Debt Management Policies & Guidelines

1 debt Management Policies & GuidelinesJanuary, 2004 PREPARED BY:PATRICK M. DOHANY, COUNTY TREASURERANDREW E. MEISNER, COUNTY TREASURERANDREW E. MEISNER, COUNTY TREASURER2I. COUNTY'S debt POLICYA. PurposeThe County recognizes the foundation of any well-managed debt program is acomprehensive debt Management policy. A debt Management policy sets forth theparameters for issuing debt and managing the outstanding debt portfolio and providesguidance to decision makers regarding the purposes for which debt may be issued, typesand amounts of permissible debt , timing and method of sale that may be used, andstructural features that may be incorporated. Adherence to a debt Management policyhelps to ensure that the government maintains a sound debt position and that creditquality is is the intent of the County to establish a debt Management policy to: Ensure high quality debt Management decisions; Impose order and discipline in the debt issuance process; Promote consistency and continuity in the decision making process.

2 Demonstrate a commitment to long-term financial planning objectives, and Ensure that the debt Management decisions are viewed positively by rating agencies,investment community and ImplementationThe County's debt policy shall be implemented by the County Treasurer and provide thefollowing Guidelines : Full and timely payment of principal and interest on all outstanding debt ; debt shall be incurred only for those purposes as provided by State Statute; Capital improvements should be developed with the capital improvement budgetingprocess; Originally the payment of debt shall be secured by the limit tax, full faith, credit and taxingpower of the County, in the case of General Obligation Bonds, and by the pledge ofspecified, limited revenues in the case of revenue bonds.

3 The County shall not pledge any County revenues to its conduit bond (EDC) , the County has no moral obligation to repay bondholders of conduit (EDC)financing issued under its authority; Principal and interest retirement schedules shall be structured to: (1) achieve a lowborrowing cost for the County, (2) accommodate the debt service payments of existingdebt and (3) respond to perceptions of market demand. Shorter maturities shall alwaysbe encouraged to demonstrate to rating agencies that debt is being retired at asufficiently rapid pace; debt incurred shall be limited to obligations with serial and term maturities; The average life of the debt incurred may not be greater than the projected average life ofthe assets being financed; The County shall select a method of sale that shall maximize the financial benefit to theCounty.

4 So long as the County remains a credit rating of A or better sales shall becompetitive. All methods of sale shall be subject to County Treasurer The County shall maintain good communications with bond rating agencies to ensurecomplete and clear understanding of the credit worthiness of the County; and Every financial report, bond prospectus and Annual Information Statement ("AIS") shallfollow a policy of full, complete and accurate disclosure of financial conditions andoperating results. All reports shall conform to Guidelines established by the debt Policy,the Securities and Exchange Commission ("SEC") and the Internal Revenue Service(IRS) to meet the disclosure needs of rating agencies, underwriters, investors FINANCING ALTERNATIVESThe County shall assess all financial alternatives for funding capital improvements priorto issuing debt .

5 Pay-as-you-go financing should be considered before issuing any financing may include: Inter-governmental grants from federal, state andother sources; current revenues and fund balances; private sector contributions;public/private partnerships; and leasing the County has determined that "pay-as-you-go" is not a feasible financing option,the County may use Short-term or Long-term debt to finance capital Short Term debt and Interim Financing - Maturity of one (1) year or lessBond Anticipation Notes may be issued to finance portions of projects or portions ofprojects for which the County ultimately intends to issue long term debt ; , it shall beused to provide interim financing which shall eventually be refunded with the proceeds oflong term obligations are backed by the proceeds of the long-term bonds or otherrevenue Tax Anticipation Notes may be issued to finance all or a portion of the DelinquentTax Rolls of County governmental units.

