HomeMy WebLinkAbout15 District Debt Issuance Policiesenda Item #
WORKSHOP
15
To: Board of Directors
From. Lisa Hall
Date. August 01, 2018
Subject: Discussion of District Debt Issuance and Management Policies and
Possible Revisions
1. WHY THIS MATTER IS BEFORE THE BOARD
This informational item is before the Board because District Code updates are needed
in order for the District to comply with new laws required for the issuance of any new
debt or to participate in financings.
2. HISTORY
District Code Title 3.01, Financial Goals, establishes the District's planning, revenue,
debt, and reserve goals. The Board adopted this set of financial goals in 2004. Since
2004 there have been significant changes to financial regulatory markets with added
scrutiny for the issuance of public debt.
3. NEW INFORMATION
Development activity has recently picked up in Truckee and the District was
approached by two separate developers inquiring about the District's willingness to
participate in land -based financing. Staff reviewed the District's debt policies and
updates are recommended.
Senate Bill 1029 became effective January 1, 2017 increasing compliance
requirements for issuers of public debt. Government Code section 8855(i) requires
any issuer of public debt to file a report on the proposed issuance no later than 30
Jays prior to the sale of any debt issue.
Issuers must certify on the Report of Proposed Debt Issuance that they have adopted
local debt policies concerning the use of debt and that the proposed debt issuance is
consistent with those policies. If the issuer has received certification from another
governmental entity that will use the proceeds of the debt issue, then the issuer may
rely on a certification by that other governmental entity that it has adopted local debt
policies that include:
A) The purposes for which the debt proceeds may be used;
B) The types of debt that may be issued;
C) The relationship of the debt to, and integration with, the issuer's capital
improvement program or budget, if applicable;
D) Policy goals related to the issuer's planning goals and objectives;
E) 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
iMended use.
Staff is recommending that the Board consider limiting debt proceeds for specific
projects including financing capital facilities where it is appropriate to spread costs
over future years. District code currently limits debt maturity to 25 years and staff
recommends updating this to 30 years, better reflecting the useful life of District
facilities. Land -based financings may be subject to additional scrutiny including a
clearly articulated public purpose, and a prioritization of projects that best aligns with
the District's capital improvement plans.
The Board in its debt policy must identify the types of public finance borrowings it will
consider. Financing types may include general obligation bonds, certificates of
participation, community facilities districts, and assessment districts. Staff
recommends including all public finance borrowing types available to the District in
order not to limit future financing needs.
Due diligence requires consideration of adding new District equity requirements to the
debt policy. Staff recommends the Board consider adding the following
recommendations to the revised debt policy.
A) Require a Letter of Credit where one owner holds 25% or more equity in a project;
B) Commercial or mixed use projects should have 50% of rentable space pre -leased;
C) Residential only projects should require pre -sale of 50% of the units;
D) A reserve fund should be required for 125% of the annual average debt service or
10% of the bond proceeds, whichever is less.
A Letter of Credit may be considered in lieu of or in addition to these requirements.
Additionally, the minimum value -to -debt ratio should generally be 4:1. This means the
value of the property in the district, with the public improvements, should be at least
four times the amount of the assessment or special tax debt.
Policy considerations include the District's approach to evaluating debt against
needed and planned projects, debt limits versus assessed values and overlapping
debt. The District's local debt policy must also include specific internal control
measures to manage debt proceeds. Best practices include that all debt transactions
require Board approval, accounting procedures include a separation of funds,
payments are appropriately authorized, project spending has time limitations, and
accounting duties are separated.
Next steps are for staff to present a revised District debt policy for Board
4. FISCAL IMPACT
There is no fiscal impact associated with this Workshop item.
5. RECOMMENDATION
Provide input and direction to staff.
Lisa Hall
Administrative Services Director
Michael D. Holley
General Manager