6145 – DEBT MANAGEMENT POLICY

The purpose of the Corporation’s Debt Management Policy (“Debt Policy”) is to establish and maintain well-defined guidelines around issuing new short-term and long-term debt, including any related school building corporation debt, and considerations for outstanding debt to protect the fiscal stability of the Corporation. The Finance Team should review this Debt Policy annually to determine whether any adjustments should be made. Any changes to this Debt Policy will be presented to the School Board for approval. This Debt Policy will supersede the Corporation’s “6145 Short-Term Indebtedness Policy”, originally adopted on February 1, 2002.

Definitions:

For purposes of this policy, the following definitions apply:

School Board shall mean the Greensburg Community School Corporation’s Schools Board.

City Council shall mean the City Council of the City of Greensburg, Indiana.

Corporation shall mean the Greensburg Community School Corporation.

Finance Team shall mean the Superintendent, Director of Financial Services, municipal advisor, and bond counsel.

Tax Compliance Procedures shall mean procedures that have been adopted by the School Board in connection with tax-exempt financing.

Disclosure Operating Procedures shall mean the disclosure operating procedures approved by the Director of Financial Services on November 18, 2020.

Corporation Debt shall include short-term debt, long-term debt, or any related school building corporation debt.

Debt shall mean the total principal amount outstanding of any financial obligation which is payable from the Corporation’s Debt Service Fund.

Debt Service shall mean the total annual debt service payment, including principal and interest, for any financial obligation which is payable from the Corporation’s Debt Service Fund.

Objectives:

In order to achieve its purpose, the Debt Policy has the following objectives:

1. To guide the Corporation’s Finance Team;
2. To set forth operating principles minimizing the cost of government and financial risk;
3. To maintain appropriate financial capacity for present and future needs; and
4. To protect the Corporation's credit rating and provide for adequate resources to repay Corporation Debt.

Guidelines for Debt:

Financing Team

The Corporation employs various professionals for assistance with its debt issuance. These professionals include underwriters, trustees, municipal advisors, and attorneys. For these professional services, the Corporation, through its Superintendent and/or Director of Financial Services, will evaluate its professionals as needed. When evaluating the professionals, the Corporation will consider general municipal financing expertise and qualifications, as well as the specific understanding of the Corporation’s debt structure, finances, legal covenants, and familiarity with the Corporation.

Debt Authorization

Debt, with the exception of refunding bonds with maturities and annual debt service that does not exceed the terms of the refunded bonds, and the additional appropriation of bond proceeds shall be properly approved by the School Board and by the City Council as required by law.

Debt Limits

The Corporation will observe state constitutional and statutory restrictions applicable to any debt issued by the Corporation. The Corporation shall not be subject to any additional local debt limitation, but as a policy goal, the Corporation will maintain its debt, including any debt of a local school building corporation, at a level not to exceed:

1. Three percent (3%) up to five percent (5%) of the gross assessed valuation of the Corporation; and
2. Net direct debt per capita will not exceed $5,000 dollars.

The Corporation, with the assistance of and oversight by the Finance Team, will work to maintain the above-referenced thresholds in 1-2 above, and any changes to this policy goal must be approved by the Board.

Refunding Bonds

The Corporation may refund outstanding debt to achieve interest cost savings, remove or change burdensome bond covenants, adjust interest rates, restructure the stream of debt service payments, and for any other reason that it is deemed in the best interests of the Corporation, as determined by the Finance Team and the School Board.

If the Corporation determines it will refund outstanding debt to achieve cost savings, then such cost savings shall be targeted to be approximately a minimum savings or benefit to the Corporation of three percent (3%) of refunded bonds; however, two percent (2%) savings may be evaluated for financing where there are significant present value savings and the interest rate environment is increasing.

Tax-Exempt or Taxable Debt

Most debt will be issued as tax-exempt when permitted under federal law. To qualify as tax-exempt, the terms of the issuance and the use of issuance proceeds must comply with IRS regulations. Bond counsel will review the transaction and intended use of bond proceeds with the Finance Team and make a determination on the tax status of the bonds under consideration. The Corporation will take the necessary steps to maintain the tax-exempt status of the bonds after issuance (in accordance with its Tax Compliance Procedures which are contained in bond transcripts for the applicable tax-exempt financing).