6 That financing may be in the form of GOLT Notes orVariable rate Commercial Long Term debt (Bonds) - Maturity over one (1) limited tax general obligations shall be issued to finance significant capitalimprovements. Additionally, revenue bonds may be issued in response to usualsituations. Long-term debt may be incurred for only those purposes as provided by ISSUANCE OF LONG TERM debt OBLIGATIONSA. Issuance Policies :All County debt shall be issued in accordance with the following Policies :41. Conditions of SaleUnless otherwise justified, the issuance and sale of all County bonds, notes, loansand other evidences of indebtedness shall be subject to the following conditions: Principal and interest on all outstanding debt shall be paid in a full and timelymanner; debt shall be incurred only for those purposes as provided by State Statute; The payment of debt shall be secured by the full faith, credit and taxing power ofthe County, in the case of General Obligation Bonds, and by the pledge ofspecified, limited revenues in the case of revenue bonds.

7 The County shall notpledge any County revenues to its conduit (EDC) bond financing. Furthermore, theCounty has no moral obligation to repay bondholders of conduit (EDC) financingissued under its authority; Principal and interest retirement schedules shall be structured to: (1) achieve a lowborrowing cost for the County, (2) accommodate the debt service payments ofexisting debt and (3) respond to perceptions of market demand. Shorter maturitiesshall always be encouraged to demonstrate to rating agencies that debt is beingretired at a sufficiently rapid pace; debt incurred shall be limited to obligations with serial and term maturities; The average life of the debt incurred must be no greater than the projectedaverage life of the assets being financed;2.

8 Methods of SaleDebt obligations of the County shall be sold by competitive sale methods. TheTreasurer shall select the method of sale based on the method which is expectedto result in the lowest cost and most favorable terms given the financial structureused, market conditions, and prior ) Competitive SaleAll County debt shall be sold through a competitive bid process.(1) Bid VerificationAll bond prices shall be computed based on True Interest Cost (TIC).TIC is defined as the rate at which, as of the date of the bonds,discounts semi-annually all future payments on account of principaland interest on the bonds to the price bid, not including interestaccrued to the date of delivery of the bonds.

9 (2) Award of Competitive BidsCounty debt priced by competitive bid shall be sold to the bidderproposing the lowest true interest cost - TIC to the County, providedthe bid conforms to the official request for proposal.(3) Method of Accepting Bids The County shall accept bids in person or by electronic The County shall not accept bids by telephone. The County reserves the right to reject bids that are late or includecalculation errors(4) Good Faith depositsAll bids shall be accompanied by a good faith deposit of not less thantwo percent of the principal amount of the bonds. Payment of thedeposit may be in the form of: a federal fund wire transfer to aCounty designated account, a financial surety bond, cash, cashier'scheck, treasurer's check or certified check drawn on, a solventcommercial bank or trust company in the United County will accept bids without a good faith deposit so long as ithas received confirmation of a third party surety bond guaranteeingthe receipt of a good faith deposit from the winning bidder at least 24hours in advance of the receipt of bid.

10 (5) Permissible DiscountsThe County may permit discount bids not to exceed 2% of any givenmaturity.(6) Term Bonds with Mandatory Sinking Fund RequirementsThe official Notice of Sale shall be designed to maximize theflexibility of the prospective purchasers and may include term bondswith mandatory sinking fund installments, and other features thatmay enhance the attractiveness of the offering consistent with thereceipt of the lowest true interest cost possible.(7) BiddersFinancial advisors shall not be permitted to bid on competitive salesfor bonds for which they serve as financial SELECTION OF BOND TYPES AND STRUCTURESA. Bond Types1. General obligation limited tax (GOLT) bondsThe following are general Guidelines to be considered when issuing GOLT Bonds:a) General Obligation Limited Tax bonding should be used to finance only thoseassets which have been determined to be essential in the development of theCounty;b) General Obligation Limited Tax Bonding should be used only after consideringalternative funding sources, such as federal and state grants and projectrevenues;6c) The maturity of the County's GOLT bonds shall be, generally, limited to twentyyear or less but may, depending and the scope of the project and or interest rates,could have maturities of thirty years.