DEBT LIMITS
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 securities 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
· 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 will be structured for the shortest period consistent with a fair allocation of costs to current
and future beneficiaries or users. Long-term debt will not be issued for periods exceeding the
useful life or average useful lives of the project or projects to be financed. All debt issued will
adhere to state and federal law regarding the length of time the debt may be outstanding.
Debt Structure
Debt will be structured to achieve the lowest possible net cost to the school district given market
conditions, the urgency of the capital project, the type of debt being issued, and the nature and
type of repayment source. To the extent possible, the school district will design the repayment
of its overall debt to rapidly recapture its credit capacity for future use.
Generally, the school district will only issue fixed-rate debt. In very limited circumstances, the
school district may issue variable rate debt, consistent with the limitations of Iowa law and upon
a finding of the board that the use of fixed rate debt is not in the best interest of the school
district and a statement of the reasons for the use of variable rate debt.
All debt may be structured using discount, par or premium coupons, and as serial or term bonds
or notes, or any combination thereof, consistent with Iowa law. The school district should utilize
the coupon structure that produces the lowest True Interest Cost (TIC) taking into consideration
the call option value of any callable maturities.
The school district will strive to structure their debt in sinking fund installments for each debt
issue that achieves, as nearly as practicable, level debt service within an issue or overall debt
service within a particular classification of debt.
Derivatives (including, but not limited to, interest rate swaps, caps, collars, corridors, ceiling and
floor agreements, forward agreements, float agreements, or other similar financing
arrangements), zero-coupon or capital appreciation bonds are not allowed to be issued
consistent with State law.
Decision Analysis to Issue Debt
Whenever the school district is contemplating the issuance of debt, information will be
developed concerning the following four categories commonly used by rating agencies
assessing the school district’s credit worthiness, listed below.
Debt Analysis – Debt capacity analysis; purpose for which debt is proposed to be issued; debt
structure; debt burden; debt history and trends; and adequacy of debt and capital planning.
Financial Analysis – Stability, diversity, and growth rates of tax or other revenue sources; trend
in assessed valuation and collections; current budget trends; appraisal of past revenue and
expenditure trends; history and long-term trends of revenues and expenditures; evidences of
financial planning; adherence to GAAP; audit results; fund balance status and trends in
operating and debt funds; financial monitoring systems and capabilities; and cash flow
projections.
Governmental and Administrative Analysis – Government organization structure; location of
financial responsibilities and degree of control; adequacy of basic service provision;
intergovernmental cooperation/conflict and extent of duplication; and overall planning efforts.
Economic Analysis – Geographic and location advantages; population and demographic
characteristics; wealth indicators; types of employment, industry and occupation; housing
characteristics; new construction; evidence of industrial decline; and trend of the economy.
DEBT ISSUANCE
Credit Enhancement
Credit enhancements (.i.e., bond insurance, etc.) may be used but only when the net debt
service on the debt is reduced by more than the costs of the credit enhancement.
Costs and Fees
All costs and fees related to issuing the debt will be paid out of debt proceeds and allocated
across all projects receiving proceeds of the debt issue.
Generally, all school district debt will be sold through a competitive bidding process. Bids will be
awarded on a TIC basis providing other bidding requirements are satisfied.
The school district may sell debt using a negotiated process in extraordinary circumstances
when the complexity of the issue requires specialized expertise, when the negotiated sale would
result in substantial savings in time or money, or when market conditions of school district credit
are unusually volatile or uncertain.
Professional Service Providers
The school district will retain external bond counsel for all debt issues. All debt issued by the
school district will include a written opinion by bond counsel affirming that the school district is
authorized to issue the debt, stating that the school district has met all Iowa constitutional and
statutory requirements necessary for issuance and determining the debt’s federal income tax
status. The bond counsel retained must have comprehensive municipal debt experience and a
thorough understanding of Iowa law as it relates to the issuance of the particular debt.
The school district will retain an independent financial advisor. The financial advisor will be
responsible for structuring and preparing all offering documents for each debt issue. The
financial advisor retained will have comprehensive municipal debt experience, experience with
diverse financial structuring and pricing of municipal securities.
The treasurer shall have the authority to periodically select other service providers (e.g., escrow
agents, verification agents, trustees, arbitrage consultants, rebate specialist, etc.) as necessary
to meet legal requirements and minimize net debt costs. These services can include debt
restructuring services and security or escrow purchases.
Compensation for bond counsel, financial advisor and other service providers will be as
economical as possible and consistent with industry standards for the desired qualification
levels.
DEBT MANAGEMENT
Investment of Debt Proceeds
The school district shall invest all proceeds received from the issuance of debt separate from
the school district’s consolidated cash pool unless otherwise specified by the authorizing bond
resolution or trust indenture. Investments will be consistent with those authorized by Iowa law
and the school district’s Investment Policy to maintain safety of principal and liquidity of the
funds.
Arbitrage and Record Keeping Compliance
The treasurer shall maintain a system of record-keeping, reporting and compliance procedures
with respect to all federal tax requirements which are currently, or may become applicable
through the lifetime of all tax-exempt or tax credit bonds.
Federal tax compliance, record-keeping, reporting and compliance procedures shall include not
be limited to:
1) post-issuance compliance procedures (including proper use of proceeds, timely expenditure
of proceeds, proper use of bond financed property, yield restriction and rebate, and timely return
filing);
2) proper maintenance of records to support federal tax compliance;
3) investments and arbitrage compliance;
4) expenditures and assets;
5) private business use; and
6) designation of primary responsibilities for federal tax compliance of all bond financings.
Financial Disclosure
The school district is committed to full and complete financial disclosure, and to cooperating fully
with rating agencies, institutional and individual investors, other levels of government, and the
general public to share comprehensible and accurate financial information. The school district
is dedicated to meeting secondary disclosure requirements on a timely and comprehensive
basis, as promulgated by the Securities and Exchange Commission.
The Official Statements Accompanying debt issues, Annual Audits, and Continuing Disclosure
statements will meet the standards articulated by the Municipal Securities Rulemaking Board
(MSRB), the Government Accounting Standards Board (GASB), the Securities and Exchange
Commission (SEC), Generally Accepted Accounting Principles (GAAP) and the Internal
Revenue Service (IRS). The treasurer shall be responsible for ongoing debt disclosure as
required by any Continuing Disclosure Certificate for any debt issue and for maintain
compliance with disclosure standards promulgated by state and federal regulatory bodies.
Legal Reference Iowa Code §§ 74-76; 278.1; 298; 298A (2013).
Cross Reference: 701 Financial Accounting System
704 Revenue
Approved Reviewed: 4/23/2018 Revised: 8/17/2022
