R-69-11 Res Adopting Debt Management PolicyVillage of Lemont, Illinois
Debt Management Policy
Adopted September 26, 2011
TABLE OF CONTENTS
A. Purpose and Goals 1
B. Debt Issuances 2
1. Authority and Purposes of the Issuance of Debt 2
2. Types of Debt Issuances 2
3. Structure of Debt Issuances 2
4. Sale of Securities 2
5. Markets 2
6. Credit Enhancements 3
C. Legal Constraints 3
1. State Law 3
2. Authority for Debt 3
3. Debt Limitation 3
4. Methods of Sale 4
5. Credit Implications 4
D. Debt Administration 5
1. Financial Disclosures 5
2. Review of Financing Proposals 5
3. Investment of Bond Proceeds 56
4. Establishing Financing Priorities 6
5. Ratings Agency Relations 6
6. Investment Community Relations 6
7. Refunding Policy 6
8. Investment of Borrowed Proceeds 7
9. Federal Arbitrage Rebate Requirement 7
E. Governmental Obligation Alternate Revenue Source Bonds 7
F. Conduit Financing 8
A. Purpose and Goals
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
This Debt Management Policy sets forth comprehensive guidelines for the financing of
capital projects and infrastructure. It is the objective of the policy that the Village obtain
financing only when necessary; the process for identifying the timing and amount of debt
or other financing be as efficient as possible; and the most favorable interest and other
costs be obtained.
In following this policy, the Village shall pursue the following goals when issuing debt:
1. Maintain at least an Aal credit rating for each general obligation debt issue, and an
Aa credit rating for each revenue bond debt issue.
2. Take all practical precautions to avoid any financial decision which will negatively
impact current credit ratings on existing or future debt issues.
3. Effectively utilize debt capacity in relation to Village growth and the tax base, or
utility rate base to meet long -term capital requirements.
4. Consider market timing.
5. Determine the amortization (maturity) schedule which will best fit with the overall
debt structure of the Village's general obligation debt and related tax levy at the time
the new debt is issued. For issuance of revenue bonds, the amortization schedule
which will best fit with the overall debt structure of the enterprise fund and its
related rate structure will be considered. Consideration will be given to coordinating
the length of the issue with the lives of assets, whenever practical, while considering
repair and replacement costs of those assets to be incurred in future years as an offset
to the useful lives, and the related length of time in the payout structure.
6. Consider the impact of such new debt on overlapping debt and the fmancing plans of
local governments which overlap, or underlie the Village.
7. Assess financial alternatives to include new and _ innovative fmancing approaches,
including, whenever feasible, categorical grants, revolving loans or other
state /federal aid.
8. Minimize debt interest costs.
B. Debt Issuances
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011.
1 • Authori and P oses of the Issuance of Debt
The laws of the State of Illinois authorize the issuance of debt by Bond Law confers upon municipalities the power and authority
debt, borrow money, Y the Village. The
Y, and issue bonds for public improvement projects to
as defined
therein. Under these provisions, the Village may contract debt to a for
acquiring, constructing, reconstructing, im rovin to p ay the cost of
equipping such projects or to refund bonds. p g' extending, enlarging; and
2. Types of Debt Issuances
a. Short Term Debt (three years of less): The Village may issue short -term
debt which may include, but not be limited to, bond anticipation notes or
variable rate demand notes, those instruments which allow the Village to
meet cash flow requirements or provide increased flexibility in financing
g
b. Long Term Debt (more than three years): The Village may issue
long-
term debt which may include, but not limited to, general obligation bonds,
certificates of participation, capital appreciation bonds, special assessment
bonds, self - liquidating bonds and double barreled bonds. The Villa e may
also enter into long -term leases for public facilities ro y ay
property, and
equipment with a useful life greater than one year. p
3. Structure of Debt Issuances
The duration of a debt issue shall not exceed the economic
improvement or asset that the issue is financing. or useful life of the
financing schedule and repayment g The Village shall design the
p yment of debt so as to take best advantage of market
conditions and, as practical, to recapture or maximize its credit capaci fo
use, and moderate the impact to the taxpayer. tY for future
4. Sale of Securities
All debt issues shall be sold through a competitive bidding process based offered True Interest Cost TIC d upon the
sale the most advantageous to the Village. unless the Village Board deems a negotiated
5. Markets
The Village shall make use of domestic capital markets when the conditions
the Village's financing needs. ons best fit
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
6. Credit Enhancements
The Village may enter into agreements with commercial banks or other
entities for the purpose of acquiring letters of credit, municipal bond incur financial
other credit enhancements that will provide the Village with access to credit and conditions as specified in such agreements when their ante, cost
effective or otherwise advantageous. dit under
e f cti Board.
