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<br />G. Arbitrage Rebate Compliance - The City Finance Department will maintain a system of <br />record keeping and reporting to comply with arbitrage rebate compliance requirements of <br />the Federal tax code. <br /> <br />H. Sound Financing of Debt - When the City utilizes debt financing, it will ensure that the <br />debt is soundly financed by: <br /> <br />· Conservatively projecting the revenue sources that will be used to pay the debt; <br /> <br />Financing the major capital project over a period not greater than the useful life of the <br />major capital project; <br /> <br />· Maintaining a debt service coverage ratio which ensures that combined debt service <br />requirements will not exceed revenues pledged for the payment of debt; and <br /> <br />· To the extent possible, the City will aim to repay at least 25% of the principal amount <br />of its general obligation debt within five years and at least 50% within 10 years. The <br />City may choose to structure debt repayment so as to wraparound existing debt <br />obligations or to achieve other financial planning goals. <br /> <br />1. Credit Enhancement - The City should seek credit enhancement (letters of credit, bond <br />insurance, surety bonds. etc.) when such credit enhancement proves cost effective. Credit <br />enhancement may be used to improve or establish a credit rating on a debt obligation <br />even if such credit enhancement is not cost effective if the use of such credit <br />enhancement meets the financial planning goals. <br /> <br />J. Financing Methods - The City maintains the following guidelines in relation to methods <br />of financing used to issue debt: <br /> <br />· Where it is efficient and cost effective, the City will use revenue or other self- <br />supporting bonds in lieu of tax supported/pledged debt instruments. <br /> <br />When appropriate, the City will issue non-obligation debt, for example, Industrial <br />Development Revenue bonds, to promote community stability and economic growth. <br /> <br />K. Refunding - Periodic reviews of all outstanding debt will be undertaken to deternline <br />refunding opportunities. Refunding will be considered if and when there is a net <br />economic benefit of the refunding or the refunding is essential in order to modernize <br />covenants which impinge on prudent and sound financial management. <br /> <br />City of San Marcos Financial Policy - Revised April 2004 <br /> <br />Page I 7 <br />