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HomeMy WebLinkAboutP-0540 - Orange County Board of Commissioners Debt Management Policy - 05-06-1998-9fPOLICY FOR INSERTION INTO THE POLICY MANUAL ~EETING DATE: Mav 6, 1998 NUMBER: P: 0540 EFFECTIVE DATE: May 6, 1998 REVISIONS: POLICY: ORANGE COUNTY BOARD OF COMMISSIONERS DEBT MANAGEMENT POLICY The County has long recognized the importance of proper long-range planning in order to meet capital improvement needs as they arise without experiencing dramatic impacts on operational costs and debt service. The following policy statements will provide guidance on the issuance of debt to help insure that the County maintains a sound debt position and that its credit quality is protected. In conjunction with the County's Capital Policies, these policy statements rationalize the decision making process, identify objectives for staffto implement, and demonstrate a commitment to long term financial planning objectives. In addition, this debt management policy will allow for an appropriate balance between the establishing debt parameters and providing flexibility to respond to unforeseen circumstances and new opportunities. POLICY STATEMENTS Purpose and Tvpe of Debt 1. Incurrence of debt or long-term borrowing will only be used for the purpose of providing financing for capital projects to include, but not be limited to: Construction of new School and County facilities . Renovation and repair of existing School and County facilities c. Acquisition of real property (land and/or buildings) d. Construction or expansion of Sanitary Sewer Systems. e. Providing funds for Affordable Housing Projects. L Construction, acquisition and development of Parks. g. Purchase of major equipment Debt issuance will not be used to finance current operations or normal maintenance. 2. The types of debt instruments to be used by the County include: a. General Obligation Bonds b. Bond Anticipation Notes c. Installment Purchase Agreements (private placement) d. Special Obligation Bonds (landfill only) e. Certificates of Participation, when feasible f. Revenue Bonds 3. All debt issued, including installment purchase methods, will be repaid within a period not to exceed the expected useful life of the improvements or equipment financed by the debt. The County will not issue tax or revenue anticipation notes. 3 ~uraose and Tvae of Debt (continued) 5. The County will not issue bond anticipation notes with maturities in excess of one year. 6. The County will strive to maximize the use ofpay-as-you-go financing for capital improvements. Issuance of Debt 7. The County will strive to issue bonds no more frequently than once in any fiscal year. The scheduling of bond sales and installment purchase decisions and the amount of bonds to be sold and installment financing to be sought will be determined each year by the County Commissioners. These decisions will be based upon the identified cash flow requirements for each project financed, market conditions, and other relevant factors. These factors will be ascertained from the school systems and County departments. If cash needs for bond projects are insignificant in any given year, the Board may choose not to issue bonds. Instead, the Board may fund up front project costs and reimburse these costs when bonds are sold. In these situations the Board will adopt Reimbursement Resolutions prior to the expenditure of project funds. 8. The County will seek level or declining debt repayment schedules and will avoid issuing debt that provides for balloon principal payments reserved at the end of the term of the issue. 9. The County will avoid over-reliance on variable rate debt. Variable rate debt will only be considered when market conditions favor this type of issuance. When variable rate debt is considered, careful analysis will be performed and techniques applied that will ensure that the County's sound debt position will be maintained. At no time will variable rate debt exceed 20% of the County's total outstanding debt. 10. The County is required by Statute to issue general obligation debt through a competitive process. The competitive process will also be used for other debt issuance unless time factors, interest rates or other factors make it more favorable to the County to use a negotiated process. 11. In the planning process for debt issuance the County will assess the need to maintain it's "Bank Qualification" if installment purchase financing is being considered. • 4 Level of Debt • ee ercent of the assessed 12. The County will stnve to maintain rts net bonded debt at a level not to exceed thr p valuation of taxable property within the County. - 13. The County will strive to maintain its annual debt service costs at a level no greater than fifteen percent of general fund expenditures. This applies to debt service costs paid by general fund revenues, including installment purchase debt. Undesignated Fund Balance 14. The County will strive to maintain undesignated fund balance in the general fund at a level sufficient to meet its budgeted goals, to be determined annually. The amount of undesignated fund balance maintained during each fiscal year should not be less than eight percent of budgeted general fund operating expenditures that fiscal year. 15. To the extent that undesignated fund balance exceeds the budgeted goals the County could consider drawing upon the balance to fund major equipment purchases or one time expenses on apay-as-you-go basis. Investment of Capital Funds 16. Investment of capital funds will be performed in accordance with the North Carolina General Statutes (159-30). Funds will be invested in instruments that will provide the liquidity required to meet the cash flow needs of each project funded. 