Credit Ratings
The school district seeks to maintain the highest possible credit ratings for all categories of short-and long-term debt that can be achieved without compromising the delivery of services and the achievement of adopted objectives. The school district recognizes that external economic, natural, or other events may from time to time affect the creditworthiness of its debt. Nevertheless, the school district is committed to ensuring that actions within their control are
prudent.
Debt Limits For general obligation debt, the school district's outstanding debt limit shall be no more than five percent (5%) of the actual value of property within the school district's boundaries, as prescribed by the Iowa constitution and statutory restrictions.
For revenue debt, the school district's goal is to provide adequate debt service coverage of at least 1.20 times the annual debt service costs. In accordance with Iowa law, the school district may not act as a conduit issuer or issue municipal security to raise capital for revenue-generating projects where the funds generated are used by a third party ("conduit borrower") to make payments to investors.
PURPOSES AND USES OF DEBT
Capital Planning To enhance creditworthiness and prudent financial management, the school district is committed to systematic capital planning, intergovernmental cooperation and coordination and long-term financial planning.
Capital Financing The school district may issue long-term debt for capital projects as authorized by Iowa law, which include, but are not limited to, the costs of planning, design, land acquisition, buildings, permanent structures, attached fixtures or equipment, and movable pieces of equipment.
Capitalized interest may be included in sizing any capital project debt issue. The types of debt instruments to be used by the school district include: General Obligation Bonds, General Obligation Capital Loan Notes, Bond Anticipation Notes, Revenue Anticipation Notes School Infrastructure Sales, Services, and Use Tax Revenue Bonds, and Lease Purchase Agreements, including Certificates of Participation Working Capital Financing The school district may issue debt for working capital for operations after cash flow analysis has determined that there is a mismatch between available cash and cash outflows. The school district shall strive to repay working capital debt by the end of the fiscal year in which the debt was incurred. A Working Capital Reserve may be included in sizing any working capital debt issue.
Refundings Periodic reviews of all outstanding debt will be undertaken to determine if refunding opportunities exist. Refunding will be considered (within federal tax law restraints) if and when there is a net economic benefit of the refunding or if the refunding is otherwise in the best interests of the school district, such as to release restrictive bond covenants which affect the operations and management of the school district. In general, advance refundings for economic savings will be undertaken when a net present value savings exceeds three percent of the refunded debt can be achieved. Current refundings, which produce a new present value savings of less than three percent will be considered on a case by case basis taking into consideration bond covenants and general conditions. Refundings with negative savings will not be considered unless there is a compelling public policy objective for doing so.
DEBT STANDARDS AND STRUCTURE
Length of Debt
Debt Structure
Decision Analysis to Issue Debt
DEBT ISSUANCE
Credit Enhancement
Method of Sale
Professional Service Providers
DEBT MANAGEMENT
Investment of Debt Proceeds
Arbitrage and Record Keeping Compliance
Financial Disclosure
Legal Reference: Iowa Code §§ 74-76; 278.1; 298; 298A (2013).
Cross Reference: 701 Financial Accounting System
704 Revenue
Approved: 10/16/97
Reviewed: 12/13/01; 12/12/07; 12/14/11; 4/10/19; 1/10/24
Revised: 12/13/01; 5/9/16
1. Compliance Coordinator:
a: The School Business Official/Treasurer ("Coordinator") shall be responsible for monitoring post-issuance compliance
b: The Coordinator will maintain a copy of the transcript of proceedings in connection with the issuance of any tax-exempt obligations. Coordinator will obtain such records as are necessary to meet the requirements of this policy.
c: The Coordinator shall consult with bond counsel, a rebate consultant, financial advisor, IRS publications and such other resources as are necessary to understand and meet the requirements of this policy.
d: Training and education of Coordinator will be sought and implemented upon the occurrence of new developments and upon the hiring of new personnel to implement this policy.
2. Financing Transcripts: The Coordinator shall confirm the proper filing of an 8038 Series return, and maintain a transcript of proceedings for all tax-exempt obligations issued by the District, including but not limited to all tax-exempt bonds, notes, and lease-purchase contracts. Each transcript shall be maintained until eleven (11) years after the tax-exempt obligation it documents has been retired. Said transcript shall include, at a minimum:
a: Form 8038s
b: minutes, resolutions, and certificates
c: certifications of issue price form the underwriter
d: formal elections required by the IRS
e: trustee statements
f: records of refunded bonds, if applicable
g: correspondence relating to bond financings
h: reports of any IRS examinations for bond financings
3. Proper Use of Proceeds: The Coordinator shall review the resolution authorizing issuance of reach tax-exempt obligation issued by the District, and that the District shall:
a: obtain a computation of the yield on such issue from the District's financial advisor
b: create a separate Project Fund (with as many sub-funds as shall be necessary to allocate proceeds among the projects being funded by the issue) into which the proceeds of issue shall be deposited
c: review all requisitions, draw schedules, draw requests, invoices, and bills requesting payment from the Project fund
d: determine whether payment from the Project Fund is appropriate, and if so, make payment from the Project Fund (and appropriate sub-fund if applicable)
e: maintain records of the payment requests and corresponding records showing payment
f: maintain records showing the earnings on, and investment of, the Project Fund
g: ensure that all investments acquired with proceeds are purchased at fair market value
h: identify bond proceeds or applicable debt service allocations that must be invested with a yield-restriction and monitor the investments of any yield-restricted funds to ensure that the yield on such investments does not exceed the yield to which such investments are restricted
i: maintain records related to any investment contracts, credit enhancement transactions, and the bidding of financial products related to the proceeds.
