HomeMy WebLinkAboutRes 2120 - Debt PolicyClety of T
Washington
Resolution No. 14 k
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
TUKWILA, WASHINGTON, ADOPTING A DEBT POLICY;
AND REPEALING RESOLUTION NO. 1840
WHEREAS, on September 2, 2014, the City Council adopted Resolution No. 1840
adopting a debt policy; and
WHEREAS, a debt policy and appropriate management of debt issued by the City is
an important factor in measuring the City's financial performance and condition and
WHEREAS, the proper management of borrowing can yield significant advantages;
and
WHEREAS, debt issuance planning with the City's Capital Improvement Program
(CIP), will ensure alignment between financing strategies and long-term capital priorities;
and
WHEREAS, the use of long-term debt for operating or maintenance costs, except in
declared emergencies authorized by the City Council, promotes fiscal discipline and
responsible debt management, and
WHEREAS, clear delineation of the roles and responsibilities of the City Council and
Finance Director, including authority over inter -fund loans, delegation of bond issuance
approvals, and oversight of post -issuance compliance activities, will ensure appropriate
checks and balances; and
WHEREAS, expanding the range of eligible financing tools and debt instruments,
including interfund loans, state and federal loan programs, and other legal financing
contracts, provides the City with greater flexibility and cost-effective funding options; and
WHEREAS, enhancing compliance with federal and state laws by establishing
comprehensive procedures for continuing disclosure, arbitrage rebate monitoring. and
Legislation: Debt Policy Page 1 of 2
Version: 6/16i2025
Staff, T. Cullerton
post -issuance compliance with IRS and SEC regulations, thereby safeguards the City's
credit standing and legal obligations.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUKWILA,
WASHINGTON, HEREBY RESOLVES AS FOLLOWS:
Section 1. Repealer. Resolution No. 1840 is hereby repealed.
Section 2. Findings Incorporated and Adoption. The above "whereas recitals are
adopted as findings in support of this resolution, and the City of Tukwila Debt Policy
attached hereto as Exhibit A is adopted.
PASSED BY THE CITY COUNCIL OF THE CITY OF TUKWILA, WASHINGTON, at
a Regular Meeting thereof this `-� �� day of 2025.
ATTEST/AUTH E NTI CATE D:
411AAv
-
n You Barnett; MC, City Clerk Tosh Sharp, Co�X�esiden�t�
APPROVED AS TO FORM BY:
Filed with the City Clerk:
Passed by the City Council: 0") �1
Resolution Number:
{office of the City Attorney
Attachment: Exhibit A— City of Tukwila Debt Policy - 2025
Legislation: Debt Policy
Version: 6/16/2025
Staff: T, Cullerton
Page 2 of 2
City of Tukwila
Debt Policy
Adapted 2025
City of Tukwila Debt Policy Page 1 of 10
TABLE 01"CONTENTS
SECTION L INTRODUCTION
SECTION M, GOVERNING PRINCIPLES
SECTION V. TRANSAMON-SPECIrIC POLICIES
SECTION Vt. COMPUANCE POLIC]ES
SECTION V111. OTHCR POLICIE5
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City,of Tukwila Debt Pohcy Rage 2 of 10,
Sectilon 1. Introduction
The objective of thiis policy is to provide general guidance for the issuance and rnanagement of all City Of
Tiuk,wiJa (the City) debt. Further, this policy estabhshe5 criteria to protect the, UtV's financial integrity whlhe
providing a mechanism to fund the City's capital needs prudently and cost effectively. Adherence to this
policy is essential to enisure that the City Council (Council) maintains a debt position which allows the
Counc'(I to protect the City, its functionality, and the credit quality of its obligations.
The City's Finance Department is charged with ensuring, comphance with all debt policy requirements,
Capital Plannin
The City shall integrate, its debt issuance with its Capital Improvement Program, (referred to herein as CiP
or Capital Facilities Pian) spending to ensure that planned financing coinform!s to policy, targets regarding
the level and, composition of outstanding debt. This planning considers the long-term horizon, paying
particular attention to financing priorities, capital outlays and competing projects.
