Johnstown, Ohio Village Debt Policy

Local Tax and Budget Information

The Village of Johnstown, Ohio Debt Policy

It is the policy of the Village of Johnstown to insure public funds in a manner which will provide the maximum security with the best return, while meeting the daily cash flow demands of the entity and conforming to the State of Ohio statutes governing the debt issuance of public funds.

1. LEGAL & REGULATORY REQUIREMENTS

In order to comply with Legal and Regulatory requirements by the State of Ohio and the Federal Government’s laws, rules, and regulations; the Finance Director, City Attorney, and Bond Counsel will review all financings that involve the participation of a private-sector individual or firm.

For each proposed public-private venture, the City Attorney and Bond Counsel will advise the elected officials of structural alternatives that will permit issuance of bonds in the most cost-effective manner possible.

2. CAPITAL IMPROVEMENT PROGRAM

To assess the needs of capital improvement and funding alternatives, the Village Manager shall prepare and submit a development criterion for the next five years in accordance with the annual budget calendar. The Village Council shall adopt a Five Year Capital Project Plan each year presented by the Village Manager. Each Capital Project Plan will identify the projects needed and funding source anticipated for each improvement. Where borrowing is recommended, the source of funds to cover debt service requirements must be identified.

3. IDENTIFY USELFUL LIFE OF PROJECT

Any project with a useful life of less than five years shall not be eligible for inclusion in bond issues or be included in the Capital Project Plan. The Village will not issue debt for any capital improvement for a term that exceeds the useful life of that improvement.

4. FINANCING ALTERNATIVES

Prior to the issuance of bonds, the Village will seek any gifts, grants, other forms of intergovernmental aid, or developer agreement assistance to finance capital improvements wherever possible.

5. SELECTING SERVICE PROVIDERS

The Finance Director will select the service provider for each debt issuance. The service provider must be a firm with an office in the Central Ohio Area with a record of prior working relationships.

6. SALE

The Village will use competitive sales as the primary means of selling bonds. Negotiated sales will be permitted only if there is evidence of volatile market conditions, complex security features, or other overriding factors.

7. RATING AGENCY APPLICATIONS

The Village may seek a rating on new issues that are being sold in the public market. To insure a fare rating the Village may use more than on rating agency. These rating agencies shall include, but not limited to, Fitch Investors Service, Moody’s Investor Service, and Standard and Poor’s.

8. SELECTING BOND TYPE

The Village shall favor the use of limited obligation revenue bonds to finance capital improvements as a means of insuring that beneficiaries of an enterprise pay for a fair share of the costs. The issuance of general obligation bonds will be sought only after it is determined by the Council that no other funds are available to meet the project costs. Lease purchase financing shall be undertaken when the project is considered essential to the efficient operation of the Village.

9. INVESTMENT OF PROCEEDS

The Finance Director shall follow the Village Investment Policy.

10. ARBITRAGE COMPLIANCE

The Village will follow a policy of full compliance with all arbitrage rebate requirements of the federal tax code and Internal Revenue Service regulations, and will perform (internally or by contract consultants) arbitrage rebate calculations for each issue subject to rebate on an annual basis. All necessary rebates will be filed and paid when due.

11. INVESTOR RELATIONS

The Village will provide its annual financial report to any interested parties upon request.

12. RATING AGENCY COMMUNICATIONS

The Village will provide the rating agency with all material that has a pertinent bearing on Village finances upon request.

13. REFUNDING

The Village will monitor its debt portfolio for refunding opportunities on a regular basis. The Village will consider refunding for the reasons listed, but not limited to; interest rate savings, update covenants on outstanding debt which impair efficient operations, restructure of debt service, alter bond characteristics, such as call provisions or payment dates, on existing debt. For all refunding undertaken for the principal reason of achieving interest rate savings, the Finance Director will consult with bond counsel or a financial advisor for a value of savings based upon the size of the refunding bond.

14. GLOSSARY

For the purposes of this Chapter, the following defined terms shall have the following meanings:

Arbitrage The gain that may be obtained by borrowing funds at a lower (often tax exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended.

Bond A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments.

Bond Counsel An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel’s opinion usually addresses the subject of tax exemption. Bond counsel may prepare, ore review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validations proceedings and litigation.

Bond Insurance A type of credit enhancement whereby a monocline insurance company indemnifies an investor against a default by the issuer in the event of a failure by the issuer to pay principal and interest in-full and on-time, investors may call upon the insurance company to do so. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up-front fee, or premium, when the policy is issued.

Competitive Sale The sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost.

Debt Limitation The maximum amount of debt that is legally permitted by a jurisdiction’s charter, constitution, or statues.

Debt Service The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years.

Financial Advisor A consultant who advises an issuer on matters pertinent to a debt issue, such as structure, sizing, timing, marketing, pricing, terms and bond ratings.