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<br /> <br /> <br />Debt <br />The City of Elk River has chosen, by policy, to guide its issuance of debt by following the guidelines <br />listed below. These practices were identified through examination of materials from state statutes, <br />bond rating agencies, and the Government Finance Officers Association (GFOA). This policy can <br />be amended in the future by the City Council, but is consistent with general municipal practices at <br />the time of its adoption. <br /> <br />In accordance with the authorities cited in the background section, the City of Elk River will use the <br />following policies in determining when and how to use debt for financing capital and equipment <br />needs. <br /> <br />A.Debt Limits <br /> <br />1.Legal Limits: <br /> <br />a.Minnesota Statutes, Section 475 prescribes the statutory debt limit that outstanding <br />principal of debt cannot exceed 3% of taxable market value. This limitation <br />applies only to debt that is wholly tax-supported. The type of debt included is <br />either general obligation debt of any size bond issue (G.O.) or lease revenue bond <br />issues that were over $1,000,000 at the time of issuance. However, there are also <br />several other types of debt that do not count against the limit. G.O. tax increment, <br />G.O. abatement G.O. special assessment, G.O. utility revenue, and most HRA or <br />EDA-issued debt is considered to have a separate revenue source other than just <br />taxes and so are excluded from the legal debt limit calculation. HRA and EDA <br />public project revenue bonds or lease revenue bonds with financing lease <br />agreement with a city or county do count against the statutory debt limit. <br /> <br />b.Local ordinances do not limit the city’s ability to issue debt. <br /> <br /> <br />2.Policy Limits: <br /> <br />a.Uses of Debt: Debt will be used only for capital costs. The city will not utilize <br />debt for cash flow borrowing, even though this is allowed by state statutes. <br /> <br />b.CIP and Financial Planning: The city’s capital improvement plan shall contain <br />debt assumptions which match this policy and requires a commitment to long <br />range financial planning which looks at multiple years of capital and debt needs. <br /> <br />c.Tax Increment Bonds: The city shall use G.O. tax increment bonds only when the <br />development merits special consideration. <br /> <br /> <br />3.Financial Limits: <br /> <br />a.Bond issues may require a special debt levy. The city hereby adopts a policy to <br />limit the amount of the city’s property tax levy dedicated to debt service (principal <br />and interest plus 5% for G.O. bonds ) to less than 20% of the total tax levy. <br />Unlike rating agencies, the city’s definition of tax levy does not include special <br />assessments, tax abatements, or tax increments. <br /> <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 <br />water utility operations, but only if debt service coverage achieves investment grade <br />rating from the city’s rating agencies. <br /> <br /> <br /> <br />Financial Management Policies Page 11 <br /> <br />