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6.A. - Page 6 of 29 <br />sources legally available to be used for such purposes. Long Term debt will not be issued <br />for operations or maintenance costs. Expenditure of bond proceeds should be limited <br />to major, non-recurring expenditures/expenses, including but not limited to: the financing <br />of costs related to capital project planning and design, land acquisition, real property, and <br />equipment acquisition; the construction or renovation of buildings and permanent <br />structures and the equipping thereof; financing costs related to the issuance of securities, <br />capitalized interest, necessary or financially prudent debt service reserves; or other costs <br />as permitted by law. Refunding bond issues designed to restructure currently <br />outstanding debt are an acceptable use of bond proceeds. <br />B. Approval by the City Council — All long-term financing transactions shall be approved by <br />the City Council. Such approvals shall not be on the consent calendar. The City Council <br />shall comply with all public hearing requirements applicable to the specific type of bond <br />being approved. Port of Redwood City Bonds are approved by the Board of Port <br />Commissioners and the City Council. <br />C. Maximum Maturity - All debt obligations shall have a maximum maturity of the earlier <br />of: i) the estimated useful life of the capital improvements being financed, ii) 40 years or, <br />iii) in the event obligations are being issued to refinance outstanding debt obligations, <br />the final maturity of the debt obligations being refinanced unless a longer term is approved <br />by the City Council. <br />D. Debt Limitations - All long-term financings will comply with applicable statutory regulations <br />and City policy. Specifically, the City will maintain compliance with State law limiting <br />applicable general obligation bonded indebtedness to 3.75% of the City's assessed <br />valuation of real property (see Government Code X43605). Other debt limitations will be <br />established for specific issuances to ensure all debt covenants can be met and operations <br />can be maintained. <br />G <br />Debt Structures — The City is not restricted in the structure of the debt that it issues, which <br />includes issuing variable rate debt. Should the City issue variable rate debt, the annual <br />debt service should be budgeted at not less than 1.5 times the prior year's actual debt <br />service to ensure adequate funds are available should interest rates rise materially. <br />Capitalized Interest (Funded Interest) - Subject to federal and state law, interest may be <br />capitalized from date of issuance of debt obligations through the completion of <br />construction. Interest may also be capitalized consistent with prudent financial practice, <br />State law and federal tax regulations, for a period not to exceed one year from the <br />estimated completion of construction and shall be offset by earnings in the construction <br />fund. <br />Bond Covenants and Laws - The City shall comply with all covenants and <br />requirements of applicable bond resolutions, indentures, trust agreements, and other <br />financing documents, as well as applicable state and federal laws authorizing and <br />governing the issuance and administration of debt obligations. <br />H. Method of Sale - Bonds will be sold on a competitive basis unless it is in the best interest <br />of the City to conduct a negotiated sale or private placement. Negotiated sales may occur <br />when selling bonds to refund existing debt, for land -secured debt, for variable interest rate <br />debt, for conduit debt, or for other appropriate reasons. Private placements may occur when <br />economically advantageous for conduit debt, for capital requirements too small to bear the <br />3 <br />10 <br />