Long-term borrowing shall be confined to the acquisidon and/or construction of capital improvernents
and shall not be used to fund operating or maintenance costs. The issuance of debt to fund operating
deficits is not permitted aexcept in ernergend'es as adopted by formal action, by the City Couincil. For afl
capital projects, under consideration, the City shall budget and set aside sufficient revenue from
operations to fund ongoing maintenance needs and to provide reserves for periodic replacement and
renewal. The source of funds for the project should reflect the intended use of bond flinaincing.
Section, It. Governing Principles
in the issuance and management of debt, the City hall comply with the State of Washington (State)
constitution and with, aR, other legal requirements imposed by federal, State, and local rules and
regulations, as appnCale, The foflowing, section highlights the legal framework, for debt issuance.
State Statutes, The City issues debt in accordance with the Revised Code of Washington (RCW), in
particular chapters 3936, 39.46, and 39.53, the State constitution along with all other City, State, and
federa Ill laws, rules, and regulations.
Federal Rules and Regulations. The, City shall issue and manage debt in accordance with, the lirnitatiions
and constiraints, imposed Iby federal rules and regulations, Including but: not firnited to, Internal Revenue
Code of 1996, as amended, and Treasury Department Regulations thereunder, (Tax Law'), and the
Securities, Acts oaf' 1933 and 19,34 (Securities Law).
Local Rules and Regulations. The City shall issue and sell debt in accordance with the limitations and
constraints imposed by the Tukwila Municipal Code (TMC), including but not limited to Tide 3 (Revenue
and Finance) and City ordinances, resolutions, policies, procedures, and bond covenants,
City of Tukwila Debit Policy Page 3 of 10
Legal Debt Limits for GO Debt
State law (RCW 39.36,0201) alilows for the issuance of genera I obligation, (GO) debt, through a public vote,
of up to 7.5% of the City's, assessed property valuation. The limit of 7.5% of assessed valuation for GO,
debt is divided between three different uise types,; 1) 25% for municipally owned water, sewer, or electric
facilities; 2) 2.5% for open space and parks, and 3) 2.5% for general government purposes. Within the
2.5% limit for general) government purposes, State law allows the Council to issue debt without a vote of
the people. This non -voted debt (also called councilmanic debit) cannot be greater than, 1.5%, of the
assessed property valuation of the City.
rIT"o mm.
Responsib ILfies of City Council
• Approve this policy and any updates/changes to this policy to help ensure compliance with all
applicable rules and regulations, for debt issuance,
• Approve projects to be financed as part of the City Capital Facilities Plan.
• Adopt an ordinance authorizing, the issuance and sale of debt, and, as applicable, setting forth the
delegation requirements provided for in RC W 39.46,040 when appointing a designated
representative, the City Finance Director or their designee, to approve the finall terms of the debt.
Approve budgets sufficient to, iprovide forthe firnely payment of principal and interest on all debt,
Resnsibifities of the Finance Director
0 Apply and promote prudent fiscal practices.
0 Oversee any debt issuance including sale of bonds and review and approval of disclosure
documents,
0 Approve the issuance of debit at the lowest acceptable cost and risk withiiin the pararnieters
authorized by City Council in the bond! ordinance.
0 Provide for the timely payment of principal and interest payinient on all debt and ensure the fiscal
agent receives funds for payment of debt service on or prior to the payment date,
0 Ensure compliance with all Tax Laws, Securities Laws, contractual requirements, and other ruiles
and regulations governing the issuance of debt,
0 Ensure compliance with all terms, conditions, post -issuance requirements, and Tax Law
requirements imposed by law and /orthe legal docurnents governing the debt issued,
0 Ensure any annual disclosure reports and notices regarding the occurrence of certain events are
timely posted to the EMMA (Electronic )'Municipal Market Access) system in accordance with
continuing disclosure undertakings of the City pursuant to Securities Law,
0 Maintain records for all outstanding debt.
* Oversee all aspects of debt management,
# solicit and select professional services providers as necessary, to administer debt financing.
0 Consult with the City's contracted municipal advisor to determine the method of sale best suited
for each issue of debt (competitive saile, negotiated sale, or bank/direct placernent).