g Any such agreements shall be approved by the
C. Leal Constraints
1. State Law
30 ILCS 305/0.01, et. seq.: the short title is "The Bond Authorization Act."
2. Authori for Debt
The Village may, by bond ordinance, incur indebtedness or borrow money, the issue of negotiable obligations, including refunding bonds
capital improvement of property, land acquisition, or any oney, and
except current expenses, unless approved by the Village Board.
other lawful purpose
for any
oard.
3. Debt Limitation
Under Illinois Compiled Statutes the Village's general obli gation bonded debt
issuances are subject to a legal limitation based on 8.625% of the total
value of real estate property. assessed
The Village is subject to debt limitations by Illinois Property Tax
Limitation Law ( PTELL). PTELL allows the issuance of an amount of general
obligation debt .equal to the aggregate extension for principal and interest eneral
payments for non - referendum bonds that the Village issued prior to January 1, Limited bonds are general obligation bonds that are issued without
referendum. These bonds must be identified as limited bonds at '
issuance. The following bonds are not subject to PTELL limitations: of
- Alternate revenue bonds
- Refunding obligations issued to refund or to continue to refund o eratio
initially issued pursuant to referendum P ns
4. Methods of Sale
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
All bonds shall be sold at a public sale via sealed proposal or live auction, except
that bonds may be sold at a private sale in accordance with 30 ILCS 350/10. The
Village may issue temporary notes by negotiated sale if the bond ordinance or
subsequent resolution so provides.
a. Bonds: All bonds will mature within the period or average period of
usefulness of the assets financed; and the bonds will mature in
installments, the first of which is payable not more than five years from
the dated date of the bonds. Term bonds may be allowable if
recommended by the Village's financial advisor, in lieu of a fixed
maturity schedule, and approved by the Village Board.
b. Financial Advisor: As a matter of independence, the Financial Advisor
will not bid on nor underwrite any Village debt issues on which it is
advising.
5. Credit Implications
When issuing new debt, the Village should not exceed credit industry benchmarks
where applicable. Therefore, the following factors should be considered in
developing debt issuance plans:
a. Ratio of Net Bonded Debt to Estimated Full Value: The formula for this
computation is Net Bonded Debt, which is the total outstanding debt
divided by the current Estimated Full Value as determined by the
Township Assessors.
Current Ceiling Median
1.18 4.00 2.42
b. Net Bonded Debt Per Capita: The formula for this computation is Net
Bonded Debt divided by the current population as determined by the most
recent census information available.
Current Ceiling Median
$1,142 $2,000 N/A
c. Income Per Capita: The formula for this computation is income for
all households (the number obtained from the most current census data)
divided by the current population as determined by the most recent census
information available.
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
d. Ratio of Net Bonded Debt to Equalized Value: The formula for this
computation is Net Bonded Debt, which is the total outstanding debt
divided by the current Assessed Value as determined by the Township
Assessors.
Current Ceiling Median
3.54 6.00 N/A
e. Ratio of Annual Debt Service to General Government Expenditures: The
formula for this computation is annual debt service expenditures divided
by General Government (i.e., General, Special, and Debt Service Funds)
expenditures (excluding certain interfund transfers).
Current Ceiling Median
10.41 16.00 8.14
f. Rapidity of Debt Service Repayment: Exclusive of refunding and mini-
bond issues, the Village's general obligation bond issues shall be so
structured whereby at least twenty percent of the principal and interest for
each issue is repaid in five years, and fifty in ten years.
* *Current ratio based on latest audited financials (4/30/10). Median values obtained
from Moody's 2009 US Local Government Medians. N/A indicates ratio was
not included as part of this data source.
D. Debt Administration
1. Financial Disclosures
The Village shall prepare appropriate disclosures as required by the Securities and
Exchange Commission, the federal government, the State of Illinois, rating agencies,
underwriters, investors, agencies, taxpayers, and other appropriate entities and
persons to ensure compliance with applicable laws and regulations.
