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HomeMy WebLinkAbout24-117 Adopting the Town Debit Management Policy 12-18-2024i •P I1IIUI�U14 ► i WHEREAS, the Town of Firestone previously adopted a Debt Management Policy ("Policy"); and WHEREAS, the Board of Trustees finds that such Policy should be updated with the goal of promoting and supporting the efficient, beneficial and effective use of the Town's resources: and WHEREAS, the Town Manager, Director of Finance and Consultants collaborated to develop an updated policy, which has been presented to the Board of Trustees; and WHEREAS, the Board of Trustees finds that the proposed policy meets the goals it established and also supports the Town's fiscal responsibilities. NOW THEREFORE, BE IT RESOLVED BY THE BOARD OF TRUSTEES OF THE TOWN OF FIRESTONE, COLORADO: Section 1. The Board of Trustees hereby approves and adopts the Town of Firestone Debt Management Policy in substantially the same form as the copy attached hereto and made a part of this resolution. Section 2. All prior Debt Management Policies or amendments thereof adopted by the Town are repealed in their entirety. INTRODUCED, READ AND ADOPTED this 18'x' day of December 2024. TOWN OF ., 1 TOWN OF FIRESTONE DEBT MANAGEMENT POLICY ADOPTED DECEMBER 2024 The Town of Firestone (Town) recognizes the importance of long-range, financial planning in order to meet its capital asset needs. The following debt management policy provides guidance on the issuance of debt and other financing instruments to help ensure that the Town maintains a sound debt position and that its credit quality is safeguarded. As such, the policy allows for an appropriate balance between establishing debt parameters while also providing flexibility to respond to unforeseen circumstances and new opportunities. This policy applies to Town derived revenues and revenues the Town is entitled to receive. Debt related to the Town's enterprise activities, or related URA project areas are not considered part of this policy. DEVELOPMENT OF LONG-TERM, FINANCING RECOMMENDATIONS The primary responsibility for developing long-term, financing recommendations rests with the Town Manager. During the annual budget process, and at any other such times during the year in which the need may arise, the Town Manager will work collectively with the Finance Director and other deemed necessary Town staff (the Internal Working Group) to determine if there is a need for long-term borrowing consideration. As part of the determination process, the Internal Working Group shall review the financing needs outlined by the Capital Improvement Plan (see below) to analyze the future capital financing needs as compared with the Town's currently available cash resources and projected revenues. The Internal Working Group will also provide recommendations regarding refunding and restructuring of existing debt. Prior to pursuing long-term financing, refinancing, or restructuring of debt, the Town Manager will prepare and present to the Town Board a resolution of intent to issue debt and authorization of Town staff to proceed with the necessary preparations. The Town may only issue debt upon the approval of a simple majority vote by the entire Town of Firestone Board of Trustees (Town Board). CAPITAL IMPROVEMENT PLAN On an annual basis and as part of the Town's budgeting process, the Town will prepare and/or update a five (5) year Capital Improvement Plan (CIP) identifying capital projects that are part of the Town's long-term strategic vision and economic development plan. Concurrent with the preparation of the CIP, Town staff will consider the associated, estimated ongoing operations and maintenance costs of such capital assets so that the total costs of the projects are included for budgeting and projection purposes. PURPOSE OF DEBT Incurrence of long-term debt will only be used for the purpose of financing capital assets, which include but are not limited to buildings, infrastructure, land acquisition and purchase of equipment. The Town, under no circumstances, will issue debt or borrow funds to finance the Town's on -going costs for operations and services. The Town will strive to balance the pay-as-you-go approach and incur debt for its capital projects expenditures (see the Working Reserve Policy). Debt financing will be considered when annual revenues and accumulation of capital cash reserves are not sufficient to provide the necessary funding for such projects within a timeframe deemed necessary or adequate by the Town Board. Page 1 of 3 TYPES OF DEBT AND OTHER FINANCING INSTRUMENTS The general types of debt and other financing instruments to be used by the Town will include: • General Obligation Bonds • Revenue Bonds • Short-term Notes • Special Assessment or Local Improvement Bonds • Annually appropriated leases and Certificates of Participation • Any other legally recognized security approved by the Town Board and deemed advantageous to the Town In order to mitigate any uncertainty of annual debt payment amounts due, the Town will strive to secure a fixed rate structure when issuing debt. The Town will consider a variable rate structure when market conditions favor this type of issuance, and when feasible, ensure there is a maximum interest rate(interest rate cap) provided within