0 Select the manner of sale of debt.
0i Monitor opportunities to refund debt and recommend such refunding as appropriate,,
City of Tukwila Debt Poliicy Page, 4 of 1,01
Provide pertinent information to credit rating agencies when issuing debt and as, routine credit
reviews occur.
I'he City"s Finance Director will be responsible for the solicitation and selection of professional services as
necessary to administer the City's debt program. Professional service providers necessary to issue debt
may, include, but are not limited to bond counsel, discllosure counsel (which, may be bond counsel),
municipal advisor, underwwriters,, banks, rating agencies, and fiscal agent, Selection of the service providers
will consider availability, professional knowledge, accountability, cost, as well as successful partnerships
in previous debt issuances, The City wilil issue debt considering cost and associated risk.
Professional Service Providers
Bond Counsel — Debt issued by the City will generally include a written opinion by bond counsel, affirming
that the City is legally authorized to issue the proposed debt., The opinion shall provide that the obligation
is ilegal, valid and blinding, and enforceable against the City. in the case of taix exempt financing, the llega!l
opinion will address the treatment of interest for, purposes, of Tax Law.
Municipal Advisor — A Municipal Advisor may be used to, assist in the issuance of the City's debt. The
Municipal Advisor will provide the City with objective advice and analysis on debt issuance, This includes,
but is not llimited to, coordinating of finance team, monitoring of market opportunities, structuring and
pricing of debt, competitive sale execution, and reviewing the preliminary and final official statements.
Disclosure Counsel - The Disclosure Counsel (which may be bond counsel) plays a critical role in ensuhrig
that the City's preliminary and final official statements comply with Securities Laws and ldusclosure
req uirerne nits, Disclosure Counsel provides legal guidaince on the accuracy, completeness, aind
transparency of the information Presented to investors, helping to mitigate the risk of material
misstatements or omissions. Working closely wrth the Oty's finance team, bond counsel, and irnunicipal
advisor, Disclosure Counsel reviews finainicial and operational disclosures, drafts legal sections of the
official statements, and provides legal advice in conniection with the City's obligations under SEC Rule
15c2-12 and other applicable regulations, Their expertise helps protect the City from potential legal and
regulaitory risks while maintaining investor confidence in the bond Issuance process,
Underwriters —An Underwriter willl be selected in advance for all debt issued in a negotiated sale method,
The Underwriter is responsible for purchasing debt and reselling the debt to investors,
Arbitrage Rebate Consultant -As necessary, the City may engage with an arbitrage rebate consultant to
ensure the City is compliant with Tax Law on taxi exempt bonds by calculating potential arbitrage rebate
liabilitlies, The consultant: will analyze investment earnings, determine rebate amounts owed under IR,S
Code 148(f), and assist with documentation, deadlines, and best practices to rmniimize exposure, and aivoid
penalties,
City of Tukwila Debt Policy Page 5 of 10
Fiscal Agent —A fiscal agent away be used to provide accurate and timelysecurities processing andpayrnen't
to bondholders. As provided under RCW43,80,the City will work with the Fiscal Agent that is determined
by the State.
WIFSONUM
For any City project planned to be funded through debt, an analysis will be, done to consider: (a) other
potential ways to finance the project; (b) future operating and maintenance costs, inclludiing debt
repayment; (c) expected cash inflows that could help, offset the amount borrowed; and (d) anticipated
cash outflows for construction or equipment to ensure cornpliance with, arbitrage rules.
Me_t 9 . LS _al ca
The Finance Director, in consultation with the City's municipal advisor, will determine the method of sale
best suited foir each issue of debt (competitive saille, negotiated sallei, or bank/direct placement). The type
of debt to be issued and manners of the sale will be submitted to the City Council for approval in the bond
ordinance. The bond ordinance will authorize the issuance and sale of debt, and, as applicable, set forth,
the delegation requirements provided for in, RCW 39.46.040 when appointing a designated
representative, the City finance Director or their designee, to approve the final terms of the debt.
