Drafter
Clerk 05/06/2011
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A MOTION adopting a revised general fund debt management policy as required by proviso in the 2011 Budget Ordinance 16984, Section 18, Proviso P4; and rescinding Motion 11196.
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WHEREAS, the 2011 Budget Ordinance, Ordinance 16984, Section 18, Proviso P4, required that $100,000 of the appropriation for the office of performance, strategy and budget not be encumbered or expended until the executive transmits legislation revising the county's general fund debt management policies and the council adopts legislation that references the proviso's ordinance, section and number and states that the executive has responded to the proviso, and
WHEREAS, the executive has responded to the proviso by submitting the motion herein, and
WHEREAS, the following policies are enacted to maintain standard and rational practices for the issuance and management of general fund debt by King County, and
WHEREAS, these policies are designed to provide guidance in selecting projects for debt financing, maintaining the county's credit rating, reducing issuance costs, identifying how much of general fund resources should go to projects that require debt financing, and to provide complete financial disclosure and reporting, and
WHEREAS, the county's general fund debt policy is that the level of pay as you go versus debt to finance the county's capital improvement program should be based on asset type, intergenerational equity, policy priorities and market conditions, and
WHEREAS, Motion 11196 established basic general fund debt policies including defining general fund debt obligations, the purposes and uses of debt, rating goals and debt capacity, debt structure and debt administration and established an advisory panel;
NOW, THEREFORE, BE IT MOVED by the Council of King County:
A. Motion 11196 is hereby rescinded.
B. The following general fund debt management policies are adopted
1. Definition. For the purposes of this motion "general fund debt obligations" means fixed payment term obligations (such as limited tax general obligation debt, lease purchase debt and capital equipment leases) that are not recoverable from direct charges to benefiting non-general fund agencies and that are expenses that create fixed obligations against tax revenues otherwise available for general fund operating programs. General fund debt obligations include general fund supported limited tax general obligation ("LTGO") debt, other general fund supported debt not paid directly from property taxes, general fund supported capital lease payments, and the portion of non-general fund debt recovered by central charges to the general fund.
2. Requirements, purposes and use of debt.
a. Debt-financed projects must comply with all county planning requirements and applicable King County codes except in cases of emergency.
b. Debt shall be used only for projects that have been part of a capital planning process except in cases of emergency.
c. A debt-financed project shall add to the physical infrastructure and capital assets of the county or enhance the productive capacity of county services. Examples of these types of projects are technology and telephone installations and upgrades, buildings and building rehabilitations, and selected maintenance projects.
d. Bond proceeds should be used only for permanent financing of the costs of planning, design, land acquisition, buildings, permanent structures, attached fixtures or equipment, and other capital items such as equipment or major information technology systems with a useful life of three years or longer. The terms of the debt will not exceed the estimated useful life of the asset(s) being financed.
e. Exceptions may be made for certain large non-recurring expenses such as judgments or settlements that require multiyear financing provided the term of repayment does not exceed five years.
3. Credit objectives. The county seeks to maintain its current LTGO ratings of AA+ from Fitch, Aa1 from Moody's and AAA from Standard and Poor's. The highest possible rating will be sought so long as it does not impair the ability of the county to provide basic services and achievement of other county objectives.
4. Debt capacity. To maintain the ratings listed in subsection B.3 of this motion, the county adheres to the following guidelines in deciding how much additional county general fund supported debt will be issued in a fiscal year.
a. Total limited tax general obligation debt shall not exceed the statutory and constitutional limitations imposed by the state.
b. Required annual adjusted general fund debt obligations shall not exceed six percent of general fund total revenue collected. The calculation shall be in accordance with Attachment A to this motion.
c. The county may exceed this limit in the event of an emergency, as defined in K.C.C. chapter 12.52.
5. Debt structure.
a. Unless otherwise deemed appropriate, the county shall seek to structure debt to produce level annual debt service (principal and interest) payments over the life of each project being financed.
b. The county may use interim financing such as bond anticipation notes in anticipation of a future bond issue. The interim financing shall not have maturities greater than two years. One-year notes may not be rolled more than once unless the second and any subsequent rollovers are approved in advance by the executive finance committee. Except in cases of emergency, the interest on interim financing should be paid on a pay-as-you-go basis and not from proceeds from a subsequent sale of new debt.
6. Debt administration and process. The office of performance, strategy and budget will prepare an annual six-year debt plan (with current year, proposed year and four out-years) and present this plan as part of the annual budget. The plan will identify and project current, proposed and future debt; identify and forecast relevant revenue measures against which compliance with the debt service limitation will apply; provide sufficient information to demonstrate compliance with debt policies and identify any required proposed or pending exceptions.
7. Review. The executive finance committee is responsible for reviewing the
general fund debt management policy and recommending any policy changes to the executive and county council for approval.
C. No later than June 30, 2020, the executive shall review the current debt condition of the county, and submit to the council a motion reaffirming the policies in section B.1. to B.7. of this motion, recommending changes to these policies or recommending new policies as appropriate.
D. This motion remains in effect until the earlier of council adoption of the motion described in section C. of this motion, or January 1, 2021.