Page 119 - City of Mansfield FY22 Operarting Budget

City of Mansfield Debt Management Policy

Purpose

The City recognizes that effective management of the public’s funds is an investment of the public’s
funds within the community in which it serves. It is with this understanding that the City of Mansfield
establishes its debt policy to guide decision makers in investing the public’s money within the City of
Mansfield, Texas.

 “Tax-exempt financing is used by state and local governments to raise capital to finance public capital
improvements and other projects, including infrastructure facilities that are vitally important to
sustained economic growth.”
- Tax-Exempt Financing, a Primer

It is upon this principal that the City of Mansfield, Texas determines the necessity to incur debt in order to
finance the Capital Improvement Program (CIP) of the City. The management of the City’s debt is vital
for maintaining the expected cost of services and the continued infrastructure development within this
community. With the incurrence of additional debt, the City is able to pay for the infrastructure needs of
the community without overly burdening the constituency in any given period by increasing or decreasing
the fee structure necessary to support the capital improvement. As a result, the management of the City’s
debt portfolio is designed to minimize the impact to its constituency.

Authorization

The Constitution of the State of Texas and the general laws of the State of Texas allow for and permit
Texas cities, as authorized by the City, to issue direct obligations or bonds for the purpose of financing
improvements and capital assets.

Although the Federal Government does not govern local spending authority, it closely regulates and
monitors the types of issuances and the authority for issuance through the Federal Income Tax Code,
Sections 141 through 150. The Federal Income Tax Code restricts the nature and character of Bond
Interest in how it is treated as income for income tax reporting, thereby controlling and creating markets
for tax-exempt instruments.

Uses of Debt Financing and Capital Improvements

 Debt financing shall be used to fund infrastructure improvements and the purchasing of capital
assets as long as the asset life of the improvement or capital asset is beyond the cost of financing
the improvement or the capital asset.

 Debt financing shall be used as a funding source when the improvements or the purchase of
capital assets cannot be acquired from current revenue sources or direct fees like impact fees. In
addition, if the purchase of capital assets and construction of infrastructure improvements can be
funded through available resources (fund balance, current revenue or any other recurring revenue)
then the cost of money should be considered against the value of available resources in
determining pay-as-you-go financing.

Affordability of Additional Debt and Legal Debt Limit

In Fiscal Year 2000, the City of Mansfield developed a 10-year Strategic Plan that anticipates the
financial future of the City of Mansfield, Texas. This plan is a comprehensive planning model that

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