HomeMy WebLinkAboutRes 2009-05RESOLUTION NO. 2009-05
A RESOLUTION OF THE MAYOR AND COUNCIL OF THE TOWN OF
FOUNTAIN HILLS, ARIZONA, ADOPTING THE AMENDED AND
RESTATED TOWN OF FOUNTAIN HILLS FINANCIAL POLICIES.
WHEREAS, the Mayor and Council of the Town of Fountain Hills (the "Town
Council ") approved Resolution No. 2003 -14 on May 1, 2003, adopting the Town of Fountain
Hills Financial Policies (the "Financial Policies ") to establish the framework for the Town's
fiscal planning and management; and
WHEREAS, the Mayor and Council of the Town of Fountain Hills desire to amend and
replace the Financial Policies to incorporate Rainy Day Fund procedures and to make other
technical corrections.
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COUNCIL OF
THE TOWN OF FOUNTAIN HILLS as follows:
SECTION 1. That the recitals set forth above are hereby incorporated as if fully set
forth herein.
SECTION 2. That the Town of Fountain Hills Financial Policies, Amended and
Restated .tune 18, 2009, is hereby adopted in the form attached hereto as Exhibit A.
SECTION 3. That the Mayor, the Town Manager, the Town Clerk and the Town
Attorney are hereby authorized and directed to take all steps necessary to carry out the purpose
and intent of this Resolution.
PASSED AND ADOPTED by the Mayor and Council of the Town of Fountain Hills,
Arizona, June 18, 2009.
FOR THE TOWN OF FOUNTAIN HILLS:
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J Schlum, Mayor
REVIEWED BV:
Richa L. Davis, T wn Manager
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ATTESTED TO:
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de , own Clerk
APP VED AS TO FORM:
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Andrew J. McGuire, Town Attorney
EXHIBIT A
TO
RESOLUTION NO. 2009-05
(Town of Fountain Hills Financial Policies, Amended and Restated June 18, 2009)
See following pages.
1049357.1
TOWN OF FOUNTAIN HILLS FINANCIAL POLICIES
Amended and Restated June 18, 2009
I. INTRODUCTION
The principles of sound financial management establish the framework for overall fiscal
planning and management. The principles set forth guidelines for both current activities and
long range planning. Following these principles will enhance the Town's financial health as well
as its image and credibility with its citizens, the public in general, bond rating agencies and
investors. The policies will be reviewed annually to assure the highest standards of fiscal
management. Policy changes will be needed as the Town continues to grow and becomes more
diverse and complex in the services it provides, as well as the organization under which it
operates to provide these services to its citizens. The Town Manager and staff have the primary
role of reviewing and providing guidance in the financial area to the Town Council.
II. OVERALL GOALS
The overall financial goals underlying these principles are:
1. Fiscal Conservatism. To ensure that the Town is at all times in a solid financial
condition, defined as:
A. Cash solvency — the ability to pay bills.
B. Budgetary solvency — the ability to balance the budget.
C. long run solvency — the ability to pay future costs.
D. Service level solvency — the ability to provide needed and desired services
E. Adhering to the highest accounting and management practices as set by
the Government Finance Officers' Association standards for financial
reporting and budgeting, by the Governmental Standards Board and other
professional standards.
2. To maintain an Aa3 or better bond rating in the financial community to assure the
Town taxpayers that the Town government is well managed and financially
sound.
3. To have the ability to withstand local and regional economic fluctuations, to
adjust to changes in the service requirements of our community, and to respond to
changes in Federal and State priorities and funding as they affect the Town's
residents.
4. To deliver quality services in an affordable, efficient and cost - effective basis
providing full value for each tax dollar.
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III. FUND BALANCE
Fund balance is defined as the cumulative difference of all revenues and expenditures, also
considered the difference between fund assets and fund liabilities, known as fund equity. Fund
balance is an important indicator of the Town's financial position and adequate reserves must be
maintained to allow the Town to continue providing services to the community during periods of
economic downturns and/or unexpected emergencies or requirements.