Bond Insurance
For each, issue, the City, in conjunction with its municipal advisor, will evaluate the costs and benefilts, of
bond insurance or other credit entrancements. Any credit enhancement purchases by the City must be
competitively procured in a mariner deemed reasonable by the City Finance Director.
,goad BaLlipt �Leasjjres
._ _ _
Prior to any unlimited t,ax general obligation bond (described belowl) proposition being placed before the
voters, the capitall project under consideration must, unless otherwise justified and have found to be in
the best interest of the City, have been inicluided in the City's Capital Faidlities Plain, The source of funds
for the project should reflect the intended use of bond financing.
investor a nd
The City will maintain good) communications with, bond rating agencies and investors about its fiscal
condition. The City will provide full, accurate and complete disclosure on financial reports, and in disclosure
documents to comply with the anti -fraud requirements of Securities Laws.
Short-term i debt
The City rimy use short-term debt, defined as a period not to exceed three years, to fund cash flow needs,
which may be caused by a delay in receipting tax revenues or issuing long-term dlebt. The City will not
Issue short-term debt for current operations, except in the event of an, emergency.
The City may issue interfund loans rather than issuing outside debt to rneet short-term cash flow needs.
The issuance of an interfund loan will be permissible only after an analysis of the loaning fund(s) indicate(s)
that excess funds are available, and the use of these funds will not impact the loaning fund(s) current
City of Tukwilai Debt Policy Page 6 of 10
operations or constitute a pennanient diversion of funds, All interfund borrowing will bear interest based
upon at least the Prevailing LGIP (Local Government investment Pool) ratie.
Council authorizes the City's Finance Director to, approve short-term interfund loans for a period not to
exceed three calendar months and the City Admirilstrator to approve short-term interfund loans for a
period not to exceed 12 calendar months. See long-term debt section below for policy oni loans exceeding
12 calendar, months. The Finance Directolir shaill notify the Finance & Governance Colimmitteel and/or City
Colonicil of any use of directorial or administrator approved interfund Moans at the 'first reasonable
opportunity.
Interfund loans are not considered "debt" for puirposes of State law, Securities, Law, or Tax Law,
on - Le Lrn_lit
The City will issue long-term debt, defined as a, period greater than three years, for caplital projects which
cainnolt reasonably be financed on a pay-as-you-go 'funding strategy frorn anticipated cash flows.
Acceptable uses of bond proceeds are one-time capitall projects that can be capitalized aind depreciated
in accordance with the City's accounting principles. (Refunding debt is also an acceptable use. See
refunding debt section, bellow,)
The City Council may issue long -terra interfund loans rather than issuing outside debt instruments as a
means of financing capital improvements, The issuance of an interfund loan will be permissible only after
an analysis of the Icianing funds) indicate that excess funds, are available, and the use of these funds will
not impact the loaning fund(s) current operations or constitute a plerirnanent diversion of funds. All
interfund borrowing will blear interest based upon at least the pirevalling LGIP (Local Government
Investment Pool) rate,
The decision to use an interfund loan rather than outside debt to fuind capital projects will be based on
which is deemed to be the most cost-effective approach to meet City capital needs, The City's Finance
Departni responsible for making such ain assessment, Interfund loans are not considered "clebti" for
purposes of State llawl, Securities Law, or Tax Law.
