Resolution 2024-04 Resolution No. 2024-04
A RESOLUTION OF THE UNITED CITY OF YORKVILLE, ILLINOIS,APPROVING AND
ADOPTING A DEBT POLICY
WHEREAS, the United City of Yorkville (the "City") is a duly organized and validly
existing non home-rule municipality created in accordance with the Constitution of the State of
Illinois of 1970 and the laws of the State; and
WHEREAS, the Illinois Municipal Code grants the Mayor and City Council of the City
(the"Corporate Authorities")the authority to borrow money on the credit of the City for corporate
purposes (65 ILCS 5/8-1-3); and
WHEREAS, the Corporate Authorities intend to obtain debt financing only when
necessary and desire to set forth guidelines regarding any decision to incur debt on behalf of the
City; and
WHEREAS, the Corporate Authorities of the City therefore desire to adopt a Debt Policy
that sets forth goals and parameters, legal constraints, and considerations for the issuance of debt.
NOW,THEREFORE,BE IT RESOLVED by the Mayor and City Council of the United
City of Yorkville, Kendall County, Illinois:
Section 1. The foregoing recitals are hereby incorporated in this Resolution as the findings
of the Corporate Authorities.
Section 2. That the United City of Yorkville Debt Policy, attached hereto as Exhibit A
and made a part hereof by reference, is hereby approved and adopted.
Section 3. This Resolution shall be in full force and effect upon its passage and approval
as provided by law.
Passed by the City Council of the United City of Yorkville, Kendall County, Illinois this
23rd day of January, A.D. 2024.
CIT CLERK
Resolution No. 2024-04
Page 1
KEN KOCH AYE DAN TRANSIER AYE
ARDEN JOE PLOCHER AYE CRAIG SOLING AYE
CHRIS FUNKHOUSER ABSENT MATT MAREK AYE
SEAVER TARULIS AYE RUSTY CORNEILS AYE
APPROVED by me, as Mayor of the United City of Yorkville, Kendall County, Illinois
this day of , A.D. 2024.
MAYOR
Attest:
CITY LERK
JJA �4AAykk
Resolution No. 2024-04
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Exhibit A
UNITED CITY OF YORKVILLE
DEBT POLICY
Purpose
Reasonable levels of debt provide a mechanism to reduce costs for the City by allowing critical projects to be
completed on a timely basis rather than using current funds. Debt is issued to achieve desired goals in acquiring,
developing, and improving Yorkville's facilities and infrastructure; and in purchasing necessary capital items for
conducting operations. The City will obtain debt financing only when necessary; and shall set forth processes to
identify the timing and amount of debt needed to be as efficient as possible.
Goals and Parameters
In following this Policy, the City shall pursue and adhere to the following goals and parameters when considering
the issuance of debt:
1. Debt will not be issued to finance general operating expenses or fund operating deficits.
2. Alternatives to debt financing will be considered such as other available revenue sources, interfund loans,
application of grant proceeds, State/Federal aid or other funding options to meet the long-term capital
needs of the City.
3. Current credit rating metrics used by the City's rating agency(s) will be evaluated to determine if the
rating may be impacted by the issuance of debt, loans,or other financial decisions or actions by the City.
4. Capital projects with an estimated cost of$500,000 or less will ideally be funded with funds on hand or
pay-as-you-go financing, and not funded with new debt or loans. Depending on the circumstances,
consideration will be given to combine multiple capital projects that are under $500,000 into one debt
issuance.
5. Debt issuances shall be structured to amortize within the expected useful life of the asset(s) being
financed. Principal will be amortized to best fit within the overall debt structure of the City's general
obligation debt, the repayment source and/or related tax levy at the time the new debt is issued. For
issuance of revenue bonds, or general obligation bonds paid by revenues other than property tax, principal
will be amortized to best fit with the overall debt structure of the specific enterprise fund or related
revenue source.
6. Whenever practicable, debt repayment should be structured so that level or declining debt service shall be
used unless operational or financial reasons dictate otherwise, or if to achieve overall level debt service
with existing bonds.
