The State Legislature adopted Senate Bill (SB) 1029 in 2016. SB 1029 requires municipalities to adopt local debt policies, which are to include specified provisions concerning the use of debt. The City and its related financing entities such as the Financing Authority will be required to certify that any contemplated future debt issuance is consistent with these local debt policies.
The Debt Management Policy has been developed to provide guidance in the issuance and management of debt by the City or its related entities and is intended to comply with Government Code Section 8855(i), effective January 1, 2017. The main objectives of the Debt Management Policy are to establish conditions for the use of debt, to ensure that debt capacity and affordability are adequately considered, to minimize the City’s interest and issuance costs, to maintain the highest possible credit rating, to provide complete financial disclosure and reporting, and to maintain financial flexibility for the City.
In addition to describing the purposes for which debt may be issued and the types of debt that may be issued, the Debt Management Policy includes the following sections, as required by SB 1029:
- The relationship of the debt to, and integration with, the City’s capital improvement program or budget, if applicable.
- Policy goals related to the City’s planning goals and objectives.
- The internal control procedures that the City has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use.
While the City and the Financing Authority are infrequent issuers of debt, the Debt Management Policy is required to be approved and effective for the anticipated refinancing of certain Special Tax Bonds of the City’s Community Facilities Districts and Revenue Bonds of the Financing Authority. The Debt Management Policy will formalize the Financing Authority’s existing process for issuance of debt.