HomeMy WebLinkAbout06. Consider adopting new BP 029 - Debt Management and Continuing DisclosureIte m 6.
CENTRAL SAN BOARD OF DI RECTORS
POSIT IO N PA PER
M E E T I NG D AT E :A UG US T 17, 2017
S UB J E C T: C O NS I D E R A D O P T I NG NE W B O A R D P O L I C Y NO . B P 029 - DE B T
MA N A GE ME NT A ND CONT I N U I N G DI S CL OS URE. A P P R O VA L
R E C O MME ND E D B Y A D MI NI S T R AT I O N C O MMI T T E E .
S UB M I T T E D B Y:
P HI L I P L E I B E R , D I R E C TO R O F F I NA NC E A ND
A D MI NI S T R AT I O N
I NI T I AT I NG D E PART M E NT:
A D MI NI S T R AT I O N-F I NA NC E
RE V I E WE D B Y:T HE A VA S S A L L O , F I NA NC E MA NA G E R
A NN S A S A K I , D E P UT Y G E NE R A L MA NA G E R
R oger S . B ailey
G eneral Manager
I S S UE
C entral S an does not currently have a debt policy. W ith a capital spending program that is projected to
increase signif ic antly f rom the current level, and a f inancial plan that contemplates the use of debt in the
coming decade, the adoption of a debt polic y that addresses the permis s ible uses, types, and parameters
of debt is advis ed.
B AC K G RO UND
D uring 2016, the B oard directed the G eneral Manager to develop a debt policy, and the adoption of a debt
policy was inc luded as a F iscal Year (F Y) 2016-17 goal in the current two-year S trategic P lan. A dditionally,
C alif ornia S enate B ill No. 1029, approved by the G overnor S eptember 12, 2016, requires that any iss uer
of state or loc al government debt shall submit a report on the issuance of any debt to the C alif ornia D ebt
and I nvestment A dvisory C ommission (C D I A C ), shall provide certain ongoing reporting related to suc h
debt, and shall have adopted a debt policy c oncerning any debt issuance. T he table below ref erences
where the f ive elements required by S B 1029 are addressed in the draf t policy.
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S B 1029 Requir ement L ocation in C entr al S an P olicy
1. T he purpos es f or which the debt
proceeds may be used.
V I I . S TA ND A R D S F O R US E O F D E B T
F I NA NC I NG
A . Use and Timing of D ebt
V I I I . F I NA NC I NG C R I T E R I A
2. T he types of debt that may be issued.X . T YP E S O F D E B T
3. T he relationship of the debt to, and
integration with, the issuer ’s capital
improvement program or budget, if
applicable.
I V. I NT E G R AT I O N W I T H O T HE R
F I NA NC I A L P O L I C I E S A ND
D O C UME NT S
4. P olicy goals related to the issuer ’s
planning goals and objectives.
I I . P O L I C Y O B J E C T I V E S
V I I . S TA ND A R D S F O R US E O F D E B T
F I NA NC I NG
A . Use and Timing of D ebt
5. T he internal control procedures that the
issuer has implemented, or will implement,
to ensure that the proceeds of the
proposed debt issuance will be directed to
the intended use.
