(a) Debt shall be self-supporting whenever possible. Self-supporting is the use of revenue bonds, special assessments, or other capital improvement charges rather than general property taxes.

(b) Debt shall be primarily used to finance capital projects with a relatively long life expectancy, i.e., ten (10) years or greater.

(c) Debt shall be issued in such a way so that the term of the financing does not materially exceed the useful life of the asset.

(a) Bonds may be secured by the full faith and credit pledge of the City, but assessment payments shall be adequate to pay 100 percent of debt service unless otherwise stipulated by the creation document.

(b) Benefit district project costs shall include all construction, engineering, financing, legal and administrative costs of the program.

(c) Assessments for benefit district improvements will include a maximum of 5% of the total cost of the improvement to reimburse the City for services rendered by the City in the administration and supervision of the improvement by its general officers. See K.S.A. 12-6a01(d). Reimbursement will be charged in accordance with the following schedule:

(d) Outstanding bonds will be retired when sufficient revenues are accumulated and provided associated bonds have either reached their call date or where a refunding escrow can be structured without material economic loss.

(e) Debt will not be issued by the City to finance projects for the entities that have the authority to issue tax-free bonds for those purposes. U.S.D. 233 is exempted from this policy.

(a) To the extent funds described in paragraph F2.(a) are in excess of that required by the City’s general fund operating budget, the excess amount shall first be used to fully fund the operating capital general fund reserve to the level required by these policies and then used for pay-as-you-go financing of general capital improvements.

(b) It shall be a goal of the City to finance at least a portion of the city-at-large capital improvement budget with pay-as-you-go financing with current resources.

(c) Debt service payments on non-benefit district general obligation bonds, not abated by other revenues, shall be paid from the debt service property tax levy.

(d) It is the City’s goal to maintain and fund a Capital Project Reserve (CPR) Fund in order to fund the initial design or costs of projects, so that the City is in a position to have shovel-ready projects when opportunities arise to obtain grant funding.

(e) It is the City’s practice to issue temporary notes for project expenditures anticipated to occur less than one year from the time of note issuance. Temporary note issuances will be planned to correspond with an annual long-term bond issuance, with a closing date designed to allow for all outstanding temporary notes from the prior year to be repaid on their due date each year. Long term bonds will typically be issued for completed projects or portions of projects.

(a) The City’s goal will be to not exceed seventy (70) percent of its statutory debt limit.

(b) Performance measures for the debt management process will be defined and monitored.

(a) Issue tax-exempt debt when feasible. Taxable debt may be issued if required by IRS regulation or if advantageous tax-rebated bond products are available under Federal or state law, or if it is in the City’s best interest to issue taxable debt to mitigate its risk of non-repayment or if the cost of taxable debt would not materially increase the City’s cost of borrowing.

(b) Fixed rate obligations only for general obligation debt. Fixed rate obligations generally for revenue bonds, certificates of participation and special obligation bonds, unless variable rate debt provides for reduced interest costs over a multi-year period, after accounting for the additional costs and risk associated with such obligations, and significant flexibility in redeeming the bonds. If variable rate obligations are issued, the City shall budget debt service obligations at then-current fixed rate levels to in part ensure against interest rate increases, along with other cash reserves to further mitigate periods of prolonged high short-term interest rates.

(c) Debt should be marketed on a competitive bid basis if feasible. A negotiated sale may be undertaken upon the recommendation of the financial advisor if one or more of the following conditions exist: issue lacks sufficient credit quality, the principal amount is extremely large or small, the issue to appeal to a relatively narrow investor base, the bonds are issued under a new legal authority, sufficient bidder in participation is in question or the market is experiencing extreme volatility.

(d) Optional prepayment provisions should generally be included in each bond issuance.

(e) Derivative transactions are prohibited unless specifically approved by the City’s Governing Body.

(a) Ten (10) years for most general obligation public improvement debt. The City’s goal is to structure debt with declining debt service payments over the life of the debt portfolio as a whole, taking into consideration the forecasted revenues for the Debt Service Fund., thus permitting the City to maintain a constant or declining debt service levy demand annually based upon then-existing and forecasted future debt issuance. Utility revenue debt will generally be structured in a similar way, providing for a constant or increasing debt service coverage profile when possible, except that repayment terms may be for a longer period of time due to the long-lived nature of utility infrastructure improvements.

(b) Ten (10) years for benefit district debt. Debt will be structured as set forth in Section 3.a.

(c) Ten (10) to twenty (20) years for capital improvements of citywide significance and where justified by the magnitude of the project.

(d) On an overall basis, it is the intention of the City that all general obligation debt, less temporary notes, be structured to retire at least eighty (80) percent of the City’s indebtedness within ten (10) years.

(e) The City shall insure that it fully complies with all state and federal regulatory compliance, including post-issuance compliance related to continuing disclosure, maintenance of records, testing of ongoing compliance and arbitrage rebate.

(f) The City understands the importance of high credit quality to reducing its costs of debt issuance. To that end, the City will maintain ongoing communications with the rating agencies, keeping them apprised of information central to the credit rating determination.

(a) It shall be the goal of the City to maintain a minimum fund balance in the general fund of 15% of revenues, with an annual target of 30% of revenues. Ratings agencies prefer fund balance levels at or near 30% of revenues for entities at or aspiring to Triple A status. This minimum fund balance calculation includes and is cumulative with the provisions of section F.2.

(b) A sixty (60) day reserve (measured against average daily operating expenses) in enterprise funds, as well as all reserves required by revenue bond indentures to remain in complete compliance with bond issue covenants.

(c) An annual cash basis and contingency reserve in the debt service fund of at least 10% of the annual principal and interest and capital improvement lease payments with a target of 20%. This includes beginning debt service fund cash, current year revenues, transfers, and general fund revenues dedicated toward certificates of participation, public building commission leases, etc., divided by current liabilities of general obligation debt plus payment obligations on certificates of participation, public building commission leases, etc.

3. The Governing Body may approve the use of budgeted reserves in the case of emergency events, or conditions that result in unanticipated expenditure requirements or revenue fluctuations within a fiscal year, or to take advantage of an extraordinary opportunity.

4. The City desires to establish a fund balance classification policy consistent with the needs of the City, and in a manner consistent with governmental accounting standards. The following classifications serve to enhance the usefulness of fund balance information:

5. For unrestricted fund balance, committed amounts should be reduced first, followed by assigned amounts, followed by unassigned amounts.

6. Compliance with Sections F.4. and F.5. will be reviewed in conjunction with the annual budget process.