|
Debt Policy and Considerations |
 |
 |
 |
|
Written by Todd Meierhenry
|
|
Monday, 14 January 2008 06:24 |
Debt Policy and Considerations.
Selling debt has become very demanding in terms of time, thought, and expense. Due to the increasing sophistication and complexity of the municipal bond market, it is recommended that districts have written policies regarding their debt management. Debt Policies While there are no national standards for debt policy, many state and local governments have adopted written policies in order to enhance their position in debt related matters. Formal debt policies are often used as a means of establishing credibility with underwriters, insurers and bond rating agencies. Districts are encouraged to establish a formal, comprehensive debt policy. This policy should establish debt limits and parameters, while providing sufficient flexibility to respond to changing circumstances. The debt policy should furnish instructive guidance for debt management decision-makers and be formally adopted by the school board.Debt policies may be incorporated into official budgets, capital improvement plans, general or comprehensive plans, charters, grant applications, board resolutions and/or administrative practices. However, when these policies are scattered, unwritten, or developed on a case-by-case basis, it is unlikely that decisions will be made with consideration of other current, past or future policy alternatives. Having a formal set of policies assists the board and debt managers in the decision making process and helps identify conflicts, inconsistencies and gaps in a district’s present approach to financial policy and debt management. Potential benefits of formal policies include: · Consistency in financial decisions. · Prescription of improvements that are desired. · Identification of strengths and weaknesses in the overall financial system. · Establishment of standard operating procedures to guide daily financial activities. · Measures of performance. · Improvement in bond rating translating into money saved. · Linking of long run financial planning with day-to-day operations. · Directed attention to the total financial picture versus single issue. · Significant ability to insulate from fiscal crisis. · Formal debt policies should describe policies and procedures currently in use. They should also integrate short and long term school capital infrastructure objectives with reasonably conservative estimates of available financial resources. Formal debt policies should include: · The purposes for which debt can be issued. · Integration of capital spending and debt financing. · Debt limitations. · Types and criteria for which debt can be issued. · Debt structure. · Credit policy. · Method of sale. · Selection of finance team. · Refunding policy. · Disclosure requirements. · State and Federal tax compliance. · Investment of bond proceeds.
|
|
Last Updated ( Sunday, 20 January 2008 00:26 )
|