I I I . S C O P E O F D E L E G AT I O N A ND
A UT HO R I T Y
I V. R O L E S A ND R E S P O NS I B I L I T I E S
V. E T HI C S A ND C O NF L I C T S O F
I NT E R E S T
V I I . S TA ND A R D S F O R US E O F D E B T
F I NA NC I NG
A . O ngoing D ebt A dministration and
I nternal C ontrols
X I V. MA R K E T R E L AT I O NS HI P S
A . C ontinuing D is c losure
C entral S an s taf f draf ted the attached debt policy using the f ollowing proc es s:
1. O btained s everal debt policies f rom other agencies and localities that f inancial advisor P F M had
assisted in developing which met the requirements of S B 1029;
2. R eviewed and integrated provisions of the various policies to arrive at a comprehensive draf t;
3. A ddres s ed specif ic matters of interes t and concern to C entral S an and obtained f eedback f rom
C entral S an staf f ;
4. S plit the draf t into a policy level document containing higher-level polic y related guidance and a more
detailed procedures-level document that provides more guidance on s pecif ic issues;
5. O btained f eedback on the draf t f rom P F M and another f inancial advis or, S perry C apital;
6. O btained initial f eedback f rom the A dministration C ommittee on J une 6, 2017, (including specif ying
which provisions were required by regulation/statute) and made edits accordingly;
7. O btained additional f eedback f rom the A dministration C ommittee on J une 20, 2017, regarding
inclusion of the f ollowing in the draf t polic y.
S pecified a debt service coverage target of 2.0x;
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S pecified a limit of 60% debt for funding the capital program over a ten-year period; and
S pecified that the weighted average maturity of bonds should not exceed 100% of the weighted
average useful life of the capital assets being financed.
8. O btained additional f eedback f rom the A dministration C ommittee on J uly 11, 2017, where the
additions f rom J une 20 were discuss ed and a request was made f or analysis on the impact of
additional potential debt limits f or non-pipeline capital projects.
9. O btained additional f eedback f rom the A dministration C ommittee on A ugust 1, 2017. D iscussion
was held regarding the impacts of 60% and 80% debt f unding limits f or non-pipeline projects. A
60% f unding limit would have an additional rate impact of between 1.3 to 1.6% per year. A n 80%
limit would not appear to have a rate impact, but could be a constraint and af f ect considerations
regarding wholesale customer bills. T he A dministration C ommittee elected not to f urther specif y
either of these constraints in the draf t policy, and approved moving the draf t policy f orward f or B oard
consideration.
T he policy als o addresses matters of required disclosures related to debt and appoints the D irector of
F inance and A dministration as respons ible f or these disclosures. T his includes required disclosures at
the time of is s uance, and continuing dis c losures to the C alif ornia D ebt and I nvestment A dvisory
C ommiss ion (C D I A C ), and under the Municipal S ecurities R ulemaking B oard.
ALT E RNAT I V E S /C O NS I D E RAT I O NS
A lternatives related to a debt policy include:
1. L evel of detail contained in the document, f rom high-level policy to s pecif ic detailed provisions.
Various agencies have debt policies that cover this range.
2. T he overall risk stance taken with res pec t to the use and types of debt, f rom conservative to more
aggress ive.
3. T he extent to which the document pros c ribes ongoing B oard reporting, transparency, and internal
controls related to debt.
W ith respect to these considerations, the c urrent proposed debt policy:
1. P rovides a moderate level of specif ic ity, with additional detail contained in a G eneral Manager
maintained administrative procedure. T his administrative procedure was provided to the
A dminis tration C ommittee f or review and context.
2. I s cons ervative in that it:
C ontemplates targeting the highest possible credit ratings consistent with Central San’s debt
management objectives;
S pecifies a 2.0x debt service coverage target (which is consistent with the Moody’s rating criteria for
a Aaa rating);
S pecifies that the amount of debt to be issued in a specified ten-year period will be limited
(not more than 60% overall), and that rate/tax revenues will need to fund at least the amount
spent on pipeline replacement program over a ten-year period.
S pecifies that the weighted average maturity of bonds should not exceed 100% of the
weighted average useful life of the capital assets being financed, and;
3. S pecif ies B oard approval of each debt transaction, provides transparency regarding the
contemplated use of debt in the f inanc ial plan, ongoing reporting regarding debt, and the
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maintenanc e of internal controls regarding debt administration.
