HomeMy WebLinkAboutRES 2021-11RESOLUTION NO. 2021-11
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DIAMOND
BAR APPROVING A DEBT MANAGEMENT POLICY.
The City Council of the City of Diamond Bar does hereby find, order and resolve
as follows:
Section 1. Recitals.
A. In order to issue bonds, Section 8855(i) of the California Government Code
("Section 8855(i)") requires each bond issuer and bond obligor to adopt a debt
management policy.
B. In order to enable the City of Diamond Bar (the "City") to issue bonds or to
serve as an obligor with responsibility for payments securing bonds issued by the City of
Diamond Bar Public Financing Authority or other agencies in the future, the City wishes
to approve a debt management policy (the "Debt Policy") in the form that is presented at
this meeting.
C. The City Council has been presented with the form of Debt Policy that is
referred to herein, and the City Council has examined and approved the Debt Policy and
desires to adopt the Debt Policy as the debt management policy of the City pursuant to
Section 8855(i).
D. All acts, conditions and things that are required by the laws of the State of
California to exist, to have happened and to have been performed precedent to and in
connection with the consummation of the matters that are authorized hereby do exist,
have happened and have been performed in regular and due time, form and manner as
required by law, and the City is now duly authorized and empowered, pursuant to each
and every requirement of law, to consummate such matters for the purpose, in the manner
and upon the terms herein provided.
Section 2. Approval of Debt Policy. The form of Debt Policy presented at this
meeting and attached hereto as Exhibit A is hereby approved and adopted as the debt
management policy of the City pursuant to Section 8855(i).
Section 3. Further Action. The Mayor, the Mayor Pro Tem, the City Manager
and the Finance Director are hereby authorized, empowered and directed, individually, to
execute such other documents in addition to those enumerated herein and to take such
other actions as each deems necessary or advisable in order to effectuate the purposes
of this Resolution and any such actions previously taken by such officers are hereby
ratified, confirmed and approved.
Section 4. Attestations, The City Clerk and such person or persons as may
have been designated by the City Clerk to act on the City Clerk's behalf, are hereby
authorized and directed to attest the signature of the Authorized Officers designated
Resolution No. 2021 -1 1
herein to execute any documents described herein, and to affix and attest the seal of the
City, as may be required or appropriate in connection with the execution and delivery of
the documents that are described herein.
Section 5. Effect. This Resolution shall take effect immediately upon its
passage.
Section 6. Certification. The City Clerk shall certify to the passage and adoption
of this resolution and enter it into the book of original resolutions.
PASSED, APPROVED, and ADOPTED on this 6tn day of April, 2021.
Nancy P�zL�ns, May '
ATTEST:
I, Kristina Santana, City Clerk of the City of Diamond Bar, California, do hereby
certify that the foregoing Resolution was duly and regularly passed and adopted by
the City Council of the City of Diamond Bar, California, at its regular meeting held on
the 6t" day of April, 2021, by the following vote:
AYES: COUNCIL MEMBERS: Chou, Liu, Tye, MPT/Low, M/Lyons
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
Kristina Santana, City Clerk
2
Resolution No. 2021 -1 1
CITY COUNCIL POLICY 202 m0li
3
City Council Policy and Procedure
Number: (2021 -0 1) Reviewed: Annually/As-Needed
Effective Date: Revised Date(s): N/A
04/06/2021
Debt Management Policy
1. Purpose
1.1 The purpose of this Debt Policy is to establish guidelines and parameters
for the effective governance, management and administration of debt
and other financing obligations issued by the City and its related entities
(such as, but not exclusive to, the Diamond Bar Public Financing
Authority), This Debt Policy is intended to improve and direct decision
making, assist with the structure of debt issuance, identify policy goals,
and demonstrate a commitment to long-term planning, including the
City's Five -Year Financial Plan. Adherence to a debt policy helps to
ensure the City's debt is issued and managed prudently to maintain a
sound financial position and credit worthiness. When used in this Debt
Policy, "debt" refers to all indebtedness and financing obligations of the
City and its related entities (together referred to as "City").
2. Objectives
2.1 This Debt Policy is intended to comply with the requirements of Senate
Bill 1029 (SB 1029), codified as part of California Government Code
Section 8855(i), effective on January 1, 2017 and shall govern all debt
undertaken by the City. The primary objectives of the City's debt and
financing related activities are to:
2.1.1 Maintain the City's sound financial position.
2.1.2 The City will strive to maintain at least along -term credit rating of
or its equivalent from any nationally recognized securities
rating agency selected by the City.