The Corporation may issue taxable debt for projects or uses that do not meet federal and/or state regulations for tax-exempt funding. In some instances, the use of tax-exempt debt might not be cost-effective, leading to the use of a taxable issuance as the lowest possible cost of funds, or taxable bonds may be issued to reimburse the Corporation for project costs which are not permitted to be issued as tax-exempt bonds. The Finance Team shall determine the most cost-effective way to finance the project for each financing. The following items should be considered when the Corporation plans to issue taxable debt:

1. Conventional call provisions in the taxable market can differ materially from those included in the tax-exempt market, and, if deemed appropriate, the Corporation will consider the economic benefits and costs of a make­ whole call or issuing non-callable bonds, both of which are common in the taxable bond market.
2. Consideration should be given to whether the Corporation would benefit from using a blend of tax-exempt bonds and taxable bonds on certain financing. Analysis should be completed prior to the bond sale as to what structure would produce the lowest cost for a given maturity when considering applicable legal options.

Short-Term Debt

The Corporation may utilize short-term borrowing for temporary working capital needs or to provide interim funding for capital projects in anticipation of long-term capital funding issuance. Such borrowing may be utilized to reduce the need for capitalized interest or to ensure that total borrowing matches final construction and capital costs. Short-term borrowing generally will be repaid within five years of incurrence. The primary source of short-term borrowing for capital needs will generally be the issuance of bonds. The Corporation may access available funding from state loan programs or through a private lender, as determined by the Superintendent and/or Director of Financial Services, in consultation with other members of the Finance Team as needed. The Corporation may also consider short-term borrowing for operations, including issuing tax anticipation warrants, either through the Indiana Bond Bank or through negotiations with a private lender, with a term generally not exceeding one year or as permitted by state law. Considerations when selecting a short-term lender include financing costs, ease of borrowing, and contractual terms of the agreements. All short-term borrowing requires the proper approvals from the Board. If the short-term borrowing is not a tax anticipation warrant, then bond counsel should be consulted to determine if any additional City Council approvals are required when considering the short-term debt.

Debt Considerations:

Debt Structure

All capital improvements financed through the issuance of debt will be financed for a period, in general, not to exceed the useful economic life of the improvements and in consideration of the ability of the Corporation.

Long-term debt, payable from ad valorem taxes, is limited to the maximum allowable time period under law. Call features should be evaluated based on market conditions and other considerations at the time debt is issued. The Corporation will evaluate call features with the Finance Team, with the advice of its municipal advisor, and will determine what is in the Corporation’s best interest based upon an assessment of the municipal bond market at the time of the financing.

The Corporation only plans to issue fixed-rate debt and will not issue variable-rate debt. Should future market conditions change to make variable rate debt a more attractive option for the Corporation, then the Board will re-evaluate this portion of the Debt Policy at that time.

Bond Ratings

In connection with a bond financing, the Finance Team shall evaluate whether there is a benefit to have one or more ratings assigned to the bond issue. When making this assessment, the Finance Team shall determine whether the estimated cost of securing the rating or ratings is likely to result in an estimated reduction in the total interest cost. The estimated reduction in interest cost should exceed the estimated costs to secure the rating, including the cost of professional services needed to assist with the rating process.

Additionally, the Finance Team shall respond to any inquiries from the rating agencies after the debt has been issued to provide the rating agencies with accurate and timely information that is relevant to the financial position of the Corporation. The Superintendent and Director of Financial Services, with the assistance of its municipal advisor, shall maintain a relationship with one or more rating agencies on a consistent basis to keep the rating agencies informed of capital plans, upcoming debt issuance, or other information that is pertinent to the Corporation’s finances.

Management of Bond Proceeds

When bonds are issued, the bond proceeds will be deposited into the accounts as set forth in the authorizing document for the bond financing, and which may include the construction fund and an escrow fund for refundings. Monies allocated to these funds are invested until needed. The investment strategy for each fund will depend, in part, on federal and state statutes and regulations governing the types of instruments permitted to be used and will consider any tax covenants associated with tax-exempt debt. The funds will be invested in accordance with the School Board’s investment policy, and the Director of Financial Services, with assistance from its municipal advisor and bond counsel, shall determine the appropriate investments of bond proceeds for the applicable bond issue which will meet these state and federal requirements.

Post Issuance Compliance

The Corporation will adhere to its Disclosure Operating Procedures which may be revised from time to time for any bonds that have a continuing disclosure obligation to ensure compliance, including timely filings of required financial information, audits, and reportable events on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (“EMMA”) website. The Corporation will adhere to its Tax Compliance Procedures for any Corporation bonds or its building corporation’s bonds that are issued as tax-exempt for federal income tax purposes.

Revised 10/12/04
Revised 7/9/19