HomeMy WebLinkAboutRES 20-7253 (REVISED DEBT MANAGEMENT POLICY)ii
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
RESOLUTION NO.20-7253
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERMOSA
BEACH APPROVING REVISED DEBT MANAGEMENT POLICY IN
COMPLIANCE WITH SB 1029
SECTION 1. Recitals.
1. SB 1029 (amending Government Code section 8855) has been signed into law and imposes a
new requirement on local government agencies who will issue debt in 2017 and thereafter.
2. The City of Hermosa Beach will be an issuer of new debt in 2020 and thereafter within the
meaning of SB 1029.
3. The City Council desires to adopt a "Debt Management Policy" to revise the City's existing
debt management policy, to facilitate and better manage the new debt issued, and to comply with
the requirements of the new law.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hermosa
Beach as follows:
1. Recitals. Each of the above recitals is true and correct and is adopted by the City Council.
2. Debt Policy Approved. The "Debt Management Policy" attached herewith as Exhibit "A"
is hereby approved and adopted as the debt management policy of the City, and supersedes all
prior debt management policies of the City.
3. Effective. This resolution shall be effective immediately. The City Clerk shall certify to
the passage and adoption of this Resolution; shall cause the original of the same to be entered
among the original resolutions of the City Council; and shall make a minute of the passage and
adoption thereof in the minutes of the City Council meeting at which the same is passed and
adopted.
PASSED, APPROVED and ADOPTED this 25th day of August 2020.
PRESIDENT of the City
ATTEST:
—��II+)Dco$ig��need�� e�
by:++�
City Clerk
by:
YOR of the City of Hermosa Beach, California
APPROVED AS TO FORM:
OoauWgnod by;
refffig9 MIkins, City Attorney
Page 1 of 6 20-7253
ii
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
DEBT MANAGEMENT POLICY
This Debt Management Policy (the "Debt Policy") of the City of Hermosa Beach (the
"Issuer") was approved by the Issuer's City Council on August 25, 2020. The Debt Policy may be
amended by the City Council as it deems appropriate from time to time in the prudent management
of the debt of the Issuer. This Debt Policy applies to the Issuer, the Hermosa Beach Public Financing
Authority, and all other subordinate entities of the Issuer for which the City Council serves as the
governing board.
1. Findings
This Debt Policy is intended to comply with Government Code Section 8855(i), effective
on January 1, 2017, and shall govern all debt undertaken by the Issuer.
The Issuer hereby recognizes that a fiscally prudent debt policy is required in order to:
• Maintain the Issuer's sound financial position.
• Ensure the Issuer has the flexibility to respond to changes in future service
priorities, revenue levels, and operating expenses.
• Protect the Issuer's credit -worthiness.
• Ensure that all debt is structured in order to protect both current and future
taxpayers, ratepayers and constituents of the Issuer.
• Ensure that the Issuer's debt is consistent with the Issuer's planning goals and
objectives and capital improvement program or budget, as applicable.
2. Policies
A. Purposes For Which Debt May Be Issued
(i) Long -Term Debt. Long-term debt (generally defined to mean debt maturing beyond
one year after its issuance) may be issued to finance the construction, acquisition, and
rehabilitation of capital improvements and facilities, equipment and land to be owned and
operated by the Issuer.
(a) Long-term debt financings are appropriate when the following conditions exist:
• When the project to be financed is necessary to provide basic services.
Page 2 of 6 20-7253
ii
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
2
3
4
5
6
7
8
9
10
11
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
• When the project to be financed will provide benefit to constituents over
multiple years.
• When total debt does not constitute an unreasonable burden to the Issuer and
its taxpayers and ratepayers.
• When the debt is used to refinance outstanding debt in order to produce debt
service savings or to realize the benefits of a debt restructuring.
(b) Long-term debt financings will not generally be considered appropriate for current
operating expenses and routine maintenance expenses. However, the Issuer may consider
issuance of debt for working capital purposes on a case -by -case basis.
(c) The Issuer may use long-term debt financings subject to the following conditions:
• The project to be financed must be approved by the City Council.
• The weighted average maturity of the debt (or the portion of the debt allocated
to the project) will not exceed the average useful life of the project to be financed
by more than 20%.
• The Issuer estimates that sufficient revenues will be available to service the
debt through its maturity.
• The Issuer determines that the issuance of the debt will comply with the
applicable state and federal law.
• The Issuer shall not incur general obligation bonded indebtedness payable from
ad valorem property taxes that exceeds in the aggregate 2% of the assessed value
of all real and personal property within the boundaries of the Issuer (recognizing
that California Government Code Section 43605 provides for a legal debt limit
of 15% of gross assessed valuation). (Because this provision was enacted when
assessed valuation was based on 25% of market value, the valuation will be
calculated at 25% before the debt limit is applied).
(ii) Short-term debt. Short-term debt (generally defined to mean debt maturing within
one year of its issuance) may be issued to provide financing for the Issuer's operational cash
flows in order to maintain a steady and even cash flow balance. Short-term debt may also be
used to finance short-lived capital projects; for example, the Issuer may undertake lease -
purchase financing for equipment.
Page 3 of 6 20-7253
11
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
26
27
28
(iii) Financings on Behalf of Other Entities. The Issuer may also find it beneficial to
issue debt on behalf of other governmental agencies or private third parties in order to further
the public purposes of Issuer. In such cases, the Issuer shall take reasonable steps to confirm the
financial feasibility of the project to be financed and the financial solvency of any borrower and
that the issuance of such debt is consistent with the policies set forth herein.