F I NANC I AL I M PAC T S
T he adoption of a debt policy does not have an immediate f inancial impac t, but the content of the polic y
governs any s ubsequent debt issuance. T he issuance of debt would have f inancial impacts related to:
the need to pay principal and interest and to collect f unding f or suc h f rom the S ewer S ervice C harge
and wholes ale customers;
providing f or a debt service coverage f ac tor (specif ied as 2.0x).
A debt policy would provide guidance on matters such as the type of debt that can be issued, the
allowable term, allowable purposes f or use of debt proceeds, and other administrative matters related to
the debt.
I mportantly, the policy as draf ted would not require C entral S an to deviate f rom the rate path presented to
the B oard in c onnection with the F Y 2017-18 and F Y 2018-19 rate approval. T he B oard may of cours e
take other f uture actions that have an ef f ec t on the rates presented in that f inancial plan.
C O M M I T T E E RE C O M M E ND AT I O N
A t its A ugust 1, 2017 meeting, the A dminis tration C ommittee recommended B oard approval of the draf t
policy.
RE C O M M E ND E D B O ARD AC T I O N
A dopt new B oard P olicy No. B P 029 - Debt Management and Conti nui ng Di scl osure.
Strategic Plan Tie-I n
G O A L T H R E E : B e a F iscally S ound and E ffective Water S ector U tility
Strategy 1 - Conduct Long-Range Financial Planning
G O A L F I V E : M aintain a R eliable I nfr astr uctur e
Strategy 2 - Facilitate Long-term Capital Renewal and Replacement
AT TAC HM E NT S :
D escription
1. P roposed B P 029 - D ebt Management and C ontinuing D isclosure
2. D ebt Management and C ontinuing D isc los ure P resentation
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Number: BP 029
Related Admin. Procedure AP 029
Authority: Board of Directors
Effective: August 17, 2017
Revised:
Reviewed:
Initiating Dept./Div.: Administration/Finance
BOARD POLICY
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
I. PURPOSE
The Government Finance Officers Association (GFOA) recommends1 as a best
management practice that state and local governments adopt comprehensive
written debt management policies to improve the quality of decisions, articulate
policy goals, provide guidelines for the structure of debt issuance, and
demonstrate a commitment to long-term capital financial planning. Additionally,
California SB 1029 requires public agency issuers of debt to adopt
comprehensive written debt management policies pursuant to the GFOA
recommendation, and to provide reports on any issuance prior to and after the
debt sale, and on an ongoing basis, to the California Debt and Investment
Advisory Commission (CDIAC).2
The purpose of this Debt Management and Continuing Disclosure Policy (Debt Policy) is
to organize and formalize debt issuance and management related policies and
procedures for the Central Contra Costa Sanitary District (District). This Debt Policy is
applicable to both the District and the Central Contra Costa Sanitary District Facilities
Financing Authority. This Debt Policy is intended to comply with Government Code
Section 8855(i). General Manager maintained procedures amplify and provide
additional guidance to staff related to the Debt Policy. The debt policies and procedures
of the District are subject to and limited by applicable provisions of State and Federal
law.
1 In their publication “Best Practice Debt Management Policy”
2 https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB1029
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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II. POLICY OBJECTIVES
The primary objectives of the District’s debt and f inancing related activities are the
following:
• Maintain cost-effective access to the capital markets through prudent
fiscal management policies and practices;
• Specify parameters related to the prudent use of debt in the context of The
District’s rates and financial planning;
o Ensure debt proceeds are expenditures for permissible uses as
defined in this policy, and in accordance with bond covenants and
other applicable requirements;
• Minimize debt service commitments through effective planning and cash
management;
• Ensure the District is compliant with all applicable federal and state
securities laws;
• Protect the District’s creditworthiness and achieve the highest practical
credit ratings; and
• Maintain the District’s sound financial position.
III. SCOPE AND DELEGATION OF AUTHORITY
This Debt Policy will govern the issuance and management of all debt funded through
the capital markets, including the selection and management of related financial and
advisory services and products, and the investment of bond proceeds.
