Page 122 - Pantego FY22 Operating Budget

D. CAPITAL PROJECTS AND DEBT SERVICE FUNDS

1. Items in the Capital Projects Funds will be completed and paid for within 36 months
of receipt of bonds proceeds. Balances will be used to generate interest income to
offset construction costs.

2. General Obligation Debt Service Funds will not have reserves or balances in excess
of one month of principal and interest plus fifteen (15) percent of the principal
outstanding for non-refunded debt issued prior to September 1, 1986. This maximum
is dictated by Federal law and does not include the amounts accrued for the next
debt service payment. Total direct debt shall not exceed ten (10) percent of the
assessed value of taxable property.

The policy above does not preclude the debt service reserves normally established
to market revenue bonds. The Town's policy and bond ordinance requirements are
to maintain these debt service reserves at the level of the average annual debt
service.

3. Revenue obligations will maintain Debt Coverage Ratios as specified by the bond
covenants. The Town is currently required to have net revenues in excess of
average annual debt by 1.25 times. Net revenues must also exceed the maximum
outstanding debt by 1.10 times. Both these tests must be met in order to issue
additional bonds.

4. Obligations of the Pantego Economic Development Corporation will maintain
coverage ratios as specified by bond covenants. If the Town issues obligations
partially secured by a limited pledge of the corporations’ sales tax revenues, not
subject to the coverage ratios of the revenue bond covenants, coverage shall be
maintained at no less than 1.25 times average annual debt service, and 1.15 times
the maximum annual debt service. Both tests must be met to issue additional bonds.

X. TREASURY AND DEBT MANAGEMENT

A. CASH MANAGEMENT. Periodic review of cash flow position will be performed to
determine performance of cash management. A detailed policy structure will be followed
with respect to Cash/Treasury Management. The underlying theme will be that idle cash
will be invested with the intent to 1) safeguard assets, (2) maintain liquidity, and 3)
maximize return. Where legally permitted, pooling of investments will be performed.

The Town will adhere to the investments authorized through the Public Funds
Investment Act and will additionally establish, review, and approve a comprehensive
Investment Policy and Investment Strategies on an annual basis. Such policy will clarify
acceptable investment securities, brokers, terms, and other pertinent investment
information.

B. TYPES OF DEBTS
1. SHORT-TERM DEBT. Short-term debt shall be defined as debt requiring five (5)
years or less to retire, and may be used to fund purchases of machinery, equipment
(including office equipment) and vehicles.

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