7. Investment earnings on capital funds, after subtracting required or potential arbitrage, will be used for project costs and/or debt service. Bond Ratings 18. The County will maintain good communications with bond rating agencies about its financial condition and will follow a policy of full disclosure on every financial report and offering statement. 19. The County will strive to maintain bond ratings at or better than Aal (Moody's) and AA+ (Standard & Poor's). • 5 20. The County will comply with all azbitrage rebate requirements as established by the Internal Revenue Service and all secondary market disclosure requirements established by the Securities and Exchange Commission. 21. Arbitrage will be calculated at the end of each fiscal yeaz and interest earned on investment of bond or installment purchase proceeds will be reserved to pay any penalties due. Enterprise Funds 22. For any Enterprise Fund that is supporting debt, an annual rate study will be performed to ensure that the fees or rates aze sufficient to meet the debt service requirements. Capital Reserve Funds 23. The County will create and maintain capital reserve funds as appropriate, such as for school and county projects. 24. The Capital Reserves will be funded from unallocated Vicent sales tax revenues and/or any other revenue source that the County Commissioners may choose. 25. Funds accumulated in the Capital Reserve Funds will be used on a pay-as-you go basis to finance renovations and repairs to existing buildings and the purchase of major equipment. The Boazd may also choose to fiord other pay- as-you-go initiatives from Reserve Funds. 10-Year Capital Investment Plan (CIP) 26. The County will adopt a ten year C1P annually. 27. This Debt Management Policy will be incorporated into the C1P. 28. The County will strive to include plans for debt issuance within the CIP. u APPROVED 10/20/98 MINUTES ORANGE COUNTY BOARD OF COMMISSIONERS • REGULAR MEETING May 6, 4998- The Orange County Board of Commissioners met in regular session on Wednesday, May 6, 1998 in the Judge F. Gordon Battle Courtroom, new County Courthouse in Hillsborough, North Carolina. COUNTY COMMISSIONERS PRESENT: Chair_Margaret W. Brown,. and. Commissioners Moses Carey, Jr., William L. Crowther, Alice M. Gordon and Stephen H. Halkiotis. COUNTY ATTORNEY PRESENT: Geoffrey Gledhill COUNTY STAFF PRESENT: County Manager John M. Link, Jr., Assistant County Managers Rod Visser and Albert Kittrell and Clerk to the Board Beverly A. Blythe (All other staff members will be identified approprfatety bebw7 NOTE: ALL DOCUMENTS REFERRED TO IN THESE MINUTES ARE IN THE PERMANENT AGENDA FILE IN THE CLERK'S OFFICE. ALL RECORDINGS OF THE MEETING WILL BE KEPT FOR 5 YEARS. 1. ADDITIONS OR CHANGES TO THE AGENDA The Board agreed to delete item 9-i "Lease renewal for 103 Laurel Avenue, Carrboro°. The Board added to the agenda a discussion on the request from the Carrboro Board of Aldermen to form a task force to develop a plan for library services in Carrboro. John Link will do a report on what has been provided to date for library services in Carrboro, how it is working and public utilization. The Board added aproclamation-for Disability Awareness Week as item 5-e. • 2. CITIZEN 8 AUDIENCE COMMENTS a. Matters on the Printed Aqenda Chair Brown stated that citizens who have indicated a desire to speak on an item that appears on the printed agenda will be recognized at the appropriate time. b. Matters not on the Printed Aqenda Donna Miller who lives at 4310 Old Chapel Hill-Hillsborough Road, which is part of the three mile stretch of highway that was given this name, spoke in support of changing the name of this road back to Old Hwy 86. She told about the problems they have in getting their mail because of the long name of their road. They also have a problem with 911 calls. She said it is very confusing and she asked that it be changed back to Old Hwy 86. Commissioner Halkiotis- presented a petition.with-54 signatures representing the residents of OId Chapel Hill- Hillsborough Road in their desire to change the name of the road to Old Hwy 86. The reasons are as follows: 1. The address as it is currently written has too many characters to be held by many modem computers. 2. Attempts to abbreviate the address are not standard and cause mail to be lost. 3. There is extreme difficulty in giving the address verbally over the phone to companies which need to send- information. 4. Only the residents of a 2 mile stretch of the road are impacted by the address, the remainder of the road is called Old Hwy 86. It would seem more logical to continue the name to the city limits of Hillsborough to facilitate emergency as well as personal visitors to our homes. Commissioner Halkiotis asked that staff bring back a recommendation on what can be done. Mitchell Lloyd and Don Collins both spoke in support of this request to return the name of this stretch of road to Old Hwy 86. A motion was made by Commissioner Carey, seconded by Commissioner Halkiotis to approve the advertisement for the May 26, 1998 quarterly public hearing as presented. • VOTE:. UNANIMOUS f. Debt Management Policy The Board considered adoption of a debt management policy. John Link. explained. the policy which. includes_ previous comments and suggestions