94-298 Resolution No. 94-298
RESOLUTION
ESTABLISHING A POLICY FOR INCURRING DEBT
BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN,
ILLINOIS, that as it is necessary and desirable to continue
the city' s efforts to maintain and improve the city's credit
worthiness, there is hereby established a financial policy
related to General Obligation debt issuance and key debt relat-
ed ratios and to promote a usable, financially achievable
capital improvement program.
BE IT FURTHER RESOLVED that consistent with the types of
ratios used by the major national credit rating agencies, the
following debt ratio policies are hereby established:
Estimate
As of As of
Type of Ratio 12/31/94 Median Ceiling 12/31/99
Direct Net Debt Per
Capita $508 $629 $754 $548
Ratio of Net Direct Debt
to Estimated Full Value
(EFV) 1 . 35 1 .70 1 . 92 1 . 17
Overlapping Net Debt
Per Capita $1,071 $1,217 $1,460 $1,051
Ratio of Overall Net
Debt to Estimated Full
Value 2 .85 3.20 3 . 84 2 .24
Net Direct Debt As a
Percentage of Operating
Expenditures 14 . 1% N/A 17 .5% 13 . 1%
No ratio shall exceed the ceiling established.
BE IT FURTHER RESOLVED that the following debt issuance
policies are established:
A. Tax or Revenue Anticipation Notes shall not be is-
sued to fund governmental operations except in the event that
existing cash reserves are exhausted due to emergency expendi-
tures . Borrowing due to exhaustion of cash reserves shall be
for one year or less and shall be used solely to address cash
flow shortfalls between operating expenditures and revenue
collection.
B. Bond Anticipation Notes (BAN' s) shall not be issued
for a period longer than two years . If the city issues a BAN
for a capital project, the BAN will be converted to a long-
term bond or redeemed at expiration.
C. Capital projects shall be financed from current
revenues to the extent reasonably practicable.
D. A five-year capital improvement program shall be
adopted and updated annually. In accordance with this policy
and in order to meet the debt ratio targets, to schedule debt
issuance, and to systematically improve the capital infrastruc-
ture, the capital improvement program shall identify the
source of funding for all capital projects . The debt issues
that are a part of the capital improvement program shall be
structured to meet the city' s debt policies and debt ratio
targets . The city when issuing debt, shall insure that when
averaging proposed debt with existing debt 50% of the princi-
pal shall be retired within ten years . Additionally, no debt
shall be issued whose maturity exceeds the expected life of
the asset for which the debt was incurred.
E. The Director of Finance, in conjunction with the
city's financial advisor, shall review the acquisition, im-
provement, or other purpose of borrowing and provide the City
Manager with a recommendation as to the type of debt that
should be issued. Criteria used shall include amount, time,
type of acquisition or project, prevailing interest rates and
prudent maturity schedule.
F. The city shall not other than in exceptional circum-
stances use General Fund equity to finance current opera-
tions . The city's General Fund equity balance (unreserved
cash balance) shall by the year 1999 provide the city with
sufficient working capital and contingency funds to enable it
to finance unforeseen emergencies without borrowing. To con-
serve the General Fund equity balance and to avoid reliance on
this balance, the city will not finance operations from the
General Fund equity balance for periods longer than one year.
sl George VanDeVoorde
George VanDeVoorde, Mayor
Presented: October 26, 1994
Adopted: October 26, 1994
Omnibus Vote: Yeas 7 Nays 0
Attest:
sl Dolonna Mecum
Dolonna Mecum, City Clerk