The level of Fund Balance is related to the degree of uncertainty that the Town faces. A prudent
level of financial resources is necessary to protect against the need to reduce service levels or
raise taxes and fees due to temporary revenue shortfalls or unpredicted one -time expenditures.
With the Town dependency upon State Shared Income and State Sales Tax revenues for one
third of the General Fund budget there is increased opportunity for fluctuation. Additionally, a
significant portion of Town revenue is received from sales taxes — both state shared and local -
which are sensitive to fluctuations in the economy. Therefore, the level of reserves needs to be
sufficient to ensure stability in on -going government operations during a slowdown in the
economy or legislative changes to the revenue sharing formula.
Other objectives that influence the size of the fund balance are: (a) preserving or improving the
Aa3 bond rating, (b) maintaining a positive trend to historical fund balances, (c) maintaining a
rating equal to or better than surrounding communities and (d) maintaining ratios consistent with
desired outcomes of ten key ratios of financial condition (Government Finance Review, Dec.
1993) — Appendix A.
1. General Fund. The Town fund balance consists of three (3) components, defined
below. In order to satisfy the objective of maintaining a bond rating equal to or
better than surrounding peer communities a fund balance of at least 30% of
revenues is recommended. The three components added together will help
achieve the 30% goal.
A. Definitions.
"Designated unreserved fund balance" — means management's intended use of
otherwise available expendable financial resources reflecting actual plans
submitted by the Town Manager and approved by the Town Council. An
example would be funds set aside for future capital purchases, land acquisition,
construction projects, equipment replacement, etc.
"Rainy Day Fund" — means available expendable financial resources that are not
the object of tentative management plans. Also defined as residual balance after
revenues, expenditures and reserved/designated fund balance and available for
future year appropriation.
"Reserved fund balance" — means the portion of the Town funds that are not
available for appropriation.
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B. Guidelines. In order to achieve the objectives of this policy, and to
maintain sufficient working capital and a comfortable margin of safety to
address emergencies and unexpected declines in revenue without
borrowing the following guidelines shall be adhered to by the Town
Manager, staff and Town Council:
(1) Rainy Day Fund. The Town will maintain a Rainy Day Fund
separate and apart from the General Fund which shall be
designated for use in the event of an unanticipated expenditure or
loss of revenue. The Rainy Day Fund balance at the end of any
fiscal year will be equal to no less than 30 days of annual operating
expenditures for the upcoming fiscal year. This contingency will
provide for the temporary financing of an unforeseen nature for
that year. Expenditures for these emergency or unforeseen
appropriations can only be undertaken with Town Manager
approval and only if funds are not available in the department
requesting the contingency funding.
(a) Deposit Rules.
(i) The initial Rainy Day Fund deposit shall be made
by transferring the total amount of the
"undesignated unreserved fund balance" from the
General Fund to the Rainy Day Fund.
(ii) At the end of each fiscal year, the Town Council
shall transfer 5% of any surplus revenues (before
transfers to the Capital Projects Fund) to the Rainy
Day Fund. Deposits shall be made as set forth
herein until the Rainy Day Fund balance is equal to
10% of the average of the General Fund revenues
for the immediately preceding five years.
(b) Use Rules. Rainy Day Funds may only be expended for
any one of the following purposes or under the following
circumstances:
(i) To replace the loss of more than 25% of the Town's
local share of State Shared Revenues received
pursuant to Attu. REV. STAT. § 43 -206.
(ii) For any event that threatens the health, safety or
welfare of the Town's citizens.
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(iii) For any event that threatens the fiscal stability of
the Town.
(iv) To address any matter declared as an emergency by
the Governor or the Mayor.
(c) Withdrawal Rules. All withdrawals from the Rainy Day
Fund shall be subject to the following rules:
(i) Any appropriation shall require the approval by at
least 2/3 of the entire Town Council.
(ii) The maximum amount of Rainy Day withdrawals in
any fiscal year shall not exceed one -half of the total
balance in the fund.
(d) Replenishment Rules. Any amounts withdrawn from the
Rainy Day Fund shall be replenished as follows (and such
repayment shall be in addition to the annual deposits set
forth above):
(i) All amounts shall be repaid in not more than five
years, in equal annual installments of not less than
1% of the previous fiscal year General Fund
balance.