from the County Commissioners. A motion was made by Commissioner Crowther, seconded by Commissioner Carey to adopt the debt management policy as presented. VOTE:. lNANIMOUS g, Extension of Development Moratorium for Carrboro Northern Study Area The Board considered extending an existing moratorium on the processing of special use and conditional use permits. by the. Town. of Can born in the _Northern Study Area. Interim Planning Director Gene Bell said that this request from Carrboro would extend this moratorium for Carrboro's Northern Study Area until September 30, 1998. If the County Commissioners do not object to this, no further action will be required. If the County Commissioners. do object, they.. need to respond in writing by May.l2.for Carrboro's public hearing. The Board agreed to take no action on this item. h._ Lease Renewal -Space Reallocation for Court Offices at.Carr MiIL Mall and Moody Buildin The Board considered renewing its lease at Carr Mill Mall and reallocating approximately • 2,700 square feet of space for the Public Defender's office. Purchasingand_Central_Services Director. Pam_Jones explained.this item. Commissioner Gordon asked for an inventory of facilities leased by Orange County and Pam Jones indicated she will include this list as part of the budget. A motion was_ made by Cammissioner Carey,_ seconded by Commissioner Halkiotis to approve and authorize the Chair to sign a lease with Carr Mill Mall reallocating approximately 2,700 square feet of space for the Public Defender's office. VOTE: UNANIMOUS i. Lease Renewal -103 Laurel Ave.. Carrboro The Board deletedthis item from the agenda. 10. REPORTS a. OWASA Assessment Policy The.. Board. heard.. a presentation. on AWASA's assessment policy and the process by which the OWASA Board would like to receive feedback from the Board of Commissioners. Alan Reimer, member of the OWASA Board of Directors presented this report. Commissioner Halkiotis made reference to the list of septic tank problems and asked if they kriaw if_septic tank maintenance was. done and_Ed_Kerwin said.that this was. not one of.the questions in the assessment. Commissioner Gordon made reference to the groundwater study and said that they are in phase two of this study doing groundwater quality studies. Atari Reimer said thatthe University knows we are having these discussions and-have not closed the door on further discussion. ORANGE COUNTY _ .. BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: May 6, 1998 Action Agenda Item No. q _ .¢ i~ SUBJECT: Debt Management Policy DEPARTMENT: Finance PUBLIC HEARING: (Y/N) BUDGET AMENDMENT: (Y11S) ~~- ATTACHMENT(S): Proposed Policy INFORMATION CONTACT: Ken Chavious, ext 2450 TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To consider adopting a debt management policy for Orange County. BACKGROUND: At various meetings between December 1997 and February 1998, the Board of Commissioners has reviewed several successive drafts of a proposed debt management policy for the County. Board comments have been incorporated in the final draft of the policy, which is presented to the Board here for formal adoption. Staff have also solicited, at the Board's request, input from the Local Government Commission (LGC) and the Institute of Government (IOG), regarding the proposed policy. LGC staff and Dr. Jack Vogt at the IOG submitted a number of constructive and helpful suggestions. Their comments have also been incorporated in the final version of the policy, and aze highlighted in bold text. RECOMMENDATION(S): The Manager recommends that the Board adopt the debt management policy. • 2 4 • "ORANGE COUNTY BOARD OF COMMISSIONERS :~"~~'. DEBT MANAGEMENT POLICY The County has long recognized the importance of proper-long-range planning in order to meet capital improvement needs as they arise without experiencing dramatic impacts on operational costs and debt service. The following policy statements will provide guidance on the issuance of debt to help insure that the County maintains a sound debt position and that its credit quality is protected. In conjunction with the County's Capital Policies, these policy statements rationalize the decision making process, identify objectives for .staff to implement, and demonstrate a commitment to long term financial planning objectives. In addition, this debt management policy will allow for an appropriate balance between the establishing debt parameters and providing flexibility to respond to unforeseen circumstances. and new opportunities. POLICY STATEMENTS Purpose and Type of Debt 1. Incurrence of debt or long-term borrowing will only be used for the purpose of providing financing for capital projects to include, but not be limited to: a. Construction of new School and County facilities b. Renovation and repair of existing School and County facilities c. Acquisition of real property (land and/or buildings) d. Construction or expansion of Sanitary Sewer Systems. e. Providing funds for Affordable Housing Projects. f. Construction, acquisition and development of Parks. g. Purchase of major equipment Debt issuance will not be used to finance current operations or normal~maintenance. 