OVERVIEW - Welcome to Wakulla Co , FL



-2667053975ADMINISTRATIVE REGULATIONDATE APPROVED:00ADMINISTRATIVE REGULATIONDATE APPROVED: AR: 3.02 January 20, 2015-28575186055SUBJECT:DEPARTMENT:00SUBJECT:DEPARTMENT:Debt Policy FinanceOVERVIEW STATEMENTThe Board of County Commissioners is responsible for establishing fiscally sound financial policies that will guide the County to and maintain a strong financial position. The Board of County Commissioners is ultimately responsible for and in charge of the approval of form, terms and dollar amounts of all County borrowings.The objective of this debt policy is 1) to provide guidance to County Staff in managing and reporting the County's debt, 2) to enhance the quality of the decision making process by imposing order and consistency into the debt issuance process, and 3) to maintain the County's ability to incur present and future debt at the most advantageous circumstances to the County and its citizens, for purposes of financing or refinancing approved elements of its capital improvements program.The County may issue general obligation (GO) bonds and other debt instruments by means of referendum, County ordinance, resolution and/or other applicable provisions of law as required, and in full compliance with, the Constitution and Statutes of the State of Florida.PURPOSE OF DEBTThe County borrows money from time to time to meet ongoing obligations of providing capital and infrastructure improvements necessary to offer the services needed and requested by the citizens of Wakulla. Incurring debt allows the County to spread the repayment of this equipment and infrastructure over a long period of time.In addition, incurring debt allocates the cost of these facilities to all of the users or beneficiaries over the life of the asset and it allows the County to maintain consistent healthy reserves. Debt shall not be used to fund operating activities except during a declared state of financial or physical emergency and such use must be approved by the Board of County Commissioners.7759065830834000III. LEGAL DEBT LIMITSWhile neither the Florida Constitution, nor the Florida Statutes, nor the County Charter place a limit on the amount of debt the County can incur, the Board of County Commissioners, by adoption of this policy, has established appropriate guidelines for 1) monitoring the total indebtedness of the County, 2) ensuring the ability to meet current and long-term obligations, and 3) maintaining sound financial health and creditworthiness.General obligation (GO) debt may not be used for enterprise activities. Debt, in general, shall not be used for projects solely because insufficient funds are budgeted at the time of acquisition or construction.Debt limitations are not expressed in hard dollars or capped at a particular dollar threshold. Debt limitations are analyzed, reviewed and expressed as ratios or trends. These ratios and trends are compared to industry standards or benchmarks. The change in these ratios and trends indicate the County's ability to pay long-term debt, the County's level of flexibility in how resources are allocated and/or the County's ability to respond to economic changes.Some of these ratios are analyzed from a government-wide perspective, some on a fund by fund basis and others distinguish governmental operations from enterprise operations.Long-term Debt per CapitaOne of the ways the County's total long-term debt is expressed is as an amount owed per citizen. When this amount increases over time it may indicate that the County has a decreasing level of flexibility in how resources are allocated or a decreasing ability to pay long-term debt. The County should strive to maintain a target of less than or equal to $500 per citizen as adjusted for inflation.Debt Service Expenditures to Total ExpendituresAnother way the County's debt is measured is to divide the total annual debt service payment by the County's total expenditures. When this percentage increases over time it may indicate a declining flexibility of the County to respond to economic changes. The County should strive to maintain a ratio of less than or equal to 15% of operating expenditures as adjusted for inflation. Another way of looking at this ratio is no more than 15 cents of every dollar spent should go to debt service payments.Debt Service Coverage RatioAnother way the County monitors debt is to compare the annual debt payments to the net income of the fund making those debt payments. This is called the debt service coverage ratio (DSCR). This ratio measures the cash available (net income) for debt service payments on an annual basis. Certain non-operating amounts are excluded from the net income calculation such as transfers in or out, depreciation expense and principal and interest payments.It is a benchmark used to measure the ability to produce enough cash to pay all operating costs and the anticipated debt service payments. The higher the ratio the better it is. A ratio of 1.0 or more means you have sufficient revenues to pay the debt service payments and a ratio of less than 1.0 means you have insufficient revenues. The County should strive to maintain a DSCR equal to or greater than 1.10.County staff will monitor these measurements annually and provide them in the annual debt report discussed under the Debt Administration section.IV. TYPES OF DEBTThere are two debt categories: capital and non-capital. Capital debt is incurred for the acquisition or construction