Complete Document - City of Auburn

City of AuburnOverview of Debt Policy and Outstanding DebtThe City’s annual revenues typically are not adequate to finance all the expenditures proposed to andapproved by the Council. Expenditures that benefit the citizens for the long term generally havesignificant costs and it is reasonable to spread the cost of such expenditures over more than oneyear. Borrowing is the mechanism through which the City is able to allocate the costs of largepurchases so their costs can be paid from the revenues of several years. Balancing this advantage isthe cost of borrowing, which includes interest and administrative costs. To manage public debt in aresponsible manner requires consistent application of sound debt management policies.Debt PoliciesThe City Council and City Manager have established conservative policies for managing the City’sdebt level. The City’s debt policies are summarized as follows:• All debt issuances will be accomplished in compliance with federal regulations, State law, Cityordinances and all other applicable legal constraints.• The City will retain on a continuing basis, a competent and reputable attorney specializing inmunicipal financing in the State of Alabama.• The City will retain on a continuing basis, a competent and reputable financial advisor specializingin municipal financing in the State of Alabama.• City debt will be issued only to finance the acquisition or construction of capital assets, includingland to be held for future use. Annual operating costs, including costs of employees’personal services, will be financed from current revenues or fund equities.• The repayment periods for long term debt issuances will not be extended beyond the expecteduseful life of the capital asset being acquired with the proceeds of the financing. Debt repaymentperiods will be as short as feasibly possible in order to minimize interest costs and maximizeflexibility for future financial planning.• If the impact of budgeted significant capital outlays on the current year’s projected ending fundequities will cause fund equity to be less than 6% of annual budgeted expenditures, otherfinancing sources (proceeds of long term debt) for the significant capital outlays will be included inthe budget in order to maintain fund equity at an acceptable level.• The Council and City Manager will engage in capital assets planning and will hold citizenreferenda as required by law to enable the use of the City’s property tax dedicated to repaymentof general obligation long term debt for the construction and acquisition of major capital assets,including infrastructure fixed assets. The City’s Five Mill property tax is dedicated by law to thepayment of debt service on general obligation debt that is issued to finance the construction ofcapital projects that have been approved by the voters in a public referendum. Before holding anyreferendum on the use of the Five Mill Tax debt service fund as a debt repayment source,principal amounts and amortization schedules of proposed debt issues will be structured in amanner to maintain a positive fund balance in the Five Mill Tax Fund.60