The City willl not issue long-literm, debt for current operational needs,, except in the, event of an emergency,
Types of long-term debt the City may issue,,,
,i nrTrn p l_Lq.&,p ,Sn.g.[A[q 9 _aTGO Bonds: LTaGO, debt is by pledge of the full faith and credit
J_
of the City and is payable frorn regular property taxes and other legally available funds. These bonds can
be issued without a vote of registered voters, but are limited in, that debit service payments must be paid
frorn legally available City revenue sources. The arnounit of LTG O outstanding debit cannot exceed the
threshold stated above,
Unlimited Tax General Ob il debt is secured by a pledge of the full faith and
credit of the City and is Payable from excess property taxes and other legally ava4able funds. These blonds
cain only be issued when authorized by a 610% majority vote of registered voters, (meeting the minimium
voter turnout requirement), As part of the bialllot proposition, voters will approve the issuance of the UTGO
debt and an excess property taix levy, as a completely new and dedicated source of revenue, to pay the
debt service. The amount of UTGO, debt cannot exceed the thresholds stated above. Proceeds of UTGO
debt are limited to capital purposes only and not the replacement of equipment.
City of Tukwila Debit Policy Paige 7 of 10
Revenue Bonds: Revenue bondis are used to finance construction of and/'or improvements to facilities of
enterprise systerns operated by the City in accordance with the Capiital Facilities Plain and are payable
from and secured by a pledge of revenue of the enterprise, No taxing power or general fund pledge is
provided as security, with the exceptilon, of double barrel bonds. Double -barrel bonds aire a type of
municipalbond that are backed by enterprise funds and the I°ulli faith and credit of the City, Unlike geri
obhgation bonds, revenue bonds are riot subject to the City's statutory debt limitation nor is voter
approval required. Revenue bonds, may contain certahi covenants and obligations of the City, including
but not limited to, future parity bond tests, annuai debt service coverage requirements, restrictions on
disposal of the enterprise facility/utifty, and other terrnis to protect the stream, of revenue, pledged to the
repayment of the revenue bonds.
Reserve accounts may be created on a transaction-by-trainsaictiialriI basis. Any reserve account created shall
be maintained and! funded as required by bond ordinances and as deemed advisable by the City Council)
or the designated representative on behalf of the City. The City shall structure any debt service reserve
fund to not violate the Tax Code.
The City will strive for annual revenue bond diebit coverage of at least 1-5 times the annual debt service
paid in such year. Additional bonds issued may be subject to additional bonds tests as described in, bond
ordinances.
Also referred to as Loral Improvement District (U11)), bonds, this type of debt is
used to finance capital improvements that benefit pricil owners within, the LID, LID debit is repaid from
annual assessments plaid to the City by property owners within the LID. LiDs, are formed by City Council
following the process outlined in State statutes and chapter 13.0,4 TIVIC, The cost is borne, only by those
who receive a, speclal benefit from the, improvements. LID debt is not part of the debt capacity calcullation,
Other Debt llnstrurneintsInstruni such as public Works Trust Fund loal% or other financing, contracts
issued through the State of Washington, federal grant loans, bond anticipation notes (BAN), tax
anticipation notes (TAN), bank loans, and/or other legal debit issues mialy Ibe iincurred ais allowed by law,
Egiva rMR041
Refunding debit may be issued by the City in accordance with chapter 391.53 RCW. Refunding debt is
typically issued to, taike advantage of lower interest rates for overall cost savings, restructure debt, or
rnodify blond covenants, Refunding bonds are an acceptable use of bond proceeds provided that, and
unless otherwise justifled and found to be in the best interest of the City, a) the net present vallue (NPV')
of the overall savings (not by, rniaturity), is at least 3% and b) the finial] maturity date of the obligation is not
extended.
Other ConsideratJons
The follovilling terms, shall be applied to the City's debt transactions, as appropriate. Individual terms may
change as dictated by the marketplace or the unique qualities of the transaction.
City of TiAwfla Debit Policy page 8 of 10
6 Maturity —The City shall Issue debt,with an average llife le�ss than or equal to the average life oaf
the assets being financed. U!nless otherwise stated in law, the final maturity of the debt shall be
no longer than 40 years (RC'VV 39.46, 1 :to).
0 Debt Service Structure — Ulnlless otherwise justified, debt service should be structured on a level
baisis ('i.e., level annual payments). Refunding bondls should be structured to, produce, equal
savings by fiscal year. Unless otherwise Justified, debt shall not have capitalized interest, If
appropriate, debt service reserve funds may be used for revenue bonds,
0 Price Structure — The City's long-term debt may include par, discount, and premium bonds. Cali
Provisions — For each transaction, the City shall evaluate the costs and benefits of callll iprovrsllons,
In general, the City shall opt for a call date no later than 10 Y, years from, the date of the bonds.