of physical assets with a cost of $5,000 or more or a useful life of one (1) year or more. Non-capital debt is incurred for the purchase or construction of physical assets with a cost of less than $5,000 or with a useful life of less than one (1) year (i.e. copier or postage lease) or debt incurred by the County as part of ongoing operational activities (employment and contract liabilities). This policy is intended to only cover capital debt.Debt can also be categorized by the type of collateral, security or pledge made to secure the debt. For example, General Obligation (GO) debt is secured by the County's ability to levy ad valorem taxes on real and personal property. Assessment debt is secured by special assessments upon property owners benefiting from specific activities (fire protection or solid waste collection). Revenue debt is secured by pledging specific dedicated revenues (sales taxes, sewer fees). Additionally, the County may covenant to budget and appropriate legally available non-ad valorem revenues as collateral.Some types of debt instruments are quite complex and may have tax implications to the County. In some circumstances the use of independent bond counsel and/or financial advisors may be necessary.Capital Debt InstrumentsThe list of debt instruments below are intended to provide a basic guide of the various types of capital debt the County may use to finance capital projects. It does not contain every possible type of debt instrument and is not intended to limit the County to the use of only those listed. It must also be noted that some debt instruments tend to cost more than others due to their complexity.7767955778954500Bonds or Tax-Exempt Bonds1. General Obligation (GO) Bonds are securities issued to raise funds for countywide projects that lack substantial ability to generate the income necessary to cover the project costs. General obligation bonds are unique because they require voter approval and they are backed by the full faith and credit of the County. The County commits the full resources to paying investors, including the power to collect ad valorem taxes as security for this type debt.2. Non-Ad Valorem Revenue Bonds or Pledged Revenue Bonds are issued for the construction of County infrastructure. Non-ad valorem revenue bonds are repaid from a particular revenue source such as sales tax, gas tax or user fees. If the income generated by the financed project is insufficient to make the debt payments on the bonds, additional support from non-ad valorem taxes or fees is needed.Business-type Revenue Bonds are used to finance self-supporting projects with specific and defined revenue streams. The County has two Enterprise (business-type) funds: the Sewer Fund and the Solid Waste Fund. Business-type revenue bonds are repaid with user fees from these funds.Notes I Loans I Lines of CreditBank loans or notes payable proceeds can be used for a variety of countywide projects, construction of facilities and infrastructure or for the purchase of equipment or software. Bank loans are typically secured by the County's covenant to budget and appropriate from legally available revenues in an amount sufficient to pay the required annual principal and interest payments on the note but may also be secured by non-ad valorem revenue. A line of credit is simply a pre-approval of possible future debt with a credit limit very similar to a personal credit card.Interim Financing I Bridge LoansInterim financing is typically short term debt of 1 to 5 years that is incurred to bridge the need to purchase or construct an asset now until grant funds from other governments are received in the future. Bridge loans are intended to be paid off with the future grant funds or permanent financing, either in whole or in part, depending on the grant agreement.Refunding I RefinancingRefunding is the payment of existing debt by the issuance of new debt (refinancing) and are often done to take advantage of favorable market changes in interest rates or to escape unfavorable debt covenants.7766050704532500Capital leasesCapital leases are leases of equipment, software or space with values greater than $5,000 and/or a life span of more than one (1) year. Most capital leases are heavy equipment or vehicles. All capital leases undergo a thorough process of comparison to actual acquisition costs. Lease options are chosen if the annual cost of owning and maintaining the asset is higher over the life of the asset. Capital leases are also a cost-saving mechanism designed to keep up with the fast changing technologies and high service and repair costs associated with some equipment and/or software.V. DEBT PLANNING & ADMINISTRATIONThe Government Finance Officers Association (GFOA) recommends that a formal debt policy include debt planning, management and issuance guidelines. There are many factors involved in debt planning including but not limited to the setting of capital priorities, debt affordability, weighing of opportunity costs and lowering of borrowing costs.Prior to proposing the issuance of debt to the Board of County Commissioners, either through the annual budget process or during the budget year, the County Administrator and Finance Department shall coordinate the proposed issuance and method of debt, the sizing of the debt, the structure of the debt and the source of repayment (security) for the debt. This is accomplished by preparing and reviewing a cost-benefit analysis taking into account the