the variable rate structure. Credit enhancements will be used only in instances where the anticipated present value savings in terms of reduced interest expense exceeds the cost of the credit enhancement. LEVEL OF DEBT AND RESTRICTIVE PROVISIONS The Town will strive to limit its general obligation debt (i.e., where ad valorem property taxes are the main and underlying security pledged on the debt) so as not to exceed fifteen percent (15%) of the Town's total assessed valuation as shown by the most current assessment received from Weld County's Assessor's Office. Additionally, the Town will strive to maintain its annual general obligation debt service costs (principal and interest) for its governmental activities at a level of no greater than fifteen percent (15%) of the Town's governmental expenditures. Any debt issued by the Town, other than general obligation debt, wherein other revenue sources serve as security for the debt (e.g., revenue bonds), will not have any specific debt level restrictions, provided that each of such issuances will be evaluated on a case -by -case bases, to ensure that the Town has adequately provided for conservative revenue projections as to debt repayment purposes. The repayment terms of all debt issued by the Town will not exceed the useful life of the capital asset financed. Additionally, the Town will seek level or declining debt repayment schedules and will not issue debt that provides for a balloon principal payment reserved at the end of the term of the issue, unless deemed otherwise appropriate and necessary by the Town. Furthermore, the Town will strive to obtain optional redemption terms that allow for the pre -payment of debt without paying a redemption penalty. DEBT ISSUANCE PRACTICES As part of its debt issuance process, the Town will manage its debt and sustain its financial position to strive to secure and maintain a minimum bond rating of 'A' (Standard & Poor's) and/or 'A2' (Moody's Investor Service) for its general obligation bond credit. The Town will market its new money general obligation debt through the use of a competitive bid process. The Town will market all other debt issuances via a competitive bid process, negotiated bid process (with an underwriter) or private placement process (through a placement agent) depending upon the method of sale most advantageous to the Town when considering market conditions and structuring features of the issue, among other factors. If debt is privately placed, it shall be placed with an accredited investor or financial institution. Page 2 of 3 If needed, the Town will retain an independent Municipal advisor, and other professional service providers (e.g. bond counsel), to assist in the structuring of the debt transaction and to provide overall guidance throughout the process. The Town shall consider refunding (advance and current refunding) outstanding debt whenever an analysis indicates the potential for net present value (NPV) savings of at least five percent (5%) can be achieved. The Town shall also consider restructuring its existing debt in order to extend the payment terms to meet cash flow needs if deemed beneficial to the Town's long-term financial and strategic planning. The Town may also consider refunding outstanding bonds to remove existing restrictive covenants. POST ISSUANCE MANAGEMENT The Town will invest its debt proceeds in accordance with the Town's investment policy and statutory requirements. Funds will be invested in instruments and with related maturities that will provide the liquidity needed to meet the cash flow needs of each project. In this regard, the Finance Director will prepare cash flow projection to determine the availability of funds to be invested and their respective required maturities. The Town will comply with all arbitrage rebate requirements as established by the Internal Revenue Service. Arbitrage will be calculated at the end of each fiscal year and interest earned on the investment of debt proceeds will be reserved to pay any penalties due. Secondary market disclosures requirements established within the terms of the debt transaction will be adhered to and filed on a timely basis. The Finance Director will be responsible for managing the post issuance requirements listed above and/or cause any post issuance requirements to be completed. The Finance Director will review the Debt Management Policy annually in connection with the preparation of the Town's annual budget process to ensure that the Town is adhering to the framework outlined in this policy. Furthermore, the Finance Committee and the Finance Director will be responsible for reviewing the Debt Management Policy every two years. Adoption and modifications to this policy will require the approval of a simple majority vote by tnp n+;rR Tnuin 1 n rl tl Attest: Missy Carranco, Deputy Town Clerk Page 3 of 3 MEMORANDIUM OF RECOMMENDATION TO: Board of Trustees FROM: Finance Committee DATE: November 20, 2024 RE: Debt Management Policy The proposed Debt Management Policy has been reviewed by the Finance Committee at the November 20th, 2024 meeting. With a vote of ±L for and against, the Finance Committee of the Town of Firestone recommends the approval of the Debt Management Policy, FINANCE�CM TTE - e Frank A. Jimenezlair A EST: Missy Carranco, Secretary