By a 6-0 vote the DeKalb City Council gave their constituents a formal debt policy that included a $2.5 million line of credit. Neither existed before the meeting took place. Both policies were strongly recommended by the EPI report. There seemed to be consensus agreement among members of the city council and finance advisory committee meeting.
I support using a line of credit versus using Bond Anticipation Note financing for operations. The primary reason the EPI report made such recommendations was to stop the City’s propensity to rob Peter to pay Paul. Any Home Rule community member in their right mind would support having a formal debt policy. Without one there are no checks and balances. Of course the line of credit and a formal debt policy should be approved by the city council.
The devil is in the details and the public will soon be dancing with the devil they don’t know. That’s because the city council ignored pleas to consider the formal debt policy as an ordinance, which would have required a public hearing. It would have given the public a chance to view the debt policies, study them and perhaps offer better ideas.
Here’s what was passed, without a formal public hearing: click here and start reading at page 76.
And here’s a link to the City of Evanston ORDINANCE FOR PROCEDURES FOR INCURRING MUNICIPAL INDEBTEDNESS (see chapter 19)
Also see: Evanston Ordinance 39-O-04 Providing for the Issuance of General Obligation Bonds.
ELEMENTS OF A DEBT POLICY
* Purpose for which debt may be issued
* Legal debt limitations, or limitations established by policy
* Use of moral obligation pledges
* Types of debt permitted to be issued and criteria for issuance
* Structural features that may be considered
* Credit objectives
* Method of sale
* Selection of external financial professionals
* Refunding of debt
* Disclosure (primary and secondary market)
* Compliance with federal tax law provisions, including arbitrage requirements
* Integration of capital planning and debt financing activities
* Investment of bond proceeds where otherwise not covered by explicit written law or written investment policy.
Source: GFOA Recommended Practice “Development of a Debt Policy,” GFOA 1995.
H/T Mark Charvat