Overall policy direction of this Debt Policy will be provided by the District’s Board of
Directors (Board). Responsibility for implementation of the Debt Policy and day-to-day
responsibility for structuring, implementing, and m anaging the District’s debt and finance
program will lie with the General Manager or their designee (Director of Finance and
Administration). The Board’s adoption of the District’s Annual Budget and Capital
Improvement Program (CIP), or review of the financial plan, does not, in and of itself,
constitute authorization for debt issuance for any capital projects. This Debt Policy
requires that the Board specifically authorize each debt financing.
While adherence to this Debt Policy is required in applicable circumstances, the Board
recognizes that changes in the capital markets, District programs, and other unforeseen
circumstances may from time to time produce situations that are not covered by the
Debt Policy and will require modifications or exceptions to achieve policy goals. In these
cases, management flexibility is appropriate, provided specific authorization from the
Board is obtained.
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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IV. ROLES AND RESPONSIBILITIES
• General Manager and/or Deputy General Manager – Provides oversight of
debt program and recommendations on debt to the Board.
• Director of Finance and Administration – Has primary responsibility for
debt issuance recommendations, financing transaction execution,
oversight of bond proceeds expenditures, and ongoing debt management.
• Board of Directors – Sets debt policy and approves individual
transactions.
V. ETHICS AND CONFLICTS OF INTEREST
Staff and Board involved in the debt management program will not engage in any
personal business activities that could conflict with proper and lawful execution of
securing capital financing and are to comply with the District’s Conflict of Interest
Code.
VI. INTEGRATION WITH OTHER FINANCIAL POLICIES AND DOCUMENTS
The District is committed to long-term capital and financial planning, maintaining
appropriate reserve levels and employing prudent practices in governance,
management and budget administration. Policies related to these topics are adopted
separately but affect this Debt Policy in the context of the overall long-term financial
plan. The Board shall be presented with the results of the long-term financial plan in
contemplation of any proposed rate adjustment where the capital budget, financial
policies, proposed debt issuances and resulting debt service are presented as elements
contributing to the calculation of overall projected customer rates.
VII. STANDARDS FOR USE OF DEBT FINANCING
In financial planning, the District will evaluate the use of various alternatives including
current year funding of capital projects through rates, various forms of debt financing,
use of reserves, and inter-fund borrowing. The District will utilize the most
advantageous financing alternative balancing the goals of long-term cost minimization,
risk exposure, and compliance with generally accepted ratemaking principles. The
District’s debt management program will consider debt issuance where public policy,
equity, general ratemaking principles, economic efficiency and compliance with long-
term financial planning parameters favor financing over cash funding.
A. Use and Timing of Debt
The District 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 District’s public purposes and are
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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consistent with the rate and financial planning parameters specified in the
District’s long-term financial plans. The Board shall be presented with a long-term
financial plan in each instance Sewer Service Charge rates are to be adjusted.
1. The long-term financial plans will specify an expected debt issuance
amount over a decade or more long-term planning horizon.
a. The District shall target rate or tax revenue funding of, at a minimum,
the value of the collection system replacement program component of
the CIP.
b. Not more than 60% of the overall CIP shall be financed with debt.
2. All projects in the CIP are eligible to use debt financing, so long as the
minimum rate or tax revenues are generated as described in A.1 of this
section.
This policy does not contemplate the use of debt financing to fund ongoing
operating & maintenance expenditures; exceptions beyond a de-minimis amount
would require approval of the Board.
With respect to debt repayment and amortization, the debt repayment period
should be structured so that the weighted average maturity of the debt does not
exceed 100% of the expected average useful life of the project being financed.
B. Credit Quality
All District debt management activities for new debt issuances will be conducted
in a manner conducive to receiving the highest credit ratings possible consistent
with the District’s debt management objectives.
As debt service coverage is a key ratings consideration, the District shall target a
debt service coverage level of at least 2.0x or greater for financial planning and
ratemaking purposes.
