Guidelines for Development of Your Debt Policy

The following provides guidelines for the development of your entity's debt policy.

General Guidelines

The Debt Policy should reflect the unique nature and circumstances of your entity. As such, the size and complexity of your entity's debt program will have an impact upon the scope of the debt policy.

The policy should provide parameters for issuing and managing debt with the goal of ensuring that debt is issued prudently and cost effectively.

The policy should include the six main sections below. The elements within each section will vary depending upon the entity. For uses of the sections and elements below, see the "Sample Debt Policy".

Required Debt Policy Sections

I. Introduction

The introduction should state the overall purpose and provide a brief overview of the debt policy.

II. Legal Governing Principles

The legal section should highlight the legal framework of the debt issuance and roles and responsibilities in debt issuance. As applicable to your entity, this section should speak to a) the governing laws, including local rules, regulations, and policies, b) the permitted types of debt, c) the purposes for borrowing, d) the limitations on the debt issuance, and e) the ethical standards governing conduct.

III. Professional Services

The professional services section should address the services used and the selection process(s) for these services. As applicable to your entity, this section should cover a) the types and the scope of services to be provided, b) the criteria that will be used to evaluate proposals, and c) the monitoring of the services rendered.

IV. Transaction-Specific Policies

The transaction-specific policies section should focus on the method of sale and the structural elements of a transaction. As applicable to your entity, the structural elements subsection should speak to the requirements or the constraints regarding1 a) maturity lengths, b) debt service structures, c) maturity structures, d) price structures, e) coupon types, f) redemption features, g) bond insurance, h) tax-exemption, i) pledge of revenues, and j) senior/subordinate lien structures. Include other elements as necessary.

V. Communication Policies

The communication policies section should cover communication with various market participants. As applicable to your entity, this section should deal with communications with a) rating agencies, b) bond insurance companies, and c) other market participates.

VI. Compliance Polices

The compliance policies section should emphasize requirements relating to and assuring compliance with certain rules and regulations. As applicable to your entity, this section should take into account a) investment of proceeds, b) arbitrage liability management, c) continuing disclosure, d) bond users clearinghouse, and e) legal covenants.

VII. Other Policies

The other policies section should include other elements that need to be addressed but does not belong to any of the sections above. As applicable to your entity, consider covering a) refunding savings thresholds, b) derivative products, c) alternative financings schemes, d) conduit financings, e) evaluating capital improvement program spending, f) modeling the impact of capital program needs, g) debt database management, h) accounting for the issuance of debt, and i) debt policy review.

¹ For a use of these elements, see the "Sample Debt Policy."