current amount of outstanding debt, the various debt instruments available, the fiscal strength of the fund incurring the debt, the funds' ability to repay the debt and the associated fund balance requirements of the new debt.Debt PlanningWakulla County is committed to systematic capital planning. Evidence of this commitment is demonstrated through the adoption and periodic adjustment of a Comprehensive Plan pursuant to Chapter 163, Florida Statutes, the Florida Growth Management Act and the adoption of the five (5) year Capital Improvement Plan. The County Administrator, as Budget Officer, and the Finance Department of the Clerk of Court shall evaluate each debt proposal as part of the annual budget process and/or five(5) year Capital Plan.Funding SourcesWhere ever possible, the County will first attempt to fund capital projects with grant funds. When such funds are not available or insufficient, the County shall use dedicated or restricted revenues, or the leveraging thereof, to fund the project or remainder of the project. If these are not available or insufficient, the County may use general revenue, or the leveraging thereof, to fund the project with one exception: general obligation bonds should not be used to fund enterprise activity debt.Debt Structure ConsiderationsNet Cost - All debt should be structured to provide the lowest possible net cost to the County given current market conditions, prudent estimations of future market conditions, the urgency of the capital project and the nature and type of security provided.Length of Debt - The County should design the repayment of debt so as to recapture, as rapidly as possible, credit capacity for future debt. Debt should be structured for the shortest amortization period possible giving proper consideration to the life of the asset and the fair allocation of costs to current and future beneficiaries or users of the asset.Back-loading - The County will normally seek to structure debt with level or close to level annual principal and interest payments over the life of the debt. Back-loading (balloon payments etc.) of costs should only be considered when natural disasters or extraordinary circumstances make the short term cost of the debt prohibitive, when the benefits derived from the debt issuance can be clearly demonstrated to be greater in the future than in the present, when such structuring is clearly beneficial to the County's overall amortization schedule, or when such structuring will allow debt service to more closely match project revenues that will be used to repay such debt.Refunding - An annual review should be conducted of the County's outstanding debt to determine if refunding opportunities exist and whether the refunding saves the County money either through interest savings or through unfavorable debt covenants such as compensating balances or pre-payment penalties. Federal tax law constraints should also be considered. Typically refunding should be considered when the net present value of the savings exceeds five (5) percent of the refunded debt. Refunding that produces less than five (5) percent net present value savings should be considered on a case by case basis. Refunding with negative savings should not be considered unless there is a compelling public purpose or legal objective. Debt should be structured so it can be paid off at any time.Credit Enhancements - Credit enhancements such as letters of credit or bond insurance may be used but only to the extent that the net debt service cost on the bond is reduced by more than the cost of the credit enhancement.Variable Rate Debt - The County may consider the issuance of variable rate debt only after careful consideration of current market conditions and when prudent estimations of future market conditions dictate that variable rate debt is the best choice given the County's total debt portfolio. Preference should be given to the certainty of fixed rate financing.Subordinate Debt - The County may issue subordinate debt only if it is financially beneficial to the County or consistent with creditworthiness objectives.Short-term Notes - The use of short-term borrowings, such as bond anticipation notes and tax-exempt commercial paper, may be undertaken only if the transaction costs plus 7764780735838000interest on the debt are less than the cost of internal financing, or if the available cash for internal financing is insufficient to meet funding requirements.Inter-fund Loans - If sufficient cash is available and the use of such cash is legally allowed for the anticipated project, one fund may loan another fund the necessary cash to internally finance the project. If such financing is utilized, it will be evidenced by an Inter-fund Loan Note, and if such internal financing is provided by the General Fund, said note will be approved by the Board of County Commissioners. Said note shall outline the terms of repayment including the length of the loan and the interest rate charged. The opportunity cost (i.e. lost interest earnings from the lending fund) should be considered in setting the interest ernment Loan Programs - The County should review the availability and cost of various Federal, State, or Regional Agency loan programs such as "State Revolving Fund Loans" since the costs associated with such borrowings is typically lower than borrowing from private sector banks and the open market.Debt Issuance ProcessThe County Administrator and Clerk of Court, Finance Department, shall, as