C. Ongoing Debt Administration and Internal Controls
The District will maintain all debt-related records according to the District’s
Retention Policy. The District will maintain internal controls to ensure
compliance with the Debt Policy (including use of bond proceeds for
purposes specified in the applicable Bond Official Statements and in
compliance with this debt policy), all debt covenants and any applicable
requirements of Federal and State law, including but not limited to the
following: initial bond disclosure, continuing disclosure, tax-exemption,
post-issuance compliance, investment of bond proceeds (including, for
example, any continuing disclosure obligations under Securities and
Exchange Commission (SEC) Rule 15c2-12, and tax covenants, and
related federal tax compliance requirements such as arbitrage restrictions
and rebate requirements), and annual transparency reporting to CDIAC.
These internal controls are further specified in the related Debt
Management and Continuing Disclosure (AP 029).
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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D. Rebate Policy and System
The District will develop a system of reporting interest earnings that
relates to and complies with Internal Revenue Code requirements relating
to rebate, yield limits and arbitrage. The District will accurately account for
all interest earnings in debt-related funds to ensure that the District is
compliant with all debt covenants and with state and federal laws. The
District will invest funds in accordance with the investment parameters set
forth in each respective bond indenture, and as permitted by the District’s
Statement of Investment Policy (BP 005).
VIII. FINANCING CRITERIA
When District staff determines the use of debt is appropriate, staff shall provide a report
to the Board that describes the intended use of the financing proceeds (funding for new
projects or to refund existing bonds), and recommends a specific debt type to include
duration, type, interest rate characteristics, call features, credit enhancement or financial
derivatives to be used in the transaction. For refunding transactions, a comprehensive
report on the debt to be redeemed, the replacement debt, and the benefits of the
transaction shall be provided.
IX. TERMS AND CONDITIONS OF DEBT
The District will establish all terms and conditions relating to the issuance of debt, and
will control, manage, and invest all debt proceeds. The District will specify to the Board
proposed debt terms, coupon structure, debt service structure, redemption features, any
use of capitalized interest, and lien structure.
X. TYPES OF DEBT
The following types of debt are allowable under this Debt Policy, subject to applicable
law, and the District’s statutory authority to issue debt:
• General obligation bonds
• Commercial paper
• Bond or grant anticipation notes
• Lease revenue bonds, certificates of participation and lease-purchase
transactions
• Other revenue bonds, including private placement obligations
• 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
• Refunding Obligations
• State Revolving Fund Loans
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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• Lines of Credit
• Letters of Credit
• The Board 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.
XI. CREDIT ENHANCEMENTS
The District may consider the use of credit enhancement on a case-by-case basis,
evaluating the economic benefit versus cost for each case. Only when a clearly
demonstrable savings or other measurable advantages can be shown will enhancement
be considered.
XII. REFINANCING OUTSTANDING DEBT
The District will periodically evaluate outstanding bond issues for refunding
opportunities and will bring to the attention of the Board those opportunities that are in
the District’s interest. Reports to the Board on potential refunding shall describe
anticipated savings and the structure of refunding and refunded debt.
XIII. METHODS OF ISSUANCE
District bonds may be sold on a competitive or negotiated basis (including private
placement). A recommendation regarding the proposed use of either method shall be
prepared by staff and provided to the Board prior to or concurrent with the proposed
issuance.
XIV. MARKET RELATIONSHIPS
A. Rating Agencies and Investors
The General Manager and designees (Deputy General Manager and Director of
Finance and Administration) will be responsible for maintaining the District’s
relationships with rating agencies, which will typically include two or more of the
nationally recognized statistical rating agencies.
B. Board Communication
The General Manager will make available to the Board any ratings report or other
relevant feedback provided from rating agencies and/or investors regarding the
District’s financial strengths and weaknesses and recommendations for
addressing any weaknesses.