2.1.3 Ensure the City has the flexibility to respond to possible changes in
future service obligations, revenues, and operating expenses.
2.1.4 Ensure that all debt is structured in order to protect both current
and future taxpayers, ratepayers and constituents of the City.
2.1.5 Minimize debt service commitments through efficient planning
and cash management.
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2.1.6 Protect the City's credit worthiness and achieve the highest
practical credit ratings, when applicable.
2.1.7 Ensure the City is in compliance with all relevant State and Federal
securities laws and other applicable laws and regulations.
3. Acceptable Uses of Debt Proceeds
3.1 The City will consider the use of debt financing primarily for assets and
capital projects only if the term of debt shall not exceed the asset(s) or
project's useful life or will otherwise comply with Federal tax law
requirements. An exception to this long-term driven focus is the issuance
of short-term instruments, such as tax and revenue anticipation notes,
which are to be used for reasonable cash management purposes, as
described below. Bonded debt should not be issued to finance normal
operating expenses: General Fund debt will not be issued to support
ongoing operational costs unless such debt issuance achieves net
operating cost savings and such savings are verified by independent
analysis.
3.1.1 Long -Term Debt
a. Long-term debt may be issued to finance the construction,
acquisition, and rehabilitation of capital improvements and
facilities, equipment, and land to be owned and/or operated
by the City. Long-term debt financings are appropriate when
any of the following conditions exist:
(1) When the project to be financed is necessary to provide
basic municipal services;
(2) When the project to be financed will provide benefit to the
City's constituents over a duration of more than five years;
(3) When the total debt financing would not impose an
unreasonable burden on the City and its taxpayers and/or
ratepayers, as applicable; or
(4) When the debt is used to refinance outstanding debt in
order to produce debt service savings or to benefit from
debt restructuring.
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b. The City may use long-term debt financings subject to each of
the following conditions:
(1) The project to be financed has been or will be considered
and approved by the City Council;
(2) Generally, the weighted average maturity of the debt
should not exceed 120 percent of the weighted average
economic life of the projects or equipment being financed,
unless there are specific circumstances that would mitigate
the extension of time to repay the debt and it would not
result in violation of any covenants to maintain the tax-
exempt status of such debt, if applicable;
(3) The City estimates that sufficient revenues will be available
to service the debt through its maturity; and
(4) The City determines that the issuance of the debt will
comply with the applicable requirements of State and
Federal law.
3.1.2 Short -Term Debt -Short-term debt may be issued to provide
financing for the City's operational cash flows in order to maintain
a steady and even cash flow balance. Short-term debt may also
be used to finance the City's short-lived capital projects, such as
undertaking lease -purchase financing for equipment.
3.1.3 Financings on Behalf of Other Entities -The City may also issue debt
on behalf of other governmental agencies or private third parties
in order to further the public purposes of the City. In such cases,
the City shall take reasonable steps to confirm the financial
feasibility of the project to be financed, the financial solvency of
any borrower, and that the issuance of such debt is consistent with
the policies set forth herein.
4. Standards for Use of Debt Financing
4.1 The City recognizes that there are numerous types of financing structures
and funding sources available, each with specific benefits, costs, and
risks. The City will consider debt issuance only in those cases where
public policy, equity and economic efficiency favor debt financing over
cash funding. Prior to the issuance of debt or other financing obligations,
the City will carefully consider the overall long-term affordability of the
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proposed debt issuance by conducting an objective analysis of the
City's ability to support additional debt service payments. The City will
consider its long-term revenue and expenditure trends, the impact on
operational flexibility and the overall debt burden on the
taxpayers/ratepayers. The evaluation process shall include a review of
generally accepted measures of affordability and will strive to achieve
and/or maintain debt levels consistent with its current operating and
capital needs.
5. Types of Debt
5.1 In order to maximize the financial options available to benefit the public,
it is the City's policy to allow the consideration of issuing all generally
accepted types of debt, including, but not exclusive to the following:
5.1.1 General Obligation (GO) Bonds:
a. GO Bonds are suitable for use in the construction or acquisition
of improvements to real property that benefit the public at
large. The California Government Code, Division 4, Chapter 4,
Article 1 commencing with section 43600 authorizes cities to
finance certain municipal improvements through GO bonds
when a city determines the public interest and necessity
demands the acquisition, construction or completion of such
municipal improvements, including property or structures
necessary or convenient to carry out the objects, purposes,
and powers of a city.
b. Examples of projects include but are not limited to libraries,
parks, public services, and public safety facilities. All GO bonds
shall be authorized by the requisite number of voters in order
to pass.