7. The potential financial benefits of issuing bank qualified bonds will be considered and, if possible, strive
to limit annual issuance of debt to $10 million or less within a calendar year when such estimated benefits
are greater than the benefits of exceeding the bank qualification limit. Should subsequent changes in the
law change this limit,the City policy will be adjusted accordingly.
8. Call provisions of approximately ten(10)years or less will be considered to provide the City flexibility to
refinance debt in the future. Consideration of the call feature will be determined at the time of sale based
on overall market conditions and investor acceptance.
9. Fixed rate debt, as opposed to variable rate debt, will be issued to minimize exposure to certain risks. if
unusual circumstances warrant the issuance of variable rate debt, explanation must be provided and
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approved by the City Council. The par amount of outstanding variable rate debt shall not exceed 10% of
the City's total outstanding debt. The City will not use derivative products in its debt structure.
Legal Constraints and Other Debt Limitations
The City Council may utilize the guidelines established by this Policy, or may choose, in its discretion, to
consider other relevant factors in incurring debt. The validity of any debt incurred in accordance with applicable
law shall not be invalidated, impaired, or otherwise affected by non-compliance with any part of the procedures
set forth pursuant to this Policy.
The laws of the State of Illinois authorize the issuance of debt by the City. The Illinois Municipal Code confers
upon municipalities the power and authority to contract debt, borrow money, and issue bonds. The City may, by
bond ordinance, incur indebtedness or borrow money, and authorize the issue of negotiable obligations, including
refunding bonds, for any capital improvement of property, land acquisition or any other lawful purpose.
Under Illinois Compiled Statutes, municipalities with a population of less than 500,000, unless they are a home
rule unit, are limited to the amount of general obligation bonded debt they can incur at any one time to no more
than 8.625% of the total equalized assessed value of real estate property (i.e., legal debt margin). Yorkville is a
non-home rule community and is subject to this limitation.
In order to not overly burden the City,the following debt issuance limitations will be followed:
I. General Obligation (GO) Bonds/Certificates/Loans—The City shall not issue general obligation debt in
excess of 75%of its legal debt limit referenced above.
2. General Obligation Alternate Revenue Source Bonds: The City shall not issue general obligation
alternate revenue source bonds for which coverage of pledged revenues to debt service, including parity
debt, is less than 1.25 times. Coverage shall be based on pledged revenues as provided in the most recent
audited financial statements of the City. The audited financial statements must be for the most recent
fiscal year ending not earlier than 18 months prior to the issuance of bonds. Coverage may also be
demonstrated by a report prepared by an independent accountant or feasibility analyst. If coverage is
based on higher rates, charges, fees or taxes, such higher rates, charges fees or taxes must be imposed by
ordinance prior to the issuance of the bonds.
Considerations for Issuance of Debt
Use of Professional Service Providers
The City will consider seeking the assistance and expertise of a qualified Financial Advisor prior to undertaking a
debt issuance process separate from the Underwriter of the Bonds. The City will also ensure that a qualified Bond
Counsel is also retained by the City.
Types of Deb Issued
I. Short-Term Debt (three-years or less) - The City may issue short-term debt to finance the purchase of
equipment or other items having a useful life exceeding one year; or to provide increased flexibility in
financing programs. The City will not issue debt for deficit financing.
2. Long-Term Debt (more than three-years) - The City may issue long-term debt which may include, but is
not limited to, general obligation bonds, general obligation alternate revenue source bonds certificates of
participation, installment notes, revenue bonds and special assessment bonds.
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Abatement of Property Tax Debt Service for General Obligation Bonds
If the City plans to repay debt service using a specific revenue source when issuing General Obligation bonds, the
City will use conservative revenue projection assumptions to ensure the identified funding source is sufficient to
pay debt service on the bonds. When issuing general obligation bonds in lieu of revenue bonds with the intent to
abate the debt service property tax levies, the City Council will adopt ordinances abating the debt service levies
and pay debt service costs with the identified revenues.
Methods ofSale
When issuing debt, the City will consider multiple methods of sale, including competitive, negotiated or private
placement. If the City retains the services of a Financial Advisor, the Advisor will not bid on or underwrite any
City debt issuances on which it is advising.