C. Continuing Disclosure
The District will remain in compliance with SEC Rule 15c2-12 addressing
continuing disclosure obligations. The District will also comply with state
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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reporting requirements specified in SB 1029, which require initial and
ongoing debt reporting requirements for California public agencies.
D. Rebate Reporting
The use and investment of bond proceeds shall be monitored to ensure
compliance with arbitrage restrictions.
E. Other Jurisdictions
From time to time, the District may issue bonds to fund projects that provide a
benefit to other public entities, (e.g. City of Concord). The District will conduct
such analyses as deemed necessary to assure adequate cost recovery for such
funding and to mitigate risks to the District.
The District may participate in a joint powers authority with one or more other
eligible entities pursuant to Section 6500 of the California Government Code if
deemed advantageous and appropriate and approved by the Board.
XV. CONSULTANTS
A. Selection of Financing Team Members
The General Manager or designee will make recommendations for all
financing team members, with the Board providing final approval.
Financing team members may include a financial advisor, bond counsel,
disclosure counsel (which may be the same firm as bond counsel), and
underwriter. Selection of those financing team members shall be in
accordance with Professional Service and Consultant provisions of the
District’s procurement policies, and consistent with Chapter 2.36
“Purchasing and Materials Policy” of the District Code. In the event of a
competitive bond sale, the District’s debt will be offered to the underwriter
providing the most cost advantageous proposal to the District.
B. Financial Advisor
The District may utilize a financial advisor to assist in its debt issuance
and debt administration processes as is deemed prudent and necessary
by management and in compliance with Municipal Securities Rulemaking
Board (MSRB) regulations.
C. Bond Counsel
District debt will include a written opinion by legal counsel affirming that
the District is authorized to issue the proposed debt and that the District
has met all constitutional and statutory requirements necessary for
issuance and a determination of the proposed debt’s federal income tax
status. The approving opinion and other documents relating to the
issuance of debt will be prepared by counsel with extensive experience in
public finance and tax issues.
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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D. Disclosure Counsel
The District may utilize a separate firm to serve as disclosure counsel as it
deems necessary. If cost effective, bond counsel may also serve as disclosure
counsel.
E. Underwriter
The District will have the right to select a senior manager for a proposed
negotiated sale, as well as co-managers and selling group members, as
appropriate.
F. Conflict of Interest Disclosure by Financing Team Members
All financing team members will be required to provide full and complete
disclosure, relative to agreements with other financing team members and
outside parties. The extent of disclosure may vary depending on the
nature of the transaction. However, in general terms, no agreements will
be permitted which could compromise the firm’s ability to provide
independent advice that is solely in the District’s interests (to the extent
the firm’s role involves a duty to do so) or which could reasonably be
perceived as a conflict of interest.
XVI. INITIAL AND CONTINUING DISCLOSURE COMPLIANCE
A. Disclosure Coordinator and Overall Requirements for Initial and Continuing
Disclosure
The Director of Finance and Administration (or as designated, the Finance
Manager) for the District shall be the disclosure coordinator of the District
(Disclosure Coordinator). The Disclosure Coordinator shall perform the following
functions:
• Ensure that any Official Statement meets appropriate standards and is
approved by the Board as required.
• Ensure that initial and continuing disclosure obligations undertaken
by the District related to each debt issuance are met, including
State of California requirements, and MSRB requirements that the
District commits to undertake in the Continuing Disclosure
Certificate or Agreement over the life of the bonds to investors.
o Initial Disclosure requirements include preparation of the
Bond Official statement and reports on the issuance to the
CDIAC.
o Ongoing disclosure requirements include annual reports with
the MSRB Electronic Municipal Market Access (EMMA)
system and the CDIAC.
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Number: BP 029
DEBT MANAGEMENT AND CONTINUING DISCLOSURE
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XVII. EXCEPTIONS
In the event there are any deviations or exceptions from the Debt Policy when a certain
bond issue is structured, those exceptions will be discussed in the staff reports when
the bond issue is agendized for Board consideration.
