AgdaPkt 2017-12-18 Special Joint SA PFA

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3 Redwood City Bonds are approved by the Board of Port Commissioners and the City Council. C. Maximum Maturity ‐ All debt obligations shall have a maximum maturity of the earlier of: i) the estimated useful life of the capital improvements being financed, ii) 40 years or, iii) in the event obligations are being issued to refinance outstanding debt obligations, the final maturity of the debt obligations being refinanced unless a longer term is approved by the City Council. D. Debt Limitations ‐ All long‐term financings will comply with applicable statutory regulations and City policy. Specifically, the City will maintain compliance at a more conservative 3.75% of the City’s assessed valuation of real property, well under the State law limiting applicable indebtedness to 15% of the City’s assessed valuation of real property. Other debt limitations will be established for specific issuances to ensure all debt covenants can be met and operations can be maintained. E. Debt Structures – The City is not restricted in the structure of the debt that it issues, which includes issuing variable rate debt. Should the City issue variable rate debt, the annual debt service should be budgeted at not less than 1.5 times the prior year’s actual debt service to ensure adequate funds are available should interest rates rise materially. F. Capitalized Interest (Funded Interest) ‐ Subject to federal and state law, interest may be capitalized from date of issuance of debt obligations through the completion of construction. Interest may also be capitalized consistent with prudent financial practice, State law and federal tax regulations, for a period not to exceed one year from the estimated completion of construction and shall be offset by earnings in the construction fund. G. Bond Covenants and Laws ‐ The City shall comply with all covenants and requirements of applicable bond resolutions, indentures, trust agreements, and other financing documents, as well as applicable state and federal laws authorizing and governing the issuance and administration of debt obligations. H. Method of Sale ‐ Bonds will be sold on a competitive basis unless it is in the best interest of the City to conduct a negotiated sale or private placement. Negotiated sales may occur when selling bonds to refund existing debt, for land‐secured debt, for variable interest rate debt, for conduit debt, or for other appropriate reasons. Private placements may occur when economically advantageous for conduit debt, for capital requirements too small to bear the costs of a public debt issuance, for debt obligations with short amortization schedules, or for other valid reasons. Staff shall evaluate the cost‐effectiveness of alternative financing methods before the City conducts a private placement of debt. The City Council will seek the advice of its professional managers, special legal counsel, and qualified municipal advisors in making the determination of the appropriate method of sale and the use of credit ratings and/or credit enhancements on a case by case basis. I. Enterprise Funds ‐ It is the policy that each utility or enterprise should provide adequate debt service coverage as required in the bond contract/agreement. Projected operating revenues in excess of operating expenses, less capital expenditures, depreciation, and amortization in the operating fund, should be at least 1.20 times the annual debt service costs prior to the issuance of debt. J. Refundings ‐ The City shall review its outstanding debt for the purpose of determining if the financial marketplace will afford the City the opportunity to refund an issue and lessen its debt 6.1.C. - Page 6