part of the debt planning process, determine whether proposed borrowings should be accomplished through competitive sale or negotiated sale. All proposed borrowings require the County Commission's final approval which includes the adoption of the appropriate Resolutions as drafted by legal or bond petitive SaleUnder normal market conditions, County debt is issued through a competitive bidding process, formal or otherwise. Bids are awarded on a "True Interest Cost" (TIC) basis provided other bidding requirements are satisfied. "True Interest Cost" is simply the real cost of borrowing. It includes not only the interest cost but also all ancillary fees and costs such as finances charges, possible late fees, discount points, prepaid interest, costs associated with issuing a bond, legal fees, and other factors related to the time value of money.Negotiated SaleNegotiated sale of debt is considered when the complexity of the debt issuance requires specialized expertise, when the negotiated sale would result in substantial savings in time or money, when the market conditions are unusual or volatile and/or liquidity conditions are unfavorable, if the County's credit is problematic or when a negotiated sale is otherwise in the best interest of the County.Debt AdministrationReporting & DisclosureThe County is committed to full and complete financial disclosure and to cooperate fully with rating agencies, institutional and individual investors, agencies, other levels of government and the general public to share clear, comprehensive and accurate financial and other pertinent or relevant information.The County is committed to meeting secondary disclosure requirements on a timely and comprehensive basis. The Clerk of Court, Finance Department is responsible for ongoing disclosure and maintaining compliance with disclosure standards promulgated by state and national regulatory bodies.Annual Debt ReportThe County Administrator and Clerk of Court shall prepare an annual report to the Board of County Commissioners which shall include, at a minimum:Calculations of appropriate ratios and measurementsDebt Service per CapitaDebt Service Expenditures to Total ExpendituresDebt Service Coverage Ratios by FundDetailed schedule of current outstanding debtHistorical schedule of outstanding debtList of anticipated future debtThis report shall be provided to the Board of County Commissioners in a time frame consistent with the release of the Annual Financial Report.Report to Bondholders776605019431000The County, through the Clerk of Court, Finance Department shall prepare and release to all interested parties the Annual Financial Report which will act as the ongoing disclosure document required under the Continuing Disclosure Rules promulgated by the Securities Exchange Commission [SEC Rule 15c2-12(b)(5)]. The information presented in this report shall comply with the disclosure obligations set forth in the Continuing Disclosure Certificates issued in connection with its debt obligations.Arbitrage Analysis & ComplianceArbitrage is the process by which profit is earned from interest on borrowed money that is invested at a higher yield. When government borrows money by the issuance of no? taxable debt, it is allowed to invest the proceeds of the debt and keep the interest if it earns less than or equal to the borrowing rate on the debt. If the interest earned on the investment of non-taxable debt exceeds the interest rate paid on the debt that excess interest must be remitted or "rebated" to the federal government.The process of tracking and reporting the interest on these type investments is known as arbitrage analysis and must be done in accordance with IRS tax code regulations. The County and Clerk of Court may carry out such responsibilities through the engagement of outside agents or legal counsel.4. Tax-Exempt Debt Post-Issuance ComplianceThe County's legal counsel or bond counsel shall prepare or co-ordinate the preparation of IRS Form 8038-G, Information Return for Tax-Exempt Governmental Obligations or Form 8038-GC, Information Return for Small Tax-Exempt Governmental Bond Issues, Leases and Installment Sales in connection with each tax-exempt debt issuance by the County.VI. CREDITWORTHINESSBond ratings are like credit scores for governmental entities and rate their overall creditworthiness. Wakulla County is not rated by Moody's Investor Service, Standard & Poor's or Fitch Ratings. Should the County become rated, it shall strive to maintain a minimum underlying bond rating equivalent to "Upper Medium Grade" (an A rating) without compromising the delivery of basic County services.No credit rating or poor credit ratings typically result in higher borrowing costs for a government entity. At the same time, for smaller government entities who do not issue bonds on a regular basis, the cost associated with maintaining an appropriate credit rating may outweigh the borrowing cost of not having a credit rating.There are a variety of factors involved in the credit rating of a government entity including, but not limited to, the overall management and governance, expansion strategies and economic policies, financial operating performance, resources and flexibility, total debt burden and liquidity, current economic conditions, revenue and expenditure composition and diversity, risk management and contingency planning and investment performance. ................
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