HomeMy WebLinkAbout3.E. Debt Policy
3.C.
CITY OF SHAKOPEE
Memorandum
TO: Mayor and Council
Mark McNeill, City Administrator
FROM: Gregg Voxland, Finance Director
SUBJ: Debt policy
DATE: October 19, 2006
Introduction & Background
The city does not have a debt policy. Having a debt policy is a
recommended practice by the Government Finance Officers Association and
is something rating agencies are looking for as an indication of sound
financial management. Shakopee has followed the concepts in such a
policy, it just has not documented them.
I recommend including the attached language in the budget as a starting
point. It is very brief but does address the major points. The intent
is to flesh out the information as time goes on.
The Fire Department pension debt is listed for discussion. Although
usually not thought of as a part of city debt, some debt policies do
address this issue. When a pension benefit increase is approved and
there is not a large enough surplus in the pension fund, debt is
created. The debt is amortized over 10 years by city contributions and
state aid monies.
Shakopee Fire'Relief Association does have ~debt" due to pension
increases over the past 5 years. The alternative is to make larger
than required contributions to eliminate the debt sooner or to have
funding in place before increasing pension benefit levels. In the
range of 7 to 12 years ago, the city did make contributions larger than
required with the benefit level increasing based on the funding in
place.
Action
Discuss and give staff direction.
Gregg Voxland
Finance Director
.,
DEBT SERVICE FUNDS
.
2007 BUDGET "'
ACTIVITY:
To account for the activity of servicing general obligation debt, paid for
by tax levy or special assessments. Any residual balances in debt service
funds will be transferred to the Capital Improvement Fund.
Debt Policy
The term of the debt shall not exceed the life of the asset financed.
The maturity of direct debt shall have 50% maturing in ten years or less.
Long term debt shall not be used to finance current operations.
Total general obligation debt shall not exceed two percent of the market value
of taxable property.
The term of tax support~d debt such as building bonds shall not exceed 20 years
unless there are extraordinary reasons.
Debt supported by special assessments shall have a term of ten years of less
depending on the size of the assessments.
The City will follow a policy of full disclosure in every financial report and
bond prospectus. The Ci ty will comply with Securities Exchange Commission
(SEC) reporting requirements.
FIRE PENSION
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