Debt Management Policy

Code No.: 802.5
DEBT MANAGEMENT POLICY
DEBT LIMITS
Credit Ratings
The school district seeks to maintain the highest possible credit ratings for all categories of short- and
long-term debt that can be achieved without compromising the delivery of services and the achievement
of adopted objectives. The school district recognizes that external economic, natural, or other events
may from time to time affect the creditworthiness of its debt. Nevertheless, the school district is
committed to ensuring that actions within their control are prudent.
Debt Limits
For general obligation debt, the school district’s outstanding debt limit shall be no more than five
percent (5%) of the actual value of property within the school district’s boundaries, as prescribed the
Iowa constitution and statutory restrictions.
For revenue debt, the school district’s goal is to provide adequate debt service coverage of at least 1.20
times the annual debt service costs.
In accordance with Iowa law, the school district may not act as a conduit issuer or issue municipal
securities to raise capital for revenue-generating projects where the funds generated are used by a third
party (“conduit borrower”) to make payments to investors.
PURPOSES AND USES OF DEBT
Capital Planning
To enhance creditworthiness and prudent financial management, the school district is committed to
systematic capital planning, intergovernmental cooperation and coordination and long-term financial
planning.
Capital Financing
The school district may issue long-term debt for capital projects as authorized by Iowa law, which
include, but are not limited to, the costs of planning, design, land acquisition, buildings, permanent
structures, attached fixtures or equipment, and movable pieces of equipment. Capitalized interest may be
included in sizing any capital project debt issue. The types of debt instruments to be used by the school
district include:
 General Obligation Bonds
 General Obligation Capital Loan Notes
 Bond Anticipation Notes
 Revenue Anticipation Notes
 School Infrastructure Sales, Services and Use Tax Revenue Bonds
 Lease Purchase Agreements, including Certificates of Participation
Working Capital Financing
The school district may issue debt for working capital for operations after cash flow analysis has
determined that there is a mismatch between available cash and cash outflows. The school district shall
strive to repay working capital debt by the end of the fiscal year in which the debt was incurred. A
Working Capital Reserve may be included in sizing any working capital debt issue.
Refundings
Periodic reviews of all outstanding debt will be undertaken to determine if refunding opportunities exist.
Refunding will be considered (within federal tax law restraints) if and when there is a net economic
benefit of the refunding or if the refunding is otherwise in the best interests of the school district, such as
to release restrictive bond covenants which affect the operations and management of the school district.
In general, advance refundings for economic savings will be undertaken when a net present value savings
exceeds three percent of the refunded debt can be achieved. Current refundings, which produce a new
present value savings of less than three percent will be considered on a case by case basis taking into
consideration bond covenants and general conditions. Refundings with negative savings will not be
considered unless there is a compelling public policy objective for doing so.
DEBT STANDARDS AND STRUCTURE
Length of Debt
Debt will be structured for the shortest period consistent with a fair allocation of costs to current and
future beneficiaries or users. Long-term debt will not be issued for periods exceeding the useful life or
average useful lives of the project or projects to be financed. All debt issued will adhere to state and
federal law regarding the length of time the debt may be outstanding.
Debt Structure
Debt will be structured to achieve the lowest possible net cost to the school district given market
conditions, the urgency of the capital project, the type of debt being issued, and the nature and type of
repayment source. To the extent possible, the school district will design the repayment of its overall debt
to rapidly recapture its credit capacity for future use.
Generally, the school district will only issue fixed-rate debt. In very limited circumstances, the school
district may issue variable rate debt, consistent with the limitations of Iowa law and upon a finding of
the board that the use of fixed rate debt is not in the best interest of the school district and a statement of
the reasons for the use of variable rate debt.
All debt may be structured using discount, par or premium coupons, and as serial or term bonds or
notes, or any combination thereof, consistent with Iowa law. The school district should utilize the
coupon structure that produces the lowest True Interest Cost (TIC) taking into consideration the call
option value of any callable maturities.
The school district will strive to structure their debt in sinking fund installments for each debt issue
that achieves, as nearly as practicable, level debt service within an issue or overall debt service within
a particular classification of debt.
Derivatives (including, but not limited to, interest rate swaps, caps, collars, corridors, ceiling and floor
agreements, forward agreements, float agreements, or other similar financing arrangements), zerocoupon
or capital appreciation bonds are not allowed to be issued consistent with State law.
Decision Analysis to Issue Debt
Whenever the school district is contemplating the issuance of debt, information will be developed
concerning the following four categories commonly used by rating agencies assessing the school
district’s credit worthiness, listed below.
Debt Analysis – Debt capacity analysis; purpose for which debt is proposed to be issued; debt structure;
debt burden; debt history and trends; and adequacy of debt and capital planning.
