Friday, February 15, 2019 || By Igor Studenkov || @maywoodnews
Featured image: Broadview Mayor Katrina Thompson during a Jan. 16 meeting, where the board approved a new debt management policy. | Screenshot
The Village of Broadview is looking to improve is finances – including the way it borrows money. During a regular meeting on Jan. 16, the Broadview Board of Trustees voted 3-0 to approve a new debt management policy. Trustees Judy Brown-Marino, Sherman Jones and John Ealey were absent.
The policy governs the way the village issues bonds, takes out loans and refinances its existing debt obligations. It took effect immediately upon passage.
The policy is designed to provide a consistent approach to how the village issues bonds in order to get the best interest rates, among other advantages.
The policy would automatically kick in every time Broadview borrows money, obtains loans and issues bonds. The policy does give the village board and the mayor the leeway to approve, on a case-by-case basis, exceptions that go beyond what the policy stipulates.
The policy states that Broadview will “strive to maintain a high reliance on pay-as-you go financing for its capital improvements and capital assets.” Pay-as-you-go is a method of covering costs with funds the village already has; rather than borrowing.
The policy also states that the village should keep its general obligations bond debt under the equivalent of 8.65 percent of the total assessed value of the village’s taxable property.
According to the policy, the village should not use long-term borrowing to cover regular operating costs, but the policy does let the village borrow money to cover “short-term operating needs” in the event of a natural disaster or other emergency.
When borrowing or issuing bonds, the village must carefully weigh the upsides and the downsides, and only proceed if the former outweighs the latter. It should also try to maintain and improve its credit rating. When choosing whether to issue bonds or take out private loans, the village’s financial adviser should look at the costs involved and go with the most cost-effective approach.
The policy also sets up a Debt Service Reserve Fund, which sets aside money to pay interest and principle on the bonds if the tax revenues aren’t enough to cover it. Money in the fund would come from “proceeds of bonds and/or revenues from operations or other pledged sources.” VFP
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