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<br />F. Debt Limitations - The City maintains the following limitations in relation to debt <br />lssuance: <br /> <br />An Ad Valorem tax rate of $l.20 per $lOO of assessed value is the maximum <br />municipal tax rate that may be levied for all General Fund tax supported expenditures <br />and debt service. <br /> <br />I <br /> <br />Debt payments made solely from ad valorem tax revenue should not exceed 20% of <br />combined General Fund and Debt Service Fund expenditures. <br /> <br />Total outstanding debt should not exceed 5% of the current year's taxable assessed <br />valuation. <br /> <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 I <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 />I <br /> <br />City of San Marcos Financial PolIcy - ReVIsed April 2005 <br /> <br />Page l6 <br />