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18 <br />SECTION 8 – DEBT MANAGEMENT <br />Purpose <br />Debt provides the City of Little Canada with a revenue source that can be used to finance capital <br />expenditures in advance of when it would be possible to do so on a pay-as-you-go basis. It can <br />reduce long-term costs due to inflation, prevent lost opportunities, and equalize the cost of <br />improvements among present and future constituents. The goal of the City’s debt management <br />program is to stabilize the overall debt burden and future tax levy requirement, ensuring that issued <br />debt can be repaid without weakening the City’s financial condition. <br />Policy <br />This policy will set forth parameters for issuing debt, managing outstanding debt, provide <br />guidance for decision-makers regarding the timing and purposes for which debt may be issued, <br />types and amounts of permissible debt, method of sale that may be used and structural features that <br />may be incorporated. This policy recognized a binding commitment to the full and timely <br />repayment of all debt by the City. Adherence to the debt policy helps the City to maintain a sound <br />debt position and protect its credit quality. <br /> <br />Limitations on the Issuance of Debt <br /> <br />1. Legal Debt Limits <br /> Minnesota Statutes, Section 475 prescribes the statutory debt limit that outstanding <br />principal of debt cannot exceed 3% of taxable market value. <br /> <br /> Current local ordinances do not limit the City’s ability to issue debt. <br /> <br />2. Policy Limits <br /> Use of Debt: Debt will be used only for capital costs. The City will not utilize debt <br />for current operations except in the case of an extreme financial emergency, which is <br />beyond the City’s control or reasonable ability to forecast. <br /> <br /> CIP and Financial Planning: The City’s Capital Improvement Plan (CIP) shall <br />contain debt assumptions which match this policy and requires a commitment to <br />long-range financial planning which looks at multiple years of capital and debt <br />needs. <br /> <br /> Tax Increment Bonds: The City shall use G.O. Tax Increment Bonds only when the <br />development merits special consideration. <br /> <br />3. Financial Limits: <br /> Direct debt is the amount of general obligation principal or lease obligations <br />supported by taxes, special assessments, or tax increment which are outstanding for <br />the City only. Indirect debt is the amount of the City’s share of debt of other taxing <br />jurisdictions. Direct debt per capita shall not exceed $1,000.