(ii) Repayments shall be appropriated as part of the
annual budget adoption.
(2) Designated Unreserved Fund. The Town will maintain a designated
unreserved fund balance in the General Fund of a minimum 10% of the
average actual General Fund revenues for the preceding five fiscal years.
These reserves will be designated for "pay -as- you -go" capital replacement
expenditures, equipment replacement, capital projects, prepay existing
Town debt, or any other expenditure that is non - recurring in nature. The
10% is the minimum and is based on the Property and Equipment
Replacement Schedule which may be increased to accelerate accumulation
funds for a large capital expenditure. To the extent these reserves are
expended additional funds necessary to restore this additional 10% amount
will be provided in at least approximately equal contributions during the
five fiscal years following the fiscal year in which the event occurred. The
designated General Fund Balance can only be authorized for expenditure
by upon recommendation of the Town Manager and vote of the Town
Council.
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(3) Reserved Fund Balance. The Town will maintain a reserved fund balance
in the General Fund of 20% of the average actual General Fund revenues
for the preceding five fiscal Years, indicating stable fiscal policies. The
maintenance of this fiscal balance is a particularly important factor
considered by credit rating agencies in their evaluation of the credit
worthiness of the Town. It is of primary importance that the Town's
credit rating be protected.
During the annual budget process the Town Manager will estimate the
surplus or deficit for the current year and prepare a projection of the year-
end undesignated general fund balance. Such projection will include an
analysis of trends in fund balance levels on an historical and future
projection basis.
Funds in excess of the fund balance goals set forth above may be (a)
transferred to the Rainy Day Fund, (b) used to supplement "pay as you go"
capital outlay expenditures or (c) used to prepay existing Town debt.
These funds may not be used to establish or support costs that are
recurring in nature.
These guidelines will be reviewed by the Town Manager every three years
following adoption (or sooner at the direction of the Town Council).
2. Special Revenue Funds. The Highway User Revenue Fund (HURF) is a restricted
fund and depends upon State Shared Revenues for over 90% of annual revenues.
This fund may only be used for street and highway purposes. The combined
undesignated unreserved, designated unreserved and reserved Fund Balance will
be based on the minimum requirement as specified in the Schedule for projects
funded with Special Revenue or grant funds. The schedule will be reviewed on
an annual basis to determine the required Revenue Bond amount to be set aside as
designated unreserved Fund Balance.
The Excise Tax (0.4% of Local Sales Tax) Fund is a restricted fund dedicated to
Economic Development and Land Preservation. The combined designated
unreserved and reserved Fund Balance saved in this fund will be no less than the
annual debt service payment for Land Preservation and prior year available funds
for Downtown Development.
3. Debt Service Funds. The Debt Service Fund is established for the payment of
principal and interest on bonded indebtedness. Revenues are derived from a
property tax levy, pledged excise taxes, municipal property lease payments and
shared revenues. Revenues are received in amounts sufficient to pay the annual
debt service payment; therefore, the Designated Unreserved and Reserved Fund
Balance will be no less than the annual debt service payment due on July 1 of the
new fiscal year and no more than 2% greater than the annual delinquency factor
based on the past five years delinquency rates.
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4. Capital Project Funds. A capital improvement special revenue fund has been
established to allow the Town to accumulate monies for: (A) purchase of land or
buildings; (B) improvements to Town -owned properties; (C) grant matches
associated with capital improvements; (D) public safety projects and equipment
purchases; (E) economic development projects; and (F) such other capital projects
as determined by the town council. The capital improvement special revenue
fund will be funded by: (A) sales of real and personal property belonging to the
town; (B) general fund transfer of any excess revenues collected over budgeted
and unexpended appropriations not needed to meet fund balance requirements or
re- appropriation; and (C) interest earnings on the balance of the fund invested per
the town's investment policy. Accounted for separately, but considered part of
the Capital Project Fund are accumulated development fees that are assessed on
new construction for the purpose of funding growth. These funds are restricted to
growth - related capital expenditures as designated in the Town's adopted
Infrastructure Improvements Plan. The Designated Unreserved and Reserved
Fund Balance will be established each fiscal year during the budget process
depending on planned expenditures but cannot exceed accumulated revenues.
