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City of St Anthony <br />Financial Plan <br />VI. DEBT MANAGEMENT <br />The use of borrowing and debt is an important and flexible revenue source available to <br />the City. Debt is a mechanism, which allows capital improvements to proceed when <br />needed, in advance of when it would otherwise be possible. It can reduce long-term <br />costs due to inflation, prevent lost opportunities, and equalize the costs of <br />improvements to present and future constituencies. <br />Debt management is an integral part of the financial management of the City. <br />Adequate resources must be provided for the repayment of debt, and the level of debt <br />incurred by the City must be effectively controlled to amounts that are manageable and <br />within levels that will maintain or enhance the City's credit rating. A goal of debt <br />management is to stabilize the overall debt burden and future tax levy requirements to <br />ensure that issued debt can be repaid and prevents default on any municipal debt. A <br />debt level, which is too high, places a financial burden on taxpayers and can create <br />problems for the community's economy as a whole. <br />POLICY STATEMENT <br />Wise and prudent use of debt provides fiscal and service advantages. Overuse of debt <br />places a burden on the fiscal resources of the City and its taxpayers. The following <br />guidelines provide a framework and limit on debt utilization: <br />The City will confine long-term borrowing to planned capital improvements. <br />The City will not use long-term debt for current operations. <br />The City will pay back debt within a period not to exceed the expected useful life <br />of the projects, with at least 50% of the principal retired within two-thirds of the <br />term of the bond issue. <br />4. Total general obligation debt shall not exceed 2% of the total market valuation of <br />taxable property in the City. <br />Direct net debt (gross debt less available debt service funds) shall not exceed <br />3% of the total market valuation of taxable property in the City. <br />6. The City will maintain good communications with bond rating agencies regarding <br />its financial condition. The City will follow a policy of full disclosure in every <br />financial report and bond prospectus. <br />7. The City will use refunding mechanisms to reduce interest cost when <br />economically feasible. <br />124 <br />