CROSSVILLE - Cumberland County commissioners approved a debt management policy during November's monthly meeting.
Cumberland County has roughly $65 million in debt.
According to commissioners on the debt management committee, 43 percent of the debt is in variable rate, 36 percent is in synthetic rate and 21 percent is in fixed rate debt.
According to resolution 11-2011-1, "The state funding board has adopted a statement on debt management and directed local governments and government entities that borrow money to draft their own debt management policies with certain mandatory provisions (including) transparency, professionals and conflicts."
One objective of the new debt policy is to address the synthetic and variable debt ratio to fixed rate. According to the new policy, the objective of the policy is to reach and maintain a 65 percent fixed rate and 35 percent variable rate of debt. Also, no new debt will be issued that engages in interest swap agreements or derivative arrangements. The policy seeks to limit outstanding debt to $1,200 per capita.
Under transparency, according to the new policy, the county shall comply with legal requirements for notice and for public meetings related to debt issuance. All costs and interest shall be disclosed to the citizens and members of the governing body and stakeholders in a timely manner.
The Cumberland County Finance Director is responsible for ensuring compliance to the policy and with analysis reporting. Debt reports shall be prepared and available for public view and comment.
An annual report shall be submitted to the legislative body (county commission) by January of each fiscal year and made available for public view and comment. No debt shall exceed 30 years.
Under professionals, Cumberland County shall require all professionals engaged in the process of issuing debt to disclose all compensation and consideration received for their services provided. The county shall enter into agreements with each lawyer or law firm representing Cumberland County in a debt transaction. A written agreement will also be provided if the county chooses to hire any financial advisors or debt manager. The financial advisor shall not be permitted to bid on, privately place or underwrite an issue for which they are providing advisory services. Any underwriter must clearly be identified in writing.
Under conflicts, any professionals involved in a debt transaction hired or compensated by the county shall be required to disclose to the county existing client and business relationships between and among the professionals to a transaction.
Professionals who are involved in the debt transaction as a result of a bid submitted in a widely and publicly advertised competitive sale conducted using an industry standard, electronic bidding are not subject to this disclosure. Professionals involved in a debt transaction or compensation by the county are required to enter into an engagement letter related to their proposed services, cost or any potential conflict of interest.
Debt should be amortized according to the life of the asset being financed.
The goal of the policy is also to maintain a debt service fund balance range from a low of 150 percent to a high of 300 percent in relation to the debt service annual budget. The fund balance could grow over 300 percent if the county is accumulating funds for future large debt issuances.
The county also maintains the right to modify the policy and make any exceptions to the guidelines at any time providing the exceptions or changes are within the guidelines with the Tennessee Code Annotated rules and state regulations. Any deviation of the policy shall require a two-thirds majority of the vote of the county commission.
Resolution 11-2011-1 - the debt management policy - was unanimously approved after a motion was made by Allen Foster, 4th District commissioner and debt management committee chairman. Foster's motion was supported by 4th District Commissioner Charles Seiber.
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