Preparing a Municipal Debt Policy Statement

By Hayllar, Ben | Government Finance Review, June 1994 | Go to article overview

Preparing a Municipal Debt Policy Statement


Hayllar, Ben, Government Finance Review


The cities of Pittsburgh and Philadelphia are responsible for managing their own general obligation debt as well as the debt of several municipal authorities. In an effort to consolidate the essential information about their debt responsibilities, the finance department of each of these cities produces an annual debt policy statement that provides debt schedules, elemental tax base-to-debt ratios and policies governing the issuance of long-term debt.

There are three purposes in preparing an annual debt policy statement. First, it provides finance officials with a comprehensive view of a city's long-term debt picture. The rigor of compiling data and preparing the 30-page book helps officials comprehend the trends and status of the subject. Second, the book makes it easier for policy makers, such as city council, to understand the issues concerning debt issuance and management. And finally, the publication of the book is particularly welcomed by the rating agencies as a sign of a disciplined approach to borrowing.

The heart of the document is a summary of all bond issues for which the city is responsible, principal outstanding, issuance dates, final maturities and interest ranges. The book also provides updated debt service schedules for each year of the life of the issue for which the city is responsible. This table is broken down into annual principal and interest payments. These tables also include information on overlapping debt from the school district and other independent governmental units, as shown in Exhibit 1.

Other sections provide charts and graphs concerning debt service schedules for gross bonded debt, gross direct debt and overall net debt. Primary measurements of municipal borrowing capacity are charted to help decision makers formulate borrowing plans: these are expressed as ratios, such as debt per capita, debt service as a percentage of the annual general fund and debt as a percent of the principal local revenue source--real estate assessments.

In order to enforce a sense of discipline on debt management, the debt policy section defines how city debt can be structured. Key principles are spelled out clearly, such as the commitment that long-term borrowing only will be used for capital improvements or that general obligation debt service must remain below 15 percent of the annual operating budget. In addition, policies of a more technical nature, such as limiting the terms of issues or controlling the use of variable interest rates, are part of the policy. While such policies can be reviewed and modified by the city's Debt Policy Committee, codifying them reduces friction with elected officials and community interest groups, whose views may be more liberal than professionals would feel is prudent.

Because of the current debate on how investment bankers are chosen, the book now includes a five-part policy on how debt is sold, defining and limiting conditions under which the city would use what is commonly called a negotiated process for obtaining investment bankers for bond issues. This policy statement is illustrated in Exhibit 3.

While not a part of the official closing documents for any particular bond issue, the annual debt policy statement has become an official document of the city and is used by both department and elected officials as a way to comprehend and better manage overall debt and debt service requirements.

Exhibit 2

CITY OF PITTSBURGH GOVERNING POLICY--LONG-TERM DEBT

The City of Pittsburgh establishes the following policy concerning the issue and management of debt. This debt policy, as presented to City Council and the citizens, was established by a Debt Policy Committee consisting of the City of Pittsburgh's Chief Administrative Officer, Director of Finance, City Treasurer, Chairman of City Council's Finance Committee, and Management and Budget Officer.

1. The City of Pittsburgh will not use long-term debt to finance current operations. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Preparing a Municipal Debt Policy Statement
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.