4. Timely Expenditure and Arbitrage/Rebate Compliance: The Coordinator shall review the Tax-Exemption Certificate (or equivalent) for each tax-exempt obligation issued by the District and the expenditure records provided in Section 2 of this policy, above, and shall:
a: monitor and ensure that proceeds of each such issue are spent within the temporary period set for in such certificate
b: if the District does not meet the "small issuer" exception for said obligation, monitor and ensure that the proceeds are spent in accordance with one or more of the applicable exceptions to rebate as set for in such certificate
c: not less than 60 days prior to a required expenditure date confer with bond counsel and a rebate consultant if the District will fail to meet the applicable temporary period or rebate exception expenditure requirements of the Tax-Exemption Certificate
d: in the event the District fails to meet a temporary period or rebate exception:
1: procure a timely computation of any rebate liability and, if rebate is due, file a Form 8038-T and arrange for payment of such rebate liability.
2: arrange for timely computation and payment of "yield reduction payments" (as such term is defined in the Code and Treasury Regulations), if applicable.
5. Proper Use of Bond Financed Assets.
The Coordinator Shall:
a. maintain appropriate records and a list of all bond financed assets. Such records shall include the actual amount of proceeds (including investment earnings) spent on each of the bond financed assets.
b. with respect to each bond financed asset, the Coordinator will monitor and confer with bond counsel with respect to all proposed:
1. management contracts
2. service agreements
3. research contracts
4. naming rights contracts
5. leases or sub-leases
6. joint venture, limited liability or partnership arrangements
7. sale of property
8. any other change in use of such asset
c. maintain a copy of the proposed agreement, contract, lease or arrangement, together with the response by bond counsel with respect to said proposal for at least three (3) years after retirement of all tax-exempt obligations issued to fund all or any portion of bond financed assets
d. In the event the District takes an action with respect to a bond financed asset, which causes the private business tests or private loan financing test to be met, the Coordinator shall contact bond counsel and ensure timely remedial action under IRS Regulations Sections 1.141-12.
6. General Project Records
For each project financed with tax-exempt obligations,t he Coordinator shall maintain, until three (3) years after retirement of the tax-exempt obligations or obligations issued to refund those obligations, the following:
a. appraisals, demand surveys, or feasibility studies
b. applications, approvals, and other documentation of grants
c. depreciation schedules
d. contracts respecting the project
7. Advance Refundings
The Coordinator shall be responsible for the following current, post issuance and record retention procedures with respect to advance refunding bonds:
a. Identify and select bonds to be advance refunded with advice from internal financial personnel and a financial advisor
b. The Coordinator shall identify with advice from the financial advisor and bond counsel, any possible federal tax compliance issues prior to structuring any advance refunding.
c. The Coordinator shall review the structure with the input of the financial advisor and bond counsel, or advance refunding issues prior to the issuance to ensure (1) that the proposed refunding is permitted pursuant to applicable federal tax requirements if there has been a prior refunding of the original bond issue; (2) that the proposed issuance complies with federal income tax requirements which might impose restrictions on the redemption date of the refunded bonds; (3) that the proposed issuance complies with federal income tax requirements which allow for the proceeds and replacement proceeds of an issue to be invested temporarily in higher yielding investments without causing the advance refunding bonds to become "arbitrage bonds"; and (4) that the proposed issuance will not result in the issuer's exploitation of the difference between tax exempt and taxable interest rates to obtain a financial advantage nor overburden the tax exempt market in a way that might be considered an abusive transaction for federal tax purposes.
d. The Coordinator shall collect and review data related to arbitrage yield restriction and rebate requirements for advance refunding bonds. To ensure such compliance, the Coordinator shall engage a rebate consultant to prepare a verification report in connection with the advance refunding issuance. Said report shall ensure said requirements are satisfied.
e. The Coordinator shall, whenever possible, purchase SLGS to size each advance refunding escrow. The financial advisor shall be included in the process of subscribing SLGS. To the extent SLGS are not available for purchase, the Coordinator shall, in consultation with bond counsel and the financial advisor, comply with IRS regulations.
f. To the extent an issuer elects to the purchase a guaranteed investment contract, the Coordinator shall ensure, after input from bond counsel, compliance with any bidding requirements set forth by the IRS regulations.
g. In determining the issue price for any advance refunding issuance, the Coordinator shall obtain and retain issue price certification by the purchasing underwriter at closing.
h. After the issuance of an advance refunding issue, the Coordinator shall ensure timely identification of violations of any federal tax requirements and engage bond counsel in attempt to remediate same in accordance with IRS regulations.