Page 297 - City of Westlake FY20 Budget

Section 7 Debt Service Funds
Debt Service Funds Overview

• 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.

Analysis of Debt Issuance and Debt Issuance Alternatives
Staff will explore alternatives to the issuance of debt for capital acquisitions and construction projects. These
alternatives will include, but not be limited to:
• Grants, Leases, User fees, Impact fees
• Use of reserves
• Use of either current on-going general revenues or one-time revenues
• Contributions from developers and others

Use of Debt Financing
The useful life of the asset or project shall, at a minimum, exceed the payout schedule of any debt the Town
assumes.
1. Debt financing instruments to be considered by the Town may include:
o General obligation bonds - These must be authorized by a vote of the citizens of Westlake.
o Revenue bonds - These bonds generate capital requirements necessary for continuation or
expansion of a service which produces revenue and for which the asset may reasonable be
expected to provide for a revenue stream to fund the debt service requirement.
o Certificates of obligation - These can be authorized by Council approval with debt service by
either general revenues or backed by a specific revenue stream or a combination of both.
o Lease/purchase agreements - These shall only be used to purchase capital assets that cannot
be financed from either current revenues or fund balance/retained earnings and to fund
infrastructure improvements and additions.

2. Assumption of Additional Debt - The Town shall not assume more tax-supported general-purpose debt
than it retires each year without first conducting an objective analysis as to the community's ability to
assume and support additional debt service payments.

3. Affordability Targets - The Town shall use an objective multi-year analytical approach to determine
whether it can afford to assume new general-purpose debt beyond what it retires each year. This
process shall compare generally accepted standards of affordability to the current values for the
Town. The process shall also examine the direct costs and benefits of the proposed expenditures.
The decision on whether or not to assume new debt shall be based on these costs and benefits and
on the Town's ability to "afford” new debt as determined by the aforementioned standards. The
Town shall strive to achieve and/or maintain these standards at a low to moderate classification.

4. Debt Structure - The Town shall structure its debt payment schedules for general purpose debt to ensure
level principal repayment schedules. The Town shall not assume any debt with "balloon' repayment
schedules which consist of low annual payments and one large payment of the balance due at the end of
the term. While balloon payment structures minimize the size of debt payments during the period, they
force a large funding requirement on the budget of the final year. Given the uncertainties of the future,
level payment schedules improve budget planning and financial management.

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