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Revenue Bonds: Revenue bonds are used to finance construction of and/or improvements to facilities of <br />enterprise systems operated by the City in accordance with the Capital Facilities Plan and are payable <br />from and secured by a pledge of revenue of the enterprise. No taxing power or general fund pledge is <br />provided as security, with the exception of double -barrel bonds. Double -barrel bonds are a type of <br />municipal bond that are backed by enterprise funds and the full faith and credit of the City. Unlike general <br />obligation bonds, revenue bonds are not subject to the City's statutory debt limitation nor is voter <br />approval required. Revenue bonds may contain certain covenants and obligations of the City, including <br />but not limited to, future parity bond tests, annual debt service coverage requirements, restrictions on <br />disposal of the enterprise facility/utility, and other terms to protect the stream of revenue pledged to the <br />repayment of the revenue bonds. <br />Reserve accounts may be created on a transaction -by -transaction basis. Any reserve account created shall <br />be maintained and funded as required by bond ordinances and as deemed advisable by the City Council <br />or the designated representative on behalf of the City. The City shall structure any debt service reserve <br />fund to not violate the Tax Code. <br />The City will strive for annual revenue bond debt coverage of at least 1.5 times the annual debt service <br />paid in such year. Additional bonds issued may be subject to additional bonds tests as described in bond <br />ordinances. <br />Special Assessment Bonds: Also referred to as Local Improvement District (LID) bonds, this type of debt is <br />used to finance capital improvements that benefit property owners within the LID. LID debt is repaid from <br />annual assessments paid to the City by property owners within the LID. LIDS are formed by City Council <br />following the process outlined in State statutes and chapter 13.04 TMC. The cost is borne only by those <br />who receive a special benefit from the improvements. LID debt is not part of the debt capacity calculation. <br />Other Debt Instruments: Instruments such as Public Works Trust Fund loans or other financing contracts <br />issued through the State of Washington, federal grant loans, bond anticipation notes (BAN), tax <br />anticipation notes (TAN), bank loans, and/or other legal debt issues may be incurred as allowed by law. <br />Refunding Debt <br />Refunding debt may be issued by the City in accordance with chapter 39.53 RCW. Refunding debt is <br />typically issued to take advantage of lower interest rates for overall cost savings, restructure debt, or <br />modify bond covenants. Refunding bonds are an acceptable use of bond proceeds provided that, and <br />unless otherwise justified and found to be in the best interest of the City, a) the net present value (NPV) <br />of the overall savings (not by maturity) is at least 3% and b) the final maturity date of the obligation is not <br />extended. <br />Other Considerations <br />The following terms shall be applied to the City's debt transactions, as appropriate. Individual terms may <br />change as dictated by the marketplace or the unique qualities of the transaction. <br />City of Tukwila Debt Policy Page 8 of 10 <br />32 <br />