The Town shall first be entitled to recoup the cost of any capital improvements,
infrastructure, marketing or sales related cost associated with the disposition of
property before crediting the capital improvement special revenue fund. The
town council may approve the uses of the capital improvement special revenue
fund as a part of its annual budget or by motion and affirmative vote at a time the
expenditures are awarded.
IV. FINANCIAL PLANNING
Fiscal planning refers to the process of identifying resources and allocating those resources
among competing purposes. The primary vehicle for this planning is the preparation, monitoring
and analyses of the Town's budget. It is increasingly important to monitor the performance of
the programs competing to receive funding.
1. The Town Manager shall submit to the Town Council a proposed annual budget,
which shall be submitted to the Town Council and the public for review in
accordance with ARIZ. REV. STAT. § 42- 17001, et seq. The Town will budget
revenues and expenditures on the basis of a fiscal year which begins July 1 and
ends on the following June 30. The Town Council will adopt the budget no later
than June 30, and the Town Manager shall execute the Town Council policies as
set forth in the finally adopted budget.
2. The Town Manager or authorized designee will prepare a budget in accordance
with the guidelines established by the Government Finance Officers Association
in its Distinguished Budget Award Program. The proposed budget will contain
the following:
A. Revenue estimates by major category, by major fund.
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B. Expenditure estimates by department levels and major expenditure
category, by major fund.
C. Estimated fund balance by major fund.
D. Debt service by issue detailing principal and interest amounts by fund.
E. Proposed personnel staffing levels.
F. A detailed schedule of capital projects, including a capital improvement
program.
G. Any additional information, data, or analysis requested of management by
the Town Council.
3. The operating budget will be based on the principle that current operating
expenditures, including debt service, will be funded with current revenues
creating a balanced budget. The Town will not balance the current budget at the
expense of meeting future years' expenditures; for example accruing future years'
revenues or rolling over short-term debt to avoid planned debt retirement.
4. Ongoing operating costs should be supported by ongoing, stable revenue sources.
This protects the Town from fluctuating service levels, and avoids crises when
one -time revenues are reduced or removed. Revenues from growth or
development should be targeted to costs related to development, or invested in
improvements that will benefit future residents or make future service provision
efficient.
5. The Town Manager will provide an estimate of the Town's revenues annually for
each fiscal year. The estimates of special (grant, excise tax, etc.) revenues and
interfund transfers will also be provided by the Town Manager.
6. The budget will fully appropriate the resources needed for authorized regular
staffing. At no time shall the number of regular full -time employees on the
payroll exceed the total number of full -time positions authorized by the Town
Council. All personnel actions shall be in conformance with applicable federal
and state law and all Town ordinances and policies.
7. The Town Manager shall provide annually a budget preparation schedule
outlining the preparation timelines for the proposed budget. Budget packages for
the preparation of the budget, including forms and instructions, shall be
distributed to Town departments in a timely manner for the Department's
completion. Department Directors shall prepare and return their budget proposals
to the Administration Department, as required in the budget preparation schedule.
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8. Performance measurement indicators will be integrated into the budget process as
appropriate.
9. Alternatives for improving the efficiency and effectiveness of the Town's
programs and the productivity of its employees will be considered during the
budget process. Duplication of services and inefficiency in service delivery
should be eliminated wherever they are identified.
10. Department Directors are required to monitor revenues and control expenditures
to prevent exceeding their total departmental expenditure budget. It is the
responsibility of these department directors to immediately notify the Town
Manager of any exceptional circumstances that could result in a departmental
expenditure budget to be exceeded.
11. A quarterly report on the status of the General Fund budget and trends will be
prepared within 60 days of the end of each quarter by the Town Manager or
authorized designee. In addition, the quarterly report shall include revenue and
expenditure projections through the end of the fiscal year.
