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4. Tax Notes

Tax notes may be issued without a public election to finance the
construction, acquisition, and expenses associated with placing a
capital asset into service. Under State law, the issuance of tax notes
must be approved as to legality by the State Attorney General, and
must mature no later than the seventh anniversary of the date that the
Attorney General approves the tax notes. Tax notes will be issued
considering the useful life of the capital asset to be financed, and
consideration of the economies that the City may achieve through the
issuance of obligations with a shorter term of maturity than that
typically associated with a bond amortization structure (see D. Debt
Structure, below). The issuance of tax notes may be substituted for
the issuance of Certificates of Obligations; however, the same
principles apply.

D. Debt Structure

General obligation bonds, certificates of obligation, and tax notes may be
structured with level principal or level debt service, with a preference
towards level principal. Revenue bonds will typically be structured with
level debt service. With respect to the issuance of revenue bonds for a
stand-alone or self-supporting project, the term of the debt and debt service
structure shall be consistent with the useful life of the project and the
revenue-generating capability of the project.

There shall be no debt structures, which include increasing debt service
levels in subsequent years, with the exception of the first and second year
of a payment schedule. Revenue bonds may have an amortization exempt
from this provision; however, they should be structured to provide uniform
coverage levels across the life of the bonds. There shall be no "balloon"
bond repayment schedules, which consist of low annual payments and one
large payment of the balance due at the end of the term. There shall always
be at least interest paid in the first fiscal year after a bond sale and principal
starting generally no later than the second fiscal year after the bond issue.
In the case of a revenue generating project, principal repayment should
begin no later than the first full year after the project has been placed in
service. Normally, there shall be no capitalized interest included in the debt
structure unless there are no historical reserves upon which to draw.

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