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V. Most HRA or EDA-issued debt is considered to have a separate revenue source <br /> other than just taxes and so are excluded from the legal debt limit calculation. <br /> vi. HRA and FDA public project revenue bonds or lease revenue bonds with <br /> financing lease agreement with a city or county do count against the statutory debt <br /> limit. <br /> b. Local ordinances do not limit the city's ability to issue debt. <br /> 2. Policy Limits <br /> Debt will be used only for capital costs. The city will not utilize debt for cash flow borrowing, <br /> even though this is allowed by state statutes. <br /> a. The CIP shall contain debt assumptions which match this policy and requires a <br /> commitment to long-range financial planning which looks at multiple years of capital and <br /> debt needs. <br /> b. The city shall use G.O. Tax Increment Bonds when development merits special <br /> consideration. <br /> 3. Financial Limits <br /> a. Bond issues may require a special debt levy. The amount of the city's property tax levy <br /> dedicated to debt service (principal and interest plus 5% for G.O. Bonds) is limited to less <br /> than 20% of the total tax levy. The city-defined tax levy does not include special <br /> assessments, tax abatements, or tax increments. <br /> b. Pure revenue bond debt for the city shall be used primarily as Lease Revenue Bonds <br /> supported by taxes. The city may use revenue bonds for enterprise, electric and water <br /> utility operations,but only if debt service coverage achieves investment grade rating from <br /> the city's rating agencies. <br /> B. Use of Variable Rate Debt and Derivatives <br /> 1. The city shall use variable rate debt only if total principal and interest of the debt constitutes <br /> less than 20% of the city's total debt payments and only if circumstances dictate the need for a <br /> short call date. <br /> 2. The city will not use derivative-based debt. <br /> C. Debt Structuring Practices <br /> 1. G.O. debt shall not exceed 25 years in term. <br /> 2. Equipment debt. The goal is to pay for all capital equipment with a useful life of five years or <br /> less from cash reserves or annual operating budgets. Capital equipment with a useful life <br /> greater than five years may be financed with debt,but the bond term should not exceed 10 <br /> years. <br /> 3. The city's collective debt goal shall be to amortize at least 50% of its principal within 10 years. <br /> 4. The city shall usually issue debt with level principal and interest payments. <br /> 5. The city shall have a call date (pre-payment date) of no longer than 10 years on longer term <br /> debt and 6 to 8 years on shorter-term debt. <br /> Financial Management Policies Page 8 <br />