial advisor shall have comprehensive municipal debt
experience , including debt structuring and pricing of municipal securities . In no case
shall the financial advisor serve as underwriter for the County' s bonds without first
submitting written resignation as financial advisor, which clearly sets forth the firm ' s role
relating to the bonds to be issued .
Underwriter - For negotiated sales , the County Treasurer will select an underwriter ,
consistent with the County' s general authority to contract , taking into account the type of
issue , experience offered and other relevant criteria . The selection of underwriter may
be for an individual bond issue , series of financings or a specified time period , as
determined by the Treasurer. The underwriter shall have sufficient capitalization and
experience to serve as underwriter for the County' s bonds .
Fiscal Apent - The County Treasurer shall use the State Fiscal Agent appointed by the
State Treasurer. At the sole discretion of the Treasurer, the Treasurer may serve as
registrar for very small issues or those privately placed with investors . Neither the
County or special purpose districts can obligate the County Treasurer to serve as
registrar without prior written approval of the Treasurer as provided in RCW 3964600300
Other Service providers - Professional services such as verification agent , escrow
agent or rebate analyst shall be appointed by the Treasurer, and are considered
incidental to the Treasurer' s role in undertaking the issuance of debt .
III Other DutiesObligations
Investment rees
Each Bond Resolution will provide for establishment of funds and accounts , which will
be designated in advance by the County Treasurer. Each Resolution will identify the
investing officer for the funds held by the County Treasurer, and any investments will be
made only in accordance with the County' s Investment Policy and procedures
established by the County Treasurer. Any investment officer shall be responsible for
requesting a copy of such policies and procedures from the County Treasurer, if
required .
Arbitrage and Tax Law Requirements
Prior to any debt issuance , the County Treasurer shall be provided with a schedule that
shows the expected timing and amount of expenditures to be made from the project
fund . This schedule will be provided by the County Treasurer to Bond Counsel for use in
developing an Arbitrage Certificate .
The County Treasurer will keep records of investment of bond proceeds and bond funds
sufficient to develop calculations required for compliance with arbitrage and other tax
law requirements . At the sole discretion of the County Treasurer , the County Treasurer
may retain the services of a qualified professional firm to provide computations relating
to potential rebate liability of the County .
The County Treasurer is not responsible for arbitrage and other tax law requirements for
junior taxing or benefit assessment districts for which the County Treasurer serves as
ex-o icio treasurer. No such district is authorized to obligate the County Treasurer in
any way , relating to these requirements .
Disclosure
Prima market disclosure .The County Treasurer will serve as the focal point for
information requests relating to official statements to be used in the initial offering of the
County° s bonds or notes . The County Treasurer will request from relevant departments
and offices , information required for disclosure to investors and rating agencies . Each
department or office bears responsibility for the information provided for use in the
County°s official statements .
The County Commissioners will be provided with a copy of the official statement for
each issue of debt , and upon concurrence the Chair of the Board will sign a statement
attesting to the accuracy and completeness of the information therein .
Secondary market disclosure The County Treasurer shall review any proposed
undertaking to provide secondary market disclosure , and advise the County
Commissioners of any suggested changes in information or deadlines contained
therein . The County Treasurer will provide secondary market disclosure annually , if the
County has contracted to provide any .
In accordance with RCW 36 . 48 . 070 , the County Finance Committee (whose members
are the county treasurer, county auditor and the chair of the county legislative authority)
shall adopt a Debt Policy , which shall be reviewed and updated at least every four
years .
Approved and adopted this day of 2004 , by the Mason County
Finance Committee .
Elisabeth ( Lisa ) Frazier, Mason County Treasurer
Chairperson , County Finance Committee
Al Brotche , Mason County Auditor
Secretary , County Finance Committee
Wesley Jo son , C airperson , Board of County Commissioners
Member, County Finance Committee