B. Types of Debt
For purposes of this Debt Policy, "debt" shall be interpreted broadly to mean bonds,
notes, certificates of participation, financing leases, or other financing obligations. The use of
the term "debt' in this Debt Policy shall be solely for convenience and shall not be interpreted
to characterize any such obligation as an indebtedness or debt in contravention of any statutory
or constitutional debt limitation.
The following types of debt are allowable under this Debt Policy:
• general obligation bonds
• bond or grant anticipation notes
• lease revenue bonds, certificates of participation and lease -purchase
transactions
• other revenue bonds and certificates of participation
• tax and revenue anticipation notes
• land -secured financings, such as special tax revenue bonds issued under the
Mello -Roos Community Facilities Act of 1982, as amended, and limited
obligation bonds issued under applicable assessment statutes
• tax increment financing to the extent permitted under state law
• conduit financings, such as financings for affordable rental housing and
qualified 5016 organizations
The Issuer may from time to time find that other forms of debt would be beneficial
to further its public purposes and may approve such debt without an amendment of this Debt
Policy.
Page 4 of 6 20-7253
ii
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Debt shall be issued as fixed rate debt unless the Issuer makes a specific
determination as to why a variable rate issue would be beneficial to the Issuer in a specific
circumstance.
The Issuer will generally conduct financings on a competitive basis; however,
negotiated financings (including private placements) may be used upon the advice of the
Issuer's municipal advisor if circumstances so warrant (for example, where the credit quality
of the financing, market conditions, the use of an unusual or complex financing or security
structure, or other factors weigh in favor of a negotiated financing).
C. Relationship of Debt to Capital Improvement Program and Budget
The Issuer is committed to long-term capital planning. The Issuer intends to issue
debt for the purposes stated in this Debt Policy and to implement policy decisions
incorporated in the Issuer's capital budget and the capital improvement plan.
The Issuer shall strive to fund the upkeep and maintenance of its infrastructure and
facilities due to normal wear and tear through the expenditure of available operating
revenues. The Issuer shall seek to avoid the use of debt to fund infrastructure and facilities
improvements that are the result of normal wear and tear.
The Issuer shall integrate its debt issuances with the goals of its capital improvement
program by timing the issuance of debt to ensure that projects are available when needed in
furtherance of the Issuer's public purposes.
The Issuer shall seek to avoid the use of debt to fund infrastructure and facilities
improvements in circumstances when the sole purpose of such debt financing is to reduce
annual budgetary expenditures.
The Issuer shall seek to issue debt in a timely manner to avoid having to make
unplanned expenditures for capital improvements or equipment from its general fund.
D. Policy Goals Related to Planning Goals and Objectives
The Issuer is committed to long-term financial planning, maintaining appropriate
reserves levels and employing prudent practices in governance, management and budget
administration. The Issuer intends to issue debt for the purposes stated in this Policy and to
implement policy decisions incorporated in the Issuer's annual operations budget.
It is a policy goal of the Issuer to protect taxpayers, ratepayers and constituents by
utilizing conservative financing methods and techniques so as to obtain the highest practical
Page 5 of 6 20-7253
ii
DocuSign Envelope ID: 27F910C7-EF9C-43F8-A923-B6BEE7962E51
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
credit ratings (if applicable) and the lowest practical borrowing costs.
The Issuer will comply with applicable state and federal law as it pertains to the
maximum term of debt and the procedures for levying and imposing any related taxes,
assessments, rates and charges.
When refinancing debt, it shall be the policy goal of the Issuer to realize, whenever
possible, and subject to any overriding non -financial policy considerations, (i) minimum
net present value debt service savings equal to or greater than 3.0% of the refunded principal
amount, and (ii) present value debt service savings equal to or greater than 100% of any
escrow fund negative arbitrage.
E. Internal Control Procedures
When issuing debt, in addition to complying with the terms of this Debt Policy, the
Issuer shall comply with any other applicable policies regarding initial bond disclosure,
continuing disclosure, post -issuance compliance, and investment of bond proceeds.
The Issuer will periodically review the requirements of and will remain in
compliance with the following:
• any continuing disclosure undertakings under SEC Rule 15c2-12 or annual
disclosure obligations under Government Code section 8855(k),
• any federal tax compliance requirements, including without limitation
arbitrage and rebate compliance, related to any prior bond issues, and
• the Issuer's investment policies as they relate to the investment of bond
proceeds.
Proceeds of debt will be held either (a) by a third -party trustee, which will disburse
such proceeds to the Issuer upon the submission of one or more written requisitions, or (b)
by the Issuer, to be held and accounted for in a separate fund or account, the expenditure of
which will be carefully documented by the Issuer.
Page 6 of 6 20-7253
State of California )
County of Los Angeles ) ss
City of Hermosa Beach )
October 6, 2020
Certification of Council Action
RESOLUTION NO. 20-7253
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERMOSA
BEACH APPROVING REVISED DEBT MANAGEMENT POLICY IN
COMPLIANCE WITH SB 1029
I, Eduardo Sarmiento, City Clerk of the City of Hermosa Beach do hereby certify that the
above and foregoing Resolution 20-7253 was duly approved and adopted by the City
Council of said City at its regular meeting thereof held via teleconference on the
25th day of August, 2020 and passed by the following vote.
AYES: COUNCILMEMBERS ARMATO, DETOY, FANGARY, MAYOR
PROTEMPORE MASSEY, MAYOR CAMPBELL
NOES: NONE
ABSTAIN: NONE
ABSENT: NONE
Ed ardo Sarmiento,
City Clerk