12. If a deficit is projected during any fiscal year, the Town will take steps to reduce
expenditures, increase revenues or, if a deficit is caused by an emergency,
consider using the Rainy Day Fund, to the extent necessary to ensure a balanced
budget at the close of the fiscal year. The Town Manager may institute a
cessation during the fiscal year on hirings, promotions, transfers, and capital
equipment purchases. Such action will not be taken arbitrarily and without
knowledge and support of the Town Council.
V. EXPENDITURE CONTROL
The Town Manager shall ensure compliance with the legally adopted budget. In addition,
purchases and expenditures must comply with all applicable legal requirements.
1. Expenditures will be controlled by an annual budget at the departmental level.
The Town Council shall adopt appropriations through the budget process.
Written procedures will be maintained for administrative approval and processing
of certain budget transfers within funds.
2. The Town will maintain a purchasing system that provides needed materials in a
timely manner to avoid interruptions in the delivery of services. All purchases
shall be made in accordance with the Town's purchasing policies, guidelines and
procedures and applicable state and federal laws. The Town will endeavor to
obtain supplies, equipment and services as economically as possible.
3. Expenditures will be controlled through appropriate internal controls and
procedures in processing invoices for payment.
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4. The State of Arizona sets a limit on the expenditures of local jurisdictions. The
Town will comply with these expenditure limitations and will submit an audited
expenditure limitation report, audited financial statements and audited
reconciliation report as defined by the Uniform Expenditure Reporting System
(ARIZ. REV. STAT. § 41- 1279.07) to the State Auditor General each year.
5. Assets will be capitalized at $10,000 and will be recorded in the Town of
Fountain Hills Summary of General Fixed Assets.
VI. REVENUES AND COLLECTIONS
All government employees are considered stewards of public funds. In order to provide funding
for service delivery, the Town must have reliable revenue sources. These diverse revenues must
be collected equitably, timely and efficiently.
1. The Town's goal is a General Fund revenue base that is equally balanced between
sales taxes, state shared revenues, property tax, service fees and other revenue
sources.
2. The Town will strive for a diversified and stable revenue base to shelter it from
economic changes or short-term fluctuations and in any one revenue source by
doing the following:
A. Establishing new charges and fees as needed and as permitted by law at
reasonable levels.
B. Pursuing legislative change, when necessary, to permit changes or
establishment of user charges and fees.
C. Aggressively collecting all revenues, late penalties, outstanding taxes
owed and related interest as authorized by law.
3. The Town Manager or authorized designee will monitor all taxes to ensure they
are equitably administered and collections are timely and accurate. Fees and
charges should be based on benefits and/or privileges granted by the Town, or
based on costs of a particular service.
4. The Town Manager or authorized designee should pursue intergovernmental aid
for those programs and activities that address a recognized need and are consistent
with the Town's long -range objectives. Any decision to pursue
intergovernmental aid should include the consideration of the following:
A. Present and future funding requirements.
B. Cost of administering the funds.
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C. Costs associated with special conditions or regulations attached to the
grant award.
5. The Town will attempt to recover all allowable costs (both direct and indirect)
associated with the administration and implementation of programs funded
through intergovernmental aid. In the case of the Fountain Hills Unified School
District, the Town may determine to recover less than full cost of services
provided. In the case of State and federally mandated programs, the Town will
attempt to obtain full funding for the service from the governmental entity
requiring the service be provided. Allowable costs will be determined based upon
a "Cost Allocation Study" prepared periodically.
b. Local sales tax revenues are derived from several sources with a significant
portion from construction related activity. To ensure that the revenues from
growth or development are targeted to costs related to development, or invested in
improvements that will benefit future residents or make future service provision
efficient, the Town will designate 85% of those one -time revenues to the Capital
Projects Fund. At the end of each fiscal year these revenues will be transferred
from the General Fund to the Capital Projects Fund for future appropriation.
VII. USER FEE COST RECOVERY
User fees and charges are payments for voluntarily purchased, publicly provided services that
benefit specific individuals. The Town relies on user fees and charges to supplement other
revenue sources in order to provide public services.
1. The Town may establish user fees and charges for certain services provided to
users receiving a specific benefit.