Financial Analysis – Stability, diversity, and growth rates of tax or other revenue sources; trend in
assessed valuation and collections; current budget trends; appraisal of past revenue and expenditure
trends; history and long-term trends of revenues and expenditures; evidences of financial planning;
adherence to GAAP; audit results; fund balance status and trends in operating and debt funds; financial
monitoring systems and capabilities; and cash flow projections.
Governmental and Administrative Analysis – Government organization structure; location of financial
responsibilities and degree of control; adequacy of basic service provision; intergovernmental
cooperation/conflict and extent of duplication; and overall planning efforts.
Economic Analysis – Geographic and location advantages; population and demographic characteristics;
wealth indicators; types of employment, industry and occupation; housing characteristics; new
construction; evidences of industrial decline; and trend of the economy.
DEBT ISSUANCE
Credit Enhancement
Credit enhancements (.i.e., bond insurance, etc.) may be used but only when the net debt service on the
debt is reduced by more than the costs of the credit enhancement.
Costs and Fees
All costs and fees related to issuing the debt will be paid out of debt proceeds and allocated across
all projects receiving proceeds of the debt issue.
Method of Sale
Generally, all school district debt will be sold through a competitive bidding process. Bids will be
awarded on a TIC basis providing other bidding requirements are satisfied.
The school district may sell debt using a negotiated process in extraordinary circumstances when the
complexity of the issue requires specialized expertise, when the negotiated sale would result in
substantial savings in time or money, or when market conditions of school district credit are unusually
volatile or uncertain.
Professional Service Providers
The school district will retain external bond counsel for all debt issues. All debt issued by the school
district will include a written opinion by bond counsel affirming that the school district is authorized to
issue the debt, stating that the school district has met all Iowa constitutional and statutory requirements
necessary for issuance and determining the debt’s federal income tax status. The bond counsel retained
must have comprehensive municipal debt experience and a thorough understanding of Iowa law as it
relates to the issuance of the particular debt.
The school district will retain an independent financial advisor. The financial advisor will be
responsible for structuring and preparing all offering documents for each debt issue. The financial
advisor retained will have comprehensive municipal debt experience, experience with diverse financial
structuring and pricing of municipal securities.
The treasurer shall have the authority to periodically select other service providers (e.g., escrow agents,
verification agents, trustees, arbitrage consultants, rebate specialist, etc.) as necessary to meet legal
requirements and minimize net debt costs. These services can include debt restructuring services and
security or escrow purchases.
Compensation for bond counsel, financial advisor and other service providers will be as economical as
possible and consistent with industry standards for the desired qualification levels.
DEBT MANAGEMENT
Investment of Debt Proceeds
The school district shall invest all proceeds received from the issuance of debt separate from the school
district’s consolidated cash pool unless otherwise specified by the authorizing bond resolution or trust
indenture. Investments will be consistent with those authorized by Iowa law and the school district’s
Investment Policy to maintain safety of principal and liquidity of the funds.
Arbitrage and Record Keeping Compliance
The treasurer shall maintain a system of record-keeping, reporting and compliance procedures with
respect to all federal tax requirements which are currently, or may become applicable through the
lifetime of all tax-exempt or tax credit bonds.
Federal tax compliance, record-keeping, reporting and compliance procedures shall include not be
limited to:
1) post-issuance compliance procedures (including proper use of proceeds, timely expenditure of
proceeds, proper use of bond financed property, yield restriction and rebate, and timely return
filing);
2) proper maintenance of records to support federal tax compliance;
3) investments and arbitrage compliance;
4) expenditures and assets;
5) private business use; and
6) designation of primary responsibilities for federal tax compliance of all bond financings.
Financial Disclosure
The school district is committed to full and complete financial disclosure, and to cooperating fully with
rating agencies, institutional and individual investors, other levels of government, and the general public
to share comprehensible and accurate financial information. The school district is dedicated to meeting
secondary disclosure requirements on a timely and comprehensive basis, as promulgated by the
Securities and Exchange Commission.
The Official Statements accompanying debt issues, Annual Audits, and Continuing Disclosure
statements will meet the standards articulated by the Municipal Securities Rulemaking Board (MSRB),
the Government Accounting Standards Board (GASB), the Securities and Exchange Commission
(SEC), Generally Accepted Accounting Principles (GAAP) and the Internal Revenue Service (IRS).
The treasurer shall be responsible for ongoing debt disclosure as required by any Continuing Disclosure
Certificate for any debt issue and for maintain compliance with disclosure standards promulgated by
state and federal regulatory bodies
Legal Reference Iowa Code §§ 74-76; 278.1; 298; 298A (2013)
Approved 4/18/16