Desk ItemPREPARED BY: STEPHEN CONWAY
Finance Director
Reviewed by: Assistant Town Manager Town Attorney Finance
S:\COUNCIL REPORTS\2016\11-01-16\07 Debt Policy\07 Desk Item.doc
MEETING DATE: 11/01/16
ITEM NO: 7
DESK ITEM
COUNCIL AGENDA REPORT
DATE: OCTOBER 21, 2016
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: ADOPT A RESOLUTION APPROVING THE TOWN’S LONG TERM DEBT
POLICY, AND ADOPT A RESOLUTION APPROVING THE TOWN’S
INVESTMENT POLICY
REMARKS:
It has come to our attention that the Policy section of Attachment 2 was not formatted correctly. In
addition, the following sentence was inadvertently left out at the end of the same section: “The Town
will monitor compliance with bond covenants and adhere to federal arbitrage and disclosure
regulations.” Attachment 5 contains the correct Proposed Long Term Debt Policy.
Attachments (previously received with November 1, 2016 Staff Report):
1. Resolution regarding the Town’s Long Term Debt Policy
2. Proposed Town Long Term Debt Policy (red lined)
3. Resolution regarding the Town’s Investment Policy
4. Proposed Town Investment Policy ( red lined)
Attachment received with this Desk Item Report:
5. Correct Proposed Town Long Term Debt Policy (red lined)
COUNCIL POLICY MANUAL
TITLE: Long Term Debt Policy
POLICY NUMBER:
EFFECTIVE DATE:
PAGES:
ENABLING ACTIONS:
REVISED DATES:
APPROVED:
PURPOSE
The Long Term Debt Policy sets forth certain debt management objectives for the Town and
establishes overall parameters for issuing and administering the debt for which the Town is
financially obligated or is responsible for managing.
SCOPE
The following long term debt policy sets the considerations for issuing debt and provides
guidance in the timing and structuring of long term debt commitments.
POLICY
GENERAL PRACTICES
1. The Town will seek to maintain and improve the current bond rating in order to
minimize borrowing costs and preserve access to credit.
2. Bond issue proposals are to be accompanied by an analysis defining how the new issue,
combined with current debt, impacts the Town’s debt capacity and conformance with
Town debt policies.
3. Debt Service costs [General Obligation (GO) Bond, Certificate of Participation (COP),
Revenue Bond, and Contractual Debt] are not to exceed 25% of the Town’s operating
revenue.
4. A ratio of current assets to current liabilities of at least 2/1 will be maintained to ensure
the Town’s ability to pay short-term obligations.
Small Town Service Community Stewardship Future Focus
TITLE: Long Term Debt Policy
PAGE:
2 of 3
POLICY NUMBER:
THE TOWN WILL CONSIDER THE ISSUANCE OF LONG TERM OBLIGATIONS UNDER
THE FOLLOWING CONDITIONS:
1. The Town will use debt financing only for one-time capital improvement projects and
unusual equipment purchases, and only under the following circumstances:
a. When the project is included in the Town’s five-year capital improvement program
and is in conformance with the Town’s General Plan.
b. When the project is not included in the Town five-year capital improvement plan,
but it is an emerging critical need whose timing was not anticipated in the five-year
capital improvement program, or it is a project mandated immediately by State or
Federal requirements.
c. When the project’s useful life, or the projected service life of the equipment, will be
equal to or exceed the term of the financing.
d. When there are designated revenues sufficient to service the debt, whether from
project revenues, other specified and reserved resources, or infrastructure cost-
sharing revenues.
e. Debt financing (other than tax and revenue anticipation notes) is not considered
appropriate for any recurring purpose such as current operating and maintenance
expenditures.
2. The costs of developing and maintaining the Successor Agency to the Town of Los Gatos
Redevelopment Agency (Agency) long term debt policy will be borne by the Agency and
will be developed in conjunction with amendments to existing redevelopment project
area plans and/or new proposals to issue debt by the Successor Agency to the Town of
Los Gatos Redevelopment Agency.
3. The Town will follow all State and Federal regulations and requirements regarding bond
provisions, issuance, taxation and disclosure.
4. Costs incurred by the Town, such as bond counsel and financial advisor fees, printing,
underwriters’ discount, and project design and construction costs, will be charged to the
bond issue to the extent allowable by law.
5. The Town will monitor compliance with bond covenants and adhere to federal arbitrage
and disclosure regulations.
PROCEDURES
This Long Term Debt Policy shall be adopted by resolution of the Town Council. The Treasurer
shall present this Long Term Debt Policy as needed to the Town Council for review to ensure its
TITLE: Long Term Debt Policy
PAGE:
3 of 3
POLICY NUMBER:
consistency with the Town’s long term debt objectives, and current law. Any amendments to
this Long Term Debt Policy shall be approved by the Town Council.
APPROVED AS TO FORM:
Robert Schultz, Town Attorney