2. Review of Financing Proposals
All capital financing proposals that involve a pledge of the Village's credit through
the sale of securities, execution of loans or lease agreements and/or otherwise
directly involve the lending or pledging of the Village's credit shall be referred to the
Assistant Village Administrator who shall determine the financial feasibility, and the
impact on existing debt of such proposal, and shall make recommendations
accordingly to the Village Administrator.
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
3. Investment of Bond Proceeds
The Village will invest bond proceeds in accordance with the Village's adopted
investment policy.
4. Establishing Financing Priorities
The Assistant Village Administrator shall administer and coordinate the Village's
debt issuance program and activities, including timing of issuance, method of sale,
structuring the issue, and marketing strategies. The Assistant Village Administrator
along with the Village's financial advisor shall meet, as appropriate, with the Village
Administrator and the Village Board regarding the status of the current year's
program and to make specific recommendations.
5. Ratings Agency Relations
The Village shall endeavor to maintain effective relations with the rating agencies.
The Village Administrator, Assistant Village Administrator, the Village Treasurer
and the Village's financial advisors shall meet with, make presentations to, or
otherwise communicate with the rating agencies on a consistent and regular basis in
order to keep the agencies informed concerning the Village's capital plans, debt
issuance program, and other appropriate financial information.
6. Investment Community Relations
The Village shall endeavor to maintain a positive relationship with the investment
community. The Assistant Village Administrator and the Village's financial advisor
shall, as necessary, prepare reports and other forms of communications regarding the
Village's indebtedness, as well as its future financing plans. This includes
information presented to the press and other media.
7. Refunding Policy
The Village shall consider refunding outstanding debt when legally permissible and
financially advantageous. A net present value debt service savings of at least three
percent or greater must be achieved.
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Village of Lemont, Illinois
Debt Management Policy
8. Investment of Borrowed Proce dsgust xx, 2011
The Village acknowledges its ongoing fiduciary
the proceeds of debt issued for public pit/poses responsibilities to actively statutes that govern the investment f public m Y manage
permitted securities covenants of related bond funds, that is consistent the
P funds, and consistent with the
The management of public funds shall enable the executed by the Village.
markets or changes in payment or construction schedules sosp as to to (changes in
returns, (ii) insure liquidity, and (iii) minimize risk.
so as to (i) optimize
9. Federal Arbitra e Rebate Re uirement
The Village shall maintain or cause to be
accounting to calculate bond investment arbitrage maintained an appropriate
Tax Reform Act lc l to os _ n system of
amended or supplemented, and am accordance with the
Treasury regulations related thereto. Such
Treasury
transferred from the Bond Construction Fund United ytand
amounts shall be computed annually and
account) to the Debt Service Fund escrow account, or (i.e., other appropriate interest e
eventual payment to the United States Treasury.
ngs revenue
accounts, for
In order to avoid arbitrage earnings arnings on bond proceeds, Village staff shall recommend
in which c for construction or other
issuance of debt based upon the cash flow needs of the capital which to contracts
awarded during the calendar other year. p-vic improvement blyje be
goods and services can reasonably be
feasibility of obtaining Consideration shall be given to the
g rights -of -way, engineering services, or other matters which affect the completion of the project in a timely to issue debt is made. h
Y manner, before a
Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
E. Governmental Obligation Bonds Alternate Revenue Source Bonds
The Village may seek to finance the capital needs of governmental activities and its revenue
producing enterprise funds through the issuance of Alternate Revenue Source debt
obligations. These debt obligations are payable from various limited revenue sources.
1. Governmental Funds
Revenue sources pledged for governmental activities include income taxes, sales
taxes, use taxes and utility taxes. The Village may only pledge up to 50% of the
annual revenue received for debt service. Debt service payments for the most
recent fiscal year represented 11.94% of pledged revenues.
2. Enterprise Funds
Revenue sources pledged for enterprise funds include water and sewerage revenues.
In addition, the Village has pledged revenue from income taxes, sales taxes and use
taxes as additional funding for repayment of these obligations. The Village may
only pledge up to 50% of the annual revenue received for debt service. Debt service
payments for the most recent fiscal year represented 7.58% of pledged revenues.