2. User fees and charges will be established to recover as much as possible the direct
and indirect costs of the program or service, unless the percentage of full cost
recovery has been mandated by specific action of the Town Council. It is
recognized that occasionally competing policy objectives may result in reduced
user fees and charges that recover a smaller portion of service costs.
3. Periodically, the Town will recalculate the full costs of activities supported by
user fees to identify the impact of inflation and other attendant costs.
VIII. DEBT POLICY
The purpose of this debt policy is to provide for the preservation and enhancement of the Town's
bond ratings, the maintenance of adequate debt service reserves, compliance with debt
instrument covenants and provisions and required disclosures to investors, underwriters and
rating agencies. The Town's overall debt management policy is to ensure that financial
resources are adequate in any general economic situation to not preclude the Town's ability to
pay its debt when due.
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These policies are meant to supplement the legal framework of public debt laws provided by the
Arizona Constitution, State Statutes, federal tax laws and the Town's current bond resolutions
and covenants. The Arizona Constitution limits a city or town's bonded debt capacity
(outstanding principal) to certain percentages of the Town's secondary assessed valuation by the
type of project to be constructed. There is a limit of 20% of secondary assessed valuation for
projects involving water, sewer, artificial lighting, parks, open space, public safety,
transportation, streets and recreational facility improvements. There is a limit of 6% of
secondary assessed valuation for any other general - purpose project.
1. General.
A. The Town will (1) use current revenues to pay for short-term capital
projects, repair and maintenance items and (2) reserve long -term debt for
capital improvements with useful lives of ten years or more. The Town
will not use long -term debt to fund current governmental operations and
will manage its cash flow in a fashion that will prevent any borrowing to
meet working capital needs. However, exclusive reliance upon pay -as-
you-go funds for capital improvements requires existing residents to pay
for improvements that will benefit new residents who relocate to the area
after the expenditure is made. Financing capital projects with debt
provides for an "intergenerational equity", as the actual users of the capital
asset pay for its cost over time, rather than one group of users paying in
advance for the costs of the asset. Where there is a benefit to all future
residents, debt financing should be given consideration.
B. To increase its reliance on current revenue to finance its capital
improvements, and promote a "pay -as- you -go" philosophy, the Town will
appropriate each year a percentage of current revenues to maintain a
minimum 10% of average actual General Fund revenues for the preceding
five fiscal years in the Designated Unreserved Fund.
2. Capital Improvement Plan.
A. As part of the budget process each year the Town Manager or authorized
designee will prepare a capital spending plan that provides a detailed
summary of specific capital projects for the five fiscal years subsequent to
the fiscal year presented. The plan will include the name of the project,
project schedule, capital cost by fiscal year and a recommended specific
funding source. The five year capital improvement plan will be developed
within the constraints of the Town's ability to finance the plan.
B. The Town Manager and Department Directors will develop formal
ranking criteria that will be used in the evaluation of all capital projects.
The program ranking criteria will give greatest weight to those projects
which protect the health and safety of its citizens. Pay -as- you -go project
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financing shall be given the highest priority. Capital improvements that
must rely upon debt financing shall be accorded a lower priority and
projects with a useful life of less than five years shall not be eligible for
inclusion in bond issues.
C. Lease purchase financing shall only be undertaken when the project is
considered essential to the efficient operation of the Town or to remove
expenditures that would exceed the State imposed expenditure limitation.
The Town Manager or authorized designee shall be responsible for
ensuring that pay -as- you -go expenditures do not cause the state imposed
expenditure limitation to be exceeded in any fiscal year.
D. All capital project requests will be accompanied by a description of the
sources of funding to cover project costs. Where borrowing is
recommended, a dedicated source of funds to cover debt service
requirements must be identified. All capital project requests will be
required to identify any impact the project may have on future operating
costs of the Town. The Town will seek grants to finance capital
improvements and will favor those projects which are likely to receive
grant money.
E. All capital project appropriations and amendments to the capital
improvement plan must be approved by the Town Council.
F. The capital plan will include all equipment and facilities with a useful life
of greater than ten years and a cost greater than $50,000. Debt financing
shall not exceed the useful life of the infrastructure improvement or asset.
