December 3, 2024
TO: City Council
REQUESTED BY: Erika Gomez, Finance Director
APPROVED BY: Robert A. Johnson, City Manager
SUBJECT: SB 1029 Debt Policy
RECOMMENDATION:
Staff recommends that the City Council approve Resolution 4049, approving a debt management policy in compliance with Government Code Section 8855 (i).
BACKGROUND:
In 1981 the California Legislature established the California Debt Advisory Commission as the State's clearinghouse for public debt issuance information and required it to assist state and local agencies with the monitoring, issuance, and management of public debt. In 1996, the Legislature changed the name to the California Debt and Investment Advisory Commission (CDIAC) and expanded its mission to cover public investment and to provide information, education, and technical assistance on debt issuance and public fund investments to local agencies and public finance professionals. In September 2016, the Legislature enacted Senate Bill 1029, which became effective January 1, 2017, which further amended the CDIAC requirements. In particular, Government Code Section 8855(i) was amended to require that all governmental entities establish a Debt Management Policy (“Debt Policy”) if any form of debt is being contemplated or anticipated to be issued by the entity.
DISCUSSION:
Government Code Section 8855(i), as amended by SB 1029, requires:
• CDIAC to track and report on all state and local outstanding debt until fully repaid or redeemed.
• The report of proposed debt includes a certification by the issuer that it has adopted local debt policies, which include specified provisions concerning the use of debt and that the contemplated debt issuance is consistent with those local debt policies. • A state or local public agency to submit an annual report for any issue of debt.
The City’s legal counsel, Best, Best & Krieger, prepared the debt management policy and Resolution 4049, approving the policy. The policy meets all of the requirements of SB 1029, yet preserves flexibility for the City in managing its debt.
As presented in the proposed Debt Policy, the primary objectives of the City's debt and financing-related activities are to:
A. Maintain the City's sound financial position;
B. Ensure the City has the flexibility to respond to possible changes in future service obligations, revenues, and operating expenses;
C. Ensure that all debt is structured in order to protect both current and future taxpayers, ratepayers, and constituents of the City;
D. Minimize debt service commitments through efficient planning and cash management.
E. Protect the City's credit worthiness and achieve the highest practical credit ratings, when applicable; and
F. Esure the City is in compliance with all relevant State and Federal securities laws and other applicable laws and regulations.
Since the City has not issued new debt recently, establishing this new Debt Policy was not required. However, it is now timely and necessary for the City Council to consider and adopt a debt management policy that meets the requirements of Government Code section 8855(i), as amended by SB 1029. The Debt Policy presented with this agenda report meets these State Law requirements while, as noted, also preserving flexibility for the City in the management of its debt.
FISCAL IMPACT:
Approval of the Debt Policy has no fiscal impact. Approval of a debt management policy is a legal requirement for California agencies to issue debt.
ATTACHMENTS:
Debt Policy Resolution
Exhibit A