Credit Enhancements
The City may enter into agreements with commercial banks or other financial entities for the purpose of acquiring
letters of credit, municipal bond insurance, or other credit enhancements that will provide the City with access to
credit under terms and conditions as specified in such agreements when their use is judged cost effective or
otherwise advantageous.
Conduit Debt
Conduit debt is debt issued in the name of the City but payable by third parties only, and for which the City does
not provide credit or security. The City will consider issuing conduit debt when such actions meet the financial
objectives of plans and/or policies adopted by City Council, but only to the extent permitted by law.
Debt Administration
Financial Disclosures
The City shall prepare all appropriate annual and other financial disclosures as required by the City's continuing
disclosure undertakings as well as any specific event notices required by the Securities and Exchange
Commission (SEC) to the Municipal Securities Rulemaking Board (MSRB), and any other filings required by the
federal government, the State of Illinois, rating agencies, underwriters, investors, taxpayers, and other appropriate
entities and persons to the ensure compliance with applicable laws and regulations.
Review of Financing Proposals
All financing proposals that may involve a pledge of the City's credit through the sale of securities, execution of
loans or lease agreements and/or otherwise directly involve the lending or pledging of the City's credit shall be
referred to the Director of Finance who shall determine the financial feasibility, financial impact, and the impact
on existing debt of such proposal, and shall make recommendations accordingly to the City Administrator and
City Council for approval.
Rating Agency Relations
The City shall endeavor to maintain effective relations with rating agencies. The City Administrator, Director of
Finance and other appropriate parties should meet with, make presentations to, or otherwise communicate with
the rating agencies on a consistent and regular basis in order to keep the agencies informed concerning the City's
capital plans, debt issuance program, and other appropriate financial information on the economic and fiscal status
of the City.
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Refunding Policy on Existing Issuances
The City shall consider refunding outstanding general obligation debt when legally permissible and financially
advantageous. A net present value debt service savings of at least three percent(3%) of the refunded par amount
or greater must be achieved, unless otherwise justified and authorized by City Council.
Investment of Borrowed Proceeds
The City shall invest proceeds of debt in accordance with the City' adopted investment policy. The City
acknowledges its ongoing fiduciary responsibilities to actively manage the proceeds of debt issued for public
purposes in a manner that is consistent with Illinois statutes that govern the investment of public funds, and
consistent with the permitted securities covenants of related bond documents executed by the City. The
management of public funds should enable the City to respond to changes in markets or changes in payment or
construction schedules so as to (i)minimize risk, (ii)ensure liquidity, and (iii) optimize returns.
Definitions
For purposes of this policy, the following definitions apply:
A. Bond: A debt obligation issued by a governmental entity, in which the proceeds are used for capital
purposes or other projects that benefit the public. A bond is a loan to a local government entity,
which in turn promises to pay the buyer a specified amount of interest (usually paid semiannually)
and return the principal on a specific maturity date.
B. Bank Qualification: The limit to which banks can purchase local government bonds and receive
special IRS tax treatment for doing so. Currently this amount is set at $10 million or less in bonds
issued in total for one calendar year by a unit of local government.
C. Bond Counsel: Attorneys who specializes in tax law; retained by the City to render a legal opinion on
if the City is authorized to issue the proposed bonds, has met all legal requirements necessary for
issuance, and whether interest on the bonds is, or is not, exempt from federal and state income
taxation.
D. Capitalization: A debt payment schedule where the first interest payments are made from the bond
proceeds due to cash flow concerns. This increases the cost of borrowing.
E. Debt Service: The payment of principal and interest consisting of two semi-annual interest payments
and one annual principal payment.
F. Financial Advisor: Professional service provider who consults and advises the issuer on type of bond,
type of sale, length of debt service, and assists in having the issue rated by a bond rating agency.
G. Level Debt Service - An arrangement of maturities of about equal value in which the amount of
principal maturing increases at approximately the same rate as the amount that interest declines.
H. Long term debt: Bonds or capital leases that have an amortization schedule of three (3) years or
more.
I. Rating Agency - An independent company which evaluates the issuer's credit quality, which
generally measure the probability of the timely repayment of principal and interest.
J. Short term debt: Bonds or debt that have an amortization schedule of three (3)years or less.
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