G. Seven steps in preparation of Capital Improvement Program:
(1) Establish Capital Improvement policies.
(a) Time period the CIP will cover.
(b) Facilities /equipment that will be included in the CIP.
(c) How acquisition of multiple items (e.g. computers) will be
treated.
(d) Identification of projects that are expected to be
undertaken, but fall outside the time horizon of the plan.
(2) Adopt Standards to rank project requests.
(a) Projects that address a public health or safety concern are
given top priority.
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(b)
Projects mandated by a court of competent jurisdiction or a
government with authority over the Town are equal with
public health or safety.
(c)
Major maintenance (preservation of assets).
(d)
Replacement of obsolete equipment (improving efficiency).
(e)
Expansion to meet demand caused by growth.
(f)
Coordination of projects to achieve cost savings.
(g)
Availability of cash to finance improvements from current
revenues.
(h)
Acquisition of open space.
(3) Perform and maintain a capital inventory and identify useful life.
(4) Identify
projects.
(a)
Status review of previously approved projects.
(b)
Identification of new projects.
(c)
Assess capital project alternatives.
(d)
Complete project request forms.
(5) Assess funding sources.
(a)
Available grants.
(b) Development fees shall be utilized to fund capital projects
before pay -as- you -go and bond issuance financing.
(c) Developer contributions.
(d) Public /Private partnerships.
(e) Issuance of Securities.
(f) Capital Leases.
(6) Approve the CIP and Budget.
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(a) Legislative review.
(b) Public hearing.
(c) Adoption of the CIP and capital budget.
The Town of Fountain Hills capital improvement program ranking criteria will give greatest
weight to those projects which protect the health and safety of its citizens. Pay -as- you -go project
financing shall be given the highest priority. Capital improvements that must rely upon debt
financing shall be accorded a lower priority. All capital project request will be accompanied by
a description of the sources of funding to cover project costs. Where borrowing is
recommended, the source of funds to cover debt service requirements must be identified. All
capital project requests will be required to identify any impact the project may have on future
operating costs of the Town.
Department directors will submit a detailed description of the useful life of capital projects
submitted in conjunction with the preparation of the Town's CIP. Projects with a useful life of
less than ten years shall not be eligible for inclusion in bond issues except in extraordinary
circumstances. The Town Manager shall incorporate an estimate of the useful life of proposal
capital improvements in developing an amortization schedule for each bond issue. If a short-
lived asset or project (less than ten years) is included in a bond issue then the bond amortization
schedule shall be adjusted to reflect the asset's rapid depreciation. At no time shall the
amortization exceed the life of the asset.
3. Financing Alternatives.
A. Financing alternatives include, but are not limited to:
(1) Grants.
(2) Developer Contributions.
(3) General Obligation Bond — requires voter approval, supported by
an ad valorem (property) tax.
(4) Revenue Bonds — repaid with revenue stream (HURF, revenue
generated by project).
(5) Municipal Property Corporation Bonds — repaid with a dedicated
revenue source.
(6) CFD or Special District Bonds — supported by an ad valorem
property tax.
(7) Capital Leases — repaid within operating budget.
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(8) Commercial Paper (CP) or Bond Anticipation Notes (BAN) with
terms less than two years.
B. Town Debt Service costs (GO, Revenue Bonds, MPC, Leases) shall not
exceed 20% of the Town's operating revenue in order to control fixed
costs and ensure expenditure flexibility. Improvement District (ID),
Community Facility District (CFD) and Special District debt service is not
included in this calculation because it is paid by district property owners
and is not an obligation of the general citizenry. Separate criteria have
been established and included within the Town's CFD policy.
C. In accordance with requirements of the State of Arizona Constitution, total
bonded indebtedness shall not exceed 20% of the Town's total secondary
assessed valuation of taxable property in the Town for water, sewer,
artificial lighting, parks, open space, public safety, transportation, streets
and recreational facility improvements and 6% of the total secondary
assessed valuation of taxable property in the Town for all general
purposes.
