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Policy Statement: Wise and prudent use of debt provides fiscal and service advantages. Overuse of debt places a burden on the fiscal resources of the City and its taxpayers. The following guidelines provide a framework and limit on debt utilization: 1. The City will confine long-term borrowing to planned capital improvements. 2. The City will not use long-term debt for current operations. 3. The City will pay back debt within a period not to exceed the expected useful life of the projects, with at least 50% of the principal retired within two-thirds of the term of the bond issue. 4. Total general obligation debt shall not exceed 2% of the total market valuation of taxable property in the City. 5. Direct net debt (gross debt less available debt service funds) shall not exceed 3% of the total market valuation of taxable property in the City. 6. The City will maintain good communications with bond rating agencies regarding its financial condition. The City will follow a policy of full disclosure in every financial report and bond prospectus. 7. The City will use refunding mechanisms to reduce interest cost when economically feasible. 8. The City will manage the Debt Levy associated with its 20 year Road Improvement Program to reduce the overall future high point of levy requirements during the final years of the program. The City will apply future unencumbered utility charges; Municipal State Aid fund, excess bond balances and one time revenue sources to accomplish this reduction in future levy requirements. See Exhibit A for the current projections of the plans impact. VIII. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING The key to effective financial management is to provide accurate, current, and meaningful information about the City's operations to guide decision making and enhance and protect the City's financial position. Policy Statement: 1. The City's accounting system will maintain records on a basis consistent with generally accepted accounting standards and principles for local government accounting as set forth by the Government Accounting Standards Board (GASB) and in conformance with the State Auditor's requirements per State Statutes. 2. The City will establish and maintain a high standard of accounting practices. 3. The City will follow a policy of full disclosure written in clear and understandable language in all reports on its financial condition. 4. A primary goal of the Finance Department is to provide timely monthly, quarterly and annual financial reports to users.