The Union County Commissioners have adopted a policy outlining how the county will manage debt.
“We know that in a growing county, there is always going to be a need to issue debt, we know we are always going to have to issue debt,” Commissioner Steve Stolte said. “We want to have some policy in place that guides us as we go through this.”
He said some of the policy is actually dictated by state law, other portions are the preference of the commissioners.
According to the policy, the goals and objectives of the policy is to guide decision making and promote prudent financial management of Union County’s debt; encourage coordination and consistency with respect to the structuring, issuance and management of debt; protect and enhance Union County’s credit rating; ensure the legal and fiscal application of Union County’s debt issuance authority; maintain appropriate resources and funding capacity for present and future capital demands.
County Administrator Tim Hansley called the debt management policy, “very conservative.”
The policy dictates that “whenever possible Union County will pursue alternative sources of funding, such as pay-as-you-go or government grant or loan funding in order to limit debt” especially with smaller-scale capital improvements and equipment purchases.
Even so, Stolte said the county will never be able to save enough money or pay cash for all projects and debt is “inevitable.”
The policy dictates “incurrence of debt or long-term borrowing will only be used for the purpose of providing financing for capital projects.” It can also be used to refund or restructure existing capital projects debt, though that will be considered, “only when there are significant benefits to Union County.”
“Debt financing will generally be considered only when the cost of the capital project is significant,” according to the policy. “Debt financing will be for a period not to exceed a conservatively estimated useful life of the improvements or equipment financed by the debt and for a period no less than five years.”
Additionally, the policy mandates that “debt financing will not be used to finance current operations or normal maintenance.”
Hansley said the policy, “makes sure we aren’t going to borrow more than we need.”
The policy limits that the county will not borrow more than 1% of the total valuation, $2.03-billion in 2019, and will keep annual repayments at or below 10% of the county’s gross annual general fund revenues, $25.255 million in 2019. He called those limits “guardrails for our borrowing.”
Another of the guardrails is a provision that requires every future bond issuance or long-term borrowing proposal must also have an analysis, “demonstrating conformity with this Debt Management Policy.”
Officials note that property taxpayers and public service users who benefit from projects financed by debt should be the ones paying for them.
He said the policy also dictates the county “will strive to maintain” a certain bond rating.
According to the policy, the county administrator will create a five year “Capital Improvement Plan in accordance with Union County’s Financial Philosophy.”
“That way we have an idea of where we are going with our plans and we have a plan on how we are going to fund them,” Stolte said.
Stolte said there are, “quite a few” counties, cities and school districts with similar policies.”
The policy calls for an annual review of the policy as well as all outstanding debt.
Hansley said the policy was actually drafted several years ago, before he took the position, “but somehow it never got officially adopted.”
“Even though we never really had one, we have been living within these policies, for the most part, the last several years,” Hansley said.
Commissioner Steve Stolte said he drafted the policy with help from then County Administrator Eric Richter as well as the treasurer, the auditor and outside bond and debt consultants.
Hansley said the plan should help residents and taxpayers have confidence the county is being responsible with debt.
“We are going to use debt as a tool, not as a burden on the opportunity side,” Hansley said.