D. The Town shall comply with all U.S. Internal Revenue Service arbitrage
rebate requirements for bonded indebtedness.
E. Where applicable, the Town will structure General Obligation bond issues
to create level debt service payments over the life of the issue. The goal
will be to strive for a debt repayment schedule to be no more than 15
years; at no time will the debt exceed 25 years.
F. Refunding bonds will be measured against a standard of the net present
value debt service savings exceeding 3% of the principal amount of the
bonds being refunded, or if savings exceed $750,000, or for the purposes
of modifying restrictive covenants or to modify the existing debt structure
to the benefit of the Town. Refinancings undertaken for other reasons
should proceed only when the advantages have been clearly shown in a
cost/benefit analysis of the transaction.
G. The Town will seek to maintain and, if possible, improve the current bond
rating in order to minimize borrowing costs and preserve access to credit.
H. An analysis showing how a new issue combined with current debt impacts
the Town's debt capacity and conformance with Town debt policies will
accompany every future bond issue proposal. The debt capacity analysis
should reflect a positive trend and include:
(1) Percent of debt outstanding as a percent of the legal debt limit.
(2) Measures of the tax and revenue base.
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(3) Evaluation of trends relating to expenditures and fund balance.
(4) Debt service as a percentage of assessed valuation.
(5) Measures of debt burden on the community.
(6) Tax - exempt market factors affecting interest costs.
(7) Debt ratios.
1. Municipal Property Corporation and contractual debt, which is non -voter
approved, will be utilized only when a dedicated revenue source (e.g.
excise taxes) can be identified to pay debt service expenses. The project
to be financed will generate net positive revenues (i.e., the additional
revenues generated by the project will be greater than the debt service
requirements).
J. The Town's privilege tax to debt service goal will be a ratio of at least
3.5:1 to ensure the Town's ability to pay for long term debt from this
elastic revenue source.
4. Issuance of Obli ate.
A. The Town shall select the Underwriter and the Paying agent/registrar for
each debt issuance based on competitive bid. The underwriter must be a
firm domiciled in Arizona with an office in the Phoenix area and a record
of prior working relationships.
B. The request for proposals process will be designed to select the service
providers that offer the Town the best combination of expertise and price.
The Town is not required to select the firm offering the lowest price, but a
report must be prepared by the Town Manager providing justification to
the Town Council for a recommendation when other than the lowest
bidder is chosen. The review of all proposals submitted shall be the
responsibility of the Town Manager.
C. The Town of Fountain Hills will use competitive sales as the primary
means of selling new General Obligation or revenue bonds that are repaid
through ad valorem (property) taxes. Negotiated sales will be permitted
for all other debt issues when it is expected to result in a lower true
interest cost than would a competitive sale of that same date and structure
or there is evidence of volatile market conditions, complex security
features, or another overriding factor.
D. The Town Manager or designee and Town Attorney will coordinate their
activities to ensure that all securities are issued in the most efficient and
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cost - effective manner and in compliance with the governing statutes and
regulations. The Manager and the Town Attorney shall consult and jointly
select the bond counsel for a bond issue. The Town Attorney will review
all documents related to the issuance of securities by the jurisdiction.
E. The Town Manager or authorized designee will seek a rating on all new
issues which are being sold in the public market if economically feasible.
F. The Town will report on an annual basis all financial information and/or
notices of material events to the rating agencies and Nationally -
Recognized Municipal Securities Information Repositories (NRMSIRs).
The annual report will include but not be limited to the Town's annual
Comprehensive Annual Financial Report (CAFR).
G. Any institution or individual investing monies as an agent for the Town
shall do so in a manner consistent and in compliance with the Town's
adopted Investment Policy.
H. The Town Manager or authorized designee will provide detailed draw
schedules for any project to be funded with borrowed monies. The Town
will invest the proceeds or direct a trustee to invest the proceeds of all
borrowings in a manner that will ensure the availability of funds as
described in the draw schedules.
1. The Town acknowledges the responsibilities of the underwriting
community and pledges to make all reasonable efforts to assist
underwriters in their efforts to comply with SEC Rule 15c2 -12 and MSRB
Rule G -36.
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