0 Tax -exemption — Ulnless otherwise justified and deemed necessary, the City shall issue its debt on
a tax-exempt basis,
0 Reimbursement declaration -- Must be made prior to bond Issuance if the City intends to be
reimbursed out of tax exempt bond proceeds for capital costs paid prior to the closing date.
0 The City will not use derivatives in, connection with any new financirigs,
• The City will not become obligated for any new City debt or otherwise be iinvolllved in, ainy new
financing that would include a variable rate of interest or variable debt, service (excluding of any
additional rent payable under a financing lease or other obligation for ongoing transaction fees),
The City vwill comply with all federal, State, contractual restrictions and City policies regarding the
investment of bond proceeds and associated funds subject to debt -related investment limitations. Such
requirernents may include restrictions on, the type of securities allowed the yield on, such securities, and
the length, of time that such proceeds and funds may be invested,
For refunding escrows, the City may invest funds in State and Local Government Series (SLGSl securities
issued by the US, Treasury, or, after satisfying requirements of Tax Law and if deterrnmed advisable after
consultation, with the City's municipM advisor and bond counsel, in open -market securities as permitted
under State law and relevant bond covenants,
The City will maintain a system for tracking bond proceeds, Including how proceeds are invested, when
they are spent, and for what purpose, Bond proceeds shall, unless otherwise permitted, be tracked
separately from other City funds and on an issue by issue basis,
The City shall maintain records related to the bonds for the life of the bonds (plus any refunding bonds)
plus three years,,
The City will, unless otherwise permitted, spend at least 85%, of tax-exeryipt bond proceeds within, three
years frorn the date of issuance pursuant to Tax Law, and take such steps as necessary to avoid or manage
arbitrage. The City will maintain a system, of recordkeeping and reporting to meet the arbitrage rebate
compliance requirement of the IRS (Internal Revenue Service, IRC 148) regulation, For each bond issue,
the recorcilkeeping will Include tracking the yield and Investment earnings on bondproceeds, calculating
rebate payments, and remitting any rebate earnings to, the federal go
vernment in a timely manner to
preserve the tax-exempt status of the outstanding, debt obligation. Any bond proceeds invested will
comply with the City's investment policy and strate,Oes, unless further restricted by bond covenant. "r'hie
City of Tukwila Debt Policy Page 91 of 10
City may, when determined to be in the best interest of the City or required, contract with an arbitrage
rebate consultant to assist with the arbitrage rebate calculation.
The City will repay principal' plus interest in accordance, with the paynienitteirms of the bond or contract.
Furthermore,, the City, will comply wlth all bond or contract covenants. This includes, but is not limited to,
any undertakings to provide ongoing disclosure and notice of certain listed events under Securities Laws,
Annual disclosure will take the form of the City's audited annual financial statements as well as other
information required by the bond or contract that is not reasonably contained in the annual report, The
City Finance Director will develop ands comply with all post -issuance compliance polides an�dl procedures
related to Tax Law and policies and procedures relating to, initial' and! ongoing disclosure under Securities
Laws.
The Finance Director and bond counsel wM coordinate their activities and reviiew all debt issuance to
ensure that all secuiritilies are issued in, com:plliance with State and federal legal and regulatory
requirements by the State law, Tax Law, Secuiriities Law, rules and regulations,
The Finance Director may institute procedures to inipiernent this policy and other bond covenants and
Provisions related to State law, Tax Law, Securities Law, rules and regulations applicable to the City's, debt.
No derivative products shall be used in connection with City debt.
MWOMM
This debt policy must be adopted by Councill. The policy wiH be reviewed at least every four years by the
Finance Department and modifications must be submitted to and approved by the Council,
City of Tukwila Debt Policy Page, 10 of 10