2. The types of debt instruments to be used by the County include: a. General Obligation Bonds b. Bond Anticipation Notes c. Installment Purchase Agreements (private placement) d. Special Obligation Bonds (landfill only) e. Certificates of Participation, when feasible f. Revenue Bonds 3. All debt issued, including installment purchase methods, will be repaid within a period not to exceed the expected useful life of the improvements or equipment financed • by the debt. 4. The County will not issue tax or revenue anticipation notes. Purpose and Type of Debt (continued) 5. The County will not issue bond anticipation notes with maturities in excess of one yeaz. 6. The County will strive to maximize the use of pay-as-you-go financing for capital improvements. Issuance of Debt 7. The County will strive to issue bonds no more frequently than once in any fiscal year. The scheduling of bond sales and installment purchase decisions and the amount of bonds to be sold and installment financing to be sought will be determined each year by the County Commissioners. These decisions will. be based upon the identified cash flow requirements for each project financed, market conditions, and other relevant factors. These factors will be ascertained from the school systems and County departments. If cash needs for bond projects aze insignificant in any given year, the - Board may choose not to issue bonds. Instead, the Board may fund up front project costs and reimburse these costs when bonds are sold. In these situations the Board will adopt Reimbursement Resolutions prior to the expenditure of project funds. 8. The County will seek level or declining debt repayment schedules and will avoid issuing debt that provides for balloon principal payments reserved at the end of the term of the issue. 9. The County will avoid over-reliance on variable rate debt. Variable rate debt will only be considered when market conditions favor this type of issuance. When variable rate debt is considered, careful analysis will be performed and techniques applied that will ensure that the County's sound debt position will be maintained. At no time will variable rate debt exceed 20% of the County's total outstanding debt. 10. The County is required by Statute to issue general obligation debt through a competitive process. The competitive process will also be used for other debt issuance unless time factors, interest rates or other factors make it more favorable to the County to use a negotiated process. 11. In the planning process for debt issuance the County will assess the need to maintain it's "Bank Qualification" if installment purchase financing is being considered. , 3 • 4 • Level of Debt 12. The County will strive to maintain its net bonded debt at a level not to exceed three percent of the assessed valuation of taxable property within the County. 13. The County will strive to maintain its annual debt service costs at a level no greater than fifteen percent of general fund expenditures. This applies to-debt service costs paid by general fund revenues, including installment purchase debt. Undesi~nated Fund Balance 14. The County will strive to maintain undesignated fund balance in the general fund at a level sufficient to meet its budgeted goals, to be determined annually. The amount of undesignated fund balance maintained during each fiscal yeaz should not be less than eight percent of budgeted general fund operating expenditures that fiscal year. 15. To the extent that undesignated fund balance exceeds the budgeted goals the County. could consider drawing upon the balance to fund major equipment purchases or one time expenses on a pay-as-you-go basis. Investment of Capital Funds 16. Investment of capital funds will be performed in accordance with the North Cazolina General Statutes (159-30). Funds will be invested in instruments that will provide the liquidity required to meet the cash flow needs of each project funded. 17. Investment earnings on capital funds, after subtracting required or potential arbitrage, will be used for project costs and/or debt service. Bond Ratings 18. The County will maintain good communications with bond rating agencies about its financial condition and will fallow a policy of full disclosure on every fmancial report and offering statement. 19. The County will strive to maintain bond ratings at or better than Aal (Moody's) and AA+ (Standard & Poor's). ~J . Arbitrage Rebate and Secondary Market Disclosure Requirements 20. The County will comply with all arbitrage rebate requirements as established by the Internal Revenue Service and all secondary market disclosure requirements established by the Securities and Exchange Commission. 21. Arbitrage will be calculated at the end of each fiscal year and interest earned on investment of bond or installment purchase proceeds will be reserved to pay any penalties due. Enterprise Funds 22. For any Enterprise Fund that is supporting debt, an annual rate study will be performed to ensure that the fees or rates are sufficient to meet the debt service requirements. Capital Reserve Funds 23. The County will create and maintain capital reserve funds as appropriate, such as for school and county projects. ' 24. The Capital Reserves will be funded from unallocated '/: cent sales tax revenues and/or any other revenue source that the County Commissioners may choose. 25. Funds accumulated in the Capital Reserve Funds will be used on a pay-as-you go basis to finance renovations and repairs to existing buildings and the purchase of major equipment. The Board may also choose to fund other pay- as-you-go initiatives from Reserve Funds. 10-Year Capital Investment Plan lCIP) 26. The County will adopt a ten year CIP annually. 27. This Debt Management Policy will be incorporated into the CIP. 28. The County will strive to include plans for debt issuance within the CIP. 5 •