5.1.2 Revenue Bonds/Certificates of Participation (COPS) -Revenue
Bonds and COPS are limited -liability obligations tied to a specific
enterprise or special fund revenue stream where the projects
financed clearly benefit or relate to the enterprise or are otherwise
permissible uses of the special revenue. Generally, no voter
approval is required to issue this type of obligation but in some
cases, the City must comply with proposition 218 regarding rate
adjustments.
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5.1.3 Joint Powers Authority (JPA) Lease Revenue Bonds - As an
alternative to COPs, the City may obtain financing through the
issuance of debt by a joint exercise of powers agency with such
debt payable from amounts paid by the City under a lease,
installment sale agreement, or contract of indebtedness.
5.1.4 Loans -The City is authorized to enter into loans, installment
payment obligations, or other similar funding structures secured
by a prudent source or sources of repayment.
5.1.5 Special Assessment/Special Tax Debt -The City will consider
requests from developers for the use of debt financing secured by
property -based assessments or special taxes in order to provide
for necessary infrastructure for new development under
guidelines adopted by City Council, which may include minimum
value -to -lien ratios and maximum tax burdens. Examples of this
type of debt are Assessment Districts (ADs) and Community
Facilities Districts (CFDs), also known as Mello -Roos Districts. In
order to protect bondholders as well as the City's credit rating, the
City will also comply with all State guidelines regarding the
issuance of special tax or special assessment debt.
5.1.6 Tax Increment Financing -Tax Increment Financing provides
options to finance infrastructure and economic development
projects using as a repayment stream property tax revenues
generated above an established "base year" value (tax
increment). The City may consider tax increment financing to the
extent permitted under State law. Examples include tax allocation
bonds, which are special obligations secured by the allocation of
fax increment revenues generated by increased property taxes in
a designated redevelopment project area, as well as debt issued
by Enhanced Infrastructure Financing Districts (EIFDs) or
Community Revitalization and Investment Authorities (CRIAs).
When considering tax increment financing mechanisms
permitted by law, the City should analyze the practical viability of
the proposed financing and take into account the potential
impact of the proposed structure on existing debt limitations.
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5.1.7 Short -Term Debt:
a. Short-term borrowing, such as commercial paper, Tax and
Revenue Anticipation Notes (TRANS), and lines of credit, will be
considered as an interim source of funding in anticipation of
long-term borrowing and may be issued to generate funding
for cash flow needs. The final maturity of the debt issued to
finance the project shall be consistent with the useful life of the
project.
b. Short-term debt may also be used to finance short-lived capital
projects such as lease -purchase financing for equipment.
5.1.8 Refunding Bonds:
a. The City shall refinance debt pursuant to the authorization that
is provided under California law, including but not limited to
Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5
of the California Government Code, as market opportunities
arise. Refundings may be undertaken in order:
(1) To take advantage of lower interest rates and achieve debt
service costs savings;
(2) To eliminate restrictive or burdensome bond covenants; or
(3) To restructure debt to lengthen the duration of repayment,
relieve debt service spikes, reduce volatility in interest rates
or free up reserve funds.
b. Generally, the City shall strive to achieve a minimum of 3% net
present value savings. The net present value assessment shall
factor in all costs, including issuance, escrow, and foregone
interest earnings of any contributed funds on hand.
Refundings which produce a net present value savings of less
than 3% will be considered on a case -by -case basis. Upon the
advice of the Finance Director and with the assistance of a
financial advisor and bond counsel, the City will consider
undertaking refundings for other than economic purposes
based upon a finding that such a restructuring is in the City's
overall best financial interest.
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The City may from time to time find that other forms of debt
would be beneficial to further its public purposes and may
approve such debt without an amendment of this Debt Policy.
However, the other form or forms of debt must comply with this
Debt Management Policy.
c. Debt shall be issued as fixed rate debt unless the City makes a
specific determination as to why a variable rate issue would be
beneficial to the City in that circumstance.
6. Relationship to Capital Improvement Program and Operating Budget
6.1 The City intends to issue debt for the purposes stated in this Debt Policy
and the decision to incur new indebtedness should be integrated with
the City Council -adopted annual Operating Budget and Capital
Improvement Program Budget. Prior to issuance of debt, a reliable
revenue source shall be identified to secure repayment of the debt and
the annual debt service payments shall be included in the Operating
Budget.
The City shall integrate its debt issuances with the goals of its Capital
Improvement Program by timing the issuance of debt to ensure that
projects are available when needed in furtherance of the City's public
purposes.
