Page 264 - Ord 866 Adopting a revised Fiscal Year 17-18 and new proposed Fiscal Year 18-19 budget

Section 7 Debt Service Funds
Debt Service Funds Overview

Debt Limits
Define specific limits or acceptable ranges for each type of debt. Limits are generally set for legal,
public policy, and financial reasons. For the Town of Westlake there is no legal limit to debt except
by way of a tax rate limit.
a. Legal limits are determined by:
o State constitution and/ or law which limit the Town’ s ad valorem rate.
o Local charter, by-laws, resolution or ordinance, or covenant.
b. Public Policy limits include:
o Purposes for which debt proceeds may be used or prohibited,
o Types of debt that may be issued or prohibited,
o Relationship to and integration with the Capital Improvement Program,
o Policy goals related to economic development, capital improvement financings, tax
increment financing, and public- private partnerships.
c. Financial limits generally reflect policy or other financial resource constraints. Appropriate
debt limits can positively impact bond ratings, if the government demonstrates
adherence to such policies over time. Financial limits are often expressed as ratios
customarily used by credit analysts. Different criteria for determining credit worthiness i.e.
credit rating). Direct Debt can be measured or limited by the following ratios
o Debt per capita,
o Debt to personal income,
o Debt to taxable property value
o Debt service payments as a percentage of general fund revenues or expenditures.

Debt Issuance Analysis
All consideration of debt issuance for major capital assets will be prepared within the framework of a
Council approved multi-year capital improvement plan and forecast for all Town facilities and
infrastructure.

Debt Structuring Practices
Includes specific policies regarding the debt structuring practices for each type of bond,
including:
Maximum term (often stated in absolute terms or based on the useful life of the asset),
Average maturity,
Debt service pattern such as equal payments or equal principal amortization,
Use of optional redemption features that reflect market conditions and/ or needs of the
government,
Use of variable or fixed-rate debt, credit enhancements, and short- term debt, and
limitations as to when each can be used, and
Other structuring practices should be considered such as capitalized interest, deferral of
principal and/ or other internal credit support, including general obligation pledges.

Debt Issuance Practices
Provides guidance regarding the issuance process, which may differ for each type of debt. These
practices include:
Criteria for determining the sale method ( competitive, negotiated, placement) and
investment of proceeds,
Criteria for issuance of advance refunding and current refunding bonds,
Selection and use of professional service providers,
Use of comparative bond pricing services or market indices as a benchmark in negotiated
transactions, as well as to evaluate final bond pricing results, and
Use of credit ratings, minimum bond ratings, determination of the number of ratings, and
selection of rating services.

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