Prior to issuing Alternate Revenue Source debt obligations, the Assistant Village
Administrator and Village Treasurer will develop financial plans and projections showing
the feasibility of the planned financing, required rates and charges needed to support the
planned financing and the impact of the planned financing on rate payers, property owners
and the other affected parties. On an annual basis, the Village will review the percent of
revenue stream that is pledged for repayment of debt for compliance with Village
limitations. If it is not feasible to issue an Alternative Revenue obligation, then a revenue -
secured debt obligation should be considered.
F. Conduit Financing
Under federal and state statutes the Village Board has the authority to issue tax- exempt
bonds for non - profit organizations organized under Internal Revenue Code 501 (c) (3), and
economic development revenue bonds, also known as private activity bonds, under the Tax
Reform Act of 1986. These tax- exempt bonds shall be collectively referred to as conduit
financings. The Village has no liability or responsibility for repayment of the debt
authorized under these statutes.
The following policy and procedures shall be followed prior to the issuance of any such
debt:
1. The applicant shall contact the Assistant Village Administrator or the Village
Treasurer and submit a formal application for the issuance of a conduit financing.
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Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
2. For private activity bonds (economic development revenue bonds), the application
shall include a written proposal which should include, but not be limited to, the
following information, where applicable:
a. A description of the project including original issuance, refinancing,
recollateralization or other action sought;
b. A statement indicating the amount of funding required for the project and
a description of the purpose for which such funding will be used;
c. A description of any proposed financing arrangement for the project (e.g.,
loan agreement, or Village to own the project and lease to applicant);
d. A statement of the public purpose to be served by the issuance of
economic development revenue bonds for the project;
e. An anticipated construction schedule and schedule for completing the
financing;
f. The name and address of the proposed purchaser of the economic
development revenue bonds proposed to be issued, if known;
g. A complete description, with such supporting exhibits as may be
appropriate, of the physical aspects of the project;
h. Projected number of vehicles entering the facility area per day;
i. Ability of the streets to carry additional load;
j. Drainage /storm sewer requirements;
k. Utility requirements;
1. Ability of the schools to accommodate possible enrollment increases;
m. Financial stability of the applicant;
n. Description of principal business of applicant;
o. Number of employees anticipated at the new facility;
p. Number of new jobs to be created;
q. Number of management level employees;
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Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
r. Types of skills required by the facility's employees;
s. Yearly payroll /average employee salary;
t. Projected appraised /assessed value of the facility's real personal property
in Lemont;
u. Number of years the prospective tenant has been in business;
v. Number of plant relocations since 1960, if applicable w. Civic Awareness
3. For the issuance of 501 (c) (3) bonds the proposal shall include all of the
information listed in section 2. above as well as the following, as applicable:
a. A statement of the public purpose to be served by the issuance of 501 (c)
(3) revenue bonds for the project;
4. The information submitted by the applicant should be reviewed by the Assistant
Village Administrator and the Village's financial and legal advisors and a
summary of such information, together with an evaluation thereof and the
recommendation of the staff should be presented to the Village Board as promptly
as practicable thereafter. In addition, the Village may retain the services of
qualified legal counsel to act as special counsel or the Village's financial advisor
to do a study of the economic viability of the project. The applicant shall be
responsible for all fees of the financial and legal advisors and shall deposit with
the Village a sum sufficient to cover such costs and fees as determined from time
to time by the Assistant Village Administrator.
5. The Village Board shall review the report presented to them by the Village staff
as promptly as practicable after receipt thereof and shall take one of the following
actions:
a. Notify the applicant in writing that its proposal has been rejected and
refund to the applicant any uncommitted balance of the deposit, if any.
b. Adopt a resolution of intent to proceed with the project and refund to the
applicant any uncommitted balance of the deposit, if any.
6. If a resolution of intent is adopted by the Village Board, the financing,
refinancing, or recollateralization may proceed pursuant to the provisions of this
policy. All costs of issuance associated with such financing, including any
expenses attributable to the Village, shall be borne by the applicant.
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Village of Lemont, Illinois
Debt Management Policy
Adopted August xx, 2011
G. TIF Debt
Tax Increment Financing debt is excluded from this policy as it is governed by the specific
TIF redevelopment agreement.
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