7. Policy Goals Related to Planning Goals and Objectives
7.1 This Debt Policy has been adopted to assist with the City's goal of
financial sustainability and financial prudence. In following this Debt
Policy, the City shall pursue the following policy goals:
7.1.1 The City is committed to financial planning, maintaining
appropriate reserves levels and employing prudent practices in
governance, management and budget administration. The City
intends to issue debt for the purposes stated in this Debt Policy and
to implement policy decisions incorporated in the City's annual
Operating Budget,
7.1.2 It is a policy goal of the City to protect taxpayers, ratepayers and
constituents by utilizing conservative financing methods and
techniques so as to obtain the highest practical credit ratings, if
applicable, and the lowest practical borrowing costs;
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7.1.3 It is a policy goal of the City to reduce the unfunded liabilities for
employee pension and other post -employment benefits (OPEB),
7.1.4 The City will comply with applicable State and Federal law as it
pertains to the maximum term of debt and the procedures for
levying and imposing any related taxes, assessments, rates and
charges, and
7.1.5 When refinancing debt, it shall be the policy goal of the City to
achieve, whenever possible and subject to any overriding non-
financial policy, minimum aggregate net present value debt
service savings of at least 3% of the refunded principal amount.
8. Internal Control Procedures
8.1. When issuing debt, in addition to complying with the terms of this Debt
Policy, the City shall comply with any other applicable policies regarding
initial bond disclosure, continuing disclosure, post -issuance compliance,
and investment of bond proceeds.
The City will periodically review the requirements of and will remain in
compliance with the following:
a. Federal securities law, including any continuing disclosure
undertakings under SEC Rule 15c2-12;
b. Any federal tax compliance requirements including without limitation
arbitrage and rebate compliance, related to any prior bond issues;
c. The City's investment policies as they relate to the investment of bond
proceeds; and
d. Government Code section 8855(k) and the annual reporting
requirements therein.
8.2 The City shall be vigilant in using bond proceeds in accordance with the
stated purpose at the time that such debt was issued. The City Manager,
Finance Director or designee will monitor the expenditure of bond
proceeds to ensure they are used only for the purpose and authority for
which the bonds were issued. Whenever reasonably possible, proceeds
of debt will be held by a third -party trustee and the City will submit
written requisitions for such proceeds. The City will submit a requisition
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only after obtaining the signature of the City Manager and the Finance
Director.
9. Amendment and Waivers of Debt Policy
9.1 This Debt Policy will be reviewed and updated periodically as needed:
Any amendments to this Debt Policy are subject to specific City Council
approval.
While adherence to this Debt Policy is required in all applicable
circumstances, on rare occasions there might be circumstances when
strict adherence to a provision of this Debt Policy is not possible or not in
the best interest of the City. If the City staff has determined that a waiver
of one or more provisions of this Debt Policy should be considered by the
City Council based on a strong and compelling reason, it will prepare
an analysis for the City Council describing the rationale for the waiver
and the impact of the waiver on the proposed debt issuance and on
taxpayers, if applicable. Upon a super majority vote of the City Council,
one or more provisions of this Debt Policy may be waived for a debt
financing.
The failure of a debt financing to comply with one or more provisions of
this Debt Policy shall in no way affect the validity of any debt issued by
the City in accordance with applicable laws.
10. SB 1029 Compliance
10.1 SB 1029, signed by Governor Brown on September 12, 2016, and
enacted as Chapter 30/, Statutes of 2016, requires issuers to adopt debt
policies addressing each of the five items below:
10.1.1 The purposes for which the debt proceeds may be used.
a. Section 3 (Acceptable Uses of Debt Proceeds) addresses the
purposes for which debt proceeds may be used.
10.1.2 The types of debt that may be issued.
a. Section 5 (Types of Debt) provides information regarding the
types of debt that may be issued.
10.1.3 The relationship of the debt to, and integration with, the issuer's
capital improvement program or budget, if applicable.
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a. Section 6 (Relationship to Capital Improvement Program and
Operating Budget) provides information regarding the
relationship between the City's debt and Capital Improvement
Program and annual Operating Budget.
10.1.4 Policy goals related to the issuer's planning goals and objectives.
a. Section 2 (Debt Policy Objective) and Section 7 (Policy Goals
Related to Planning Goals and Objectives) address some of
the City's policy goals and how this Debt Policy has
implemented them.
10.1.5 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.
a. Section 8 (Internal Control Procedures) provides information
regarding the City's internal control procedures designed to
ensure that the proceeds of its debt issues are spent as
intended.
10.2 This Debt Policy, as written, complies with and meets the requirements
of SB 1029.
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