(A) General debt policy. The city will confine long-term borrowing, other than for vehicles and capital equipment acquisitions/leases, to capital improvements or projects that cannot be financed from current revenues except where approved justification is provided. A balanced approach to capital funding that uses a combination of debt financing, draws on capital reserves and/or fund balances in excess of fund balance policy targets, and current-year (pay-as-you-go) appropriations will be undertaken.
(B) Authorization for debt. All long-term borrowing shall be authorized by the Council. Any two of three individuals including the City Manager, Mayor and Finance Director may execute properly authorized debt instruments on behalf of the city. While the city may have access to other types of debt instruments, it is contemplated that the need for long-term funding can be satisfied by use of either capital lease arrangements or installment financing.
(C) Debt term limits. The city will not finance capital improvements, vehicles, capital equipment acquisition/leases, or other projects for terms exceeding the expected useful life of the improvement, vehicle or project.
(D) Financial restrictions on outstanding debt.
(1) Direct net debt, defined by G.S. § 159-55 as any and all debt that is tax supported, is statutorily limited to 8% of the assessed valuation of the taxable property within the city. Total general fund debt service will not exceed any limits imposed by the North Carolina Local Government Commission (LGC). As a matter of prudent debt management, direct net debt of the city should not exceed 5% of total assessed value of taxable property.
(2) Annual debt service expenditures will be targeted to remain at or below 10% of total general fund expenditures but in any case should not exceed 12% with an aggregate direct debt ten-year principal payout not to exceed 50%.
(Ord. passed 11-14-2016)