XVIII. POLICY CONSIDERATION
This policy shall be reviewed on a bi-annual basis. Any changes must be approved by
the Board after review by the Administration Committee, as well as the individual(s)
charged with maintaining internal controls.
[Original Retained by the Secretary of the District]
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DEBT MANAGEMENT AND
CONTINUING DISCLOSURE POLICY
PHIL LEIBER, DIR. FIN & ADMIN.
AUGUST 17, 2017
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HISTORY
•Debt Management policy called for in
FY2016-18 Strategic Plan
•SB1029 requires CA localities to adopt
debt management policy, and requires
reporting to the California Debt and
Investment Advisory Commission (CDIAC)
•Draft policy discussed with Admin
Committee June-August 2017,
recommended for Board approval on 8/1
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PURPOSE
•Organize and formalize debt issuance and
management related policies
•Applies to Central San and Central Contra
Costa Sanitary District Facilities Financing
Authority
•Comply with Government Code Section
8855(i).
•Separate procedures document amplifies and
provides additional guidance to staff related
to the Debt Policy.
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CONTENT
III. Scope
•All debt issuances
IV. Responsibilities
•Board-Set policy, approve issuances
•GM-Oversight/Recommendations
•Director of Finance & Admin: recommendations, execute
transactions, ongoing compliance
V. Ethics
•Not engage in activities that conflict with execution of
transactions, comply with Conflict of Interest Code
VI. Integration with Financial Plan
•Board is presented with financial plan upon any rate
adjustment
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CONTENT
VII. Standards for Use of Debt
•A. Use and Timing of Debt
1. Financial plan to specify expected debt issuance over 10 or more years.
•Target rate or tax revenue funding of at least the value of the collection system
replacement program.
•Not more than 60% of the overall CIP shall be financed with debt.
2. All projects in the CIP eligible to use debt financing, so long as the minimum
rate or tax revenues are generated as described above.
•Repayment period: weighted average maturity of the debt < 100% of
the expected average useful life of financed project.
•B. Credit Quality:
•Target highest ratings possible; also specifies 2.0x Debt Service Coverage
•C. Debt Administration and Internal Controls
•Maintain records & internal controls to ensure compliance with Federal, State
laws.
•D. Compliance with Arbitrage Rebate requirements
August 17, 2017 Regular Board Meeting Agenda Packet - Page 48 of 102
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CONTENT
VIII.-X Financing Criteria, Terms & Types of Debt
•Will provide full details of proposed transaction
XI. Credit Enhancement
•Evaluated on case by case basis
XII. Refinancing Opportunities
•Brought to Board as available
XIII. Methods of Issuance
•Competitive or Negotiated
August 17, 2017 Regular Board Meeting Agenda Packet - Page 49 of 102
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CONTENT
XIV. Market Relationships
•GM and designees will communicate with rating
agencies and provide materials to Board.
•Will comply with continuing disclosure
requirements and rebate requirements.
•Debt may be issued on behalf of other agencies
with risk assessment and cost recovery
XV. Financing Team Members
•GM selects, Board approves
•Addresses financial advisor, bond
counsel/disclosure counsel, underwriter
August 17, 2017 Regular Board Meeting Agenda Packet - Page 50 of 102
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CONTENT
XVI. Disclosure Compliance
•Director of Finance & Administration responsible
for official statement, and ongoing disclosure
obligations committed to in the bond indenture,
required by State of California
XV. Exceptions
•Board approval required
August 17, 2017 Regular Board Meeting Agenda Packet - Page 51 of 102
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RECOMMENDATION
•Approve BP 029 “DEBT MANAGEMENT
AND CONTINUING DISCLOSURE”
August 17, 2017 Regular Board Meeting Agenda Packet - Page 52 of 102
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