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C. 66
To: Board of Supervisors
From: Monica Nino, County Administrator
Date: March  22, 2022
The Seal of Contra Costa County, CA
Contra
Costa
County
Subject: ADOPT Resolution No. 2022/77 reaffirming and authorizing updates to the County Debt Management Policy
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On:   03/22/2022
APPROVED AS RECOMMENDED OTHER
Clerks Notes:

VOTE OF SUPERVISORS

AYE:
John Gioia, District I Supervisor
Candace Andersen, District II Supervisor
Diane Burgis, District III Supervisor
Karen Mitchoff, District IV Supervisor
Federal D. Glover, District V Supervisor
Contact: Timothy Ewell, (925) 655-2043
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown.
ATTESTED:     March  22, 2022
,
 
BY: , Deputy

 

RECOMMENDATION(S):

ADOPT Resolution No. 2022/77 updating and reaffirming the County Debt Management Policy.

FISCAL IMPACT:

No specific fiscal impact.

BACKGROUND:

On December 7, 2006, the Finance Committee reviewed and discussed a report regarding establishing a County Debt Management Policy. The Committee directed staff to report to the full Board on December 19, 2006 the recommendation to adopt a formal County Debt Management Policy. A formal policy was adopted on December 19, 2006 (Resolution No. 2006/773).  
  
BACKGROUND: (CONT'D)
    The Board of Supervisors has worked exceptionally hard to address the County’s financial issues and has set very ambitious and necessary goals for lowering cost growth, balancing the budget, and increasing reserves. These solutions are aimed at addressing both short and long term needs and improving the County’s future ability to maintain public services. The four financial policy areas that have contributed significantly to the Board's goals are the following:
    • Budget Policy (established November 2006)
    • General Fund Reserve Policy (established December 2005)
    • Facilities Maintenance (included in Budget Policy)
    • Debt Management Policy (established December 2006)
      
    The Debt Management Policy establishes debt affordability standards that help the County to evaluate when, why, and how much debt should be issued. In addition, the Debt Management Policy:
    • Establishes parameters for issuing and managing debt;
    • Provides guidance to decision makers so as not to exceed the debt affordability standards;
    • Directs staff on objectives to be achieved both pre- and post-issuance;
    • Promotes objectivity in decision-making and limits the role of political influence;
    • Describes responsibilities for Continuing Disclosure and Post-Issuance Tax compliance policies and procedures; and
    • Facilitates the process by considering and making important policy decisions in advance of an actual financing.
    Periodically, policies should be revised to keep current with best practices or changes in law. The Debt Affordability Advisory Committee (DAAC) reviews the existing Debt Management Policy on an annual basis and makes recommendations for revisions to the Board of Supervisors. The DAAC met on March 14, 2022 and reviewed proposed amendments to the Debt Management Policy and is recommending updates. Specifically, there is one update to the policy for the Board's consideration at today's meeting:
    1. Section 2(C). "Creditworthiness and Debt Affordability Measures." Updates the section to include more current debt affordability ratios to be included in the DAAC's annual Debt Report to the County Administrator. Following the housing crisis during the Great Recession, rating agencies became more transparent with their respective rating criteria used to rate issuers across the country. Additionally, previous metrics used by the rating agencies have been retired. The proposed update in the attached Debt Policy reflects debt ratios currently used by rating agencies to track the performance of issuers of municipal securities, such as the County. The revised debt ratios proposed in the Debt Policy are outlined below:
    Moody's Ratios
    • Full value per capita;
    • Fund balance as a percentage of revenues;
    • Cash balance as a percentage of revenues;
    • Debt to full value; and
    • Debt to revenue.
    Standard and Poor's Ratios
    • Total market value per capita;
    • Total governmental available cash as a percentage of total governmental debt service;
    • Available fund balance as a percentage of expenditures;
    • Net direct debt as a percentage of total governmental funds revenue; and
    • Total governmental funds debt service as a percentage of governmental funds
    In addition to the DAAC, the County's municipal advisor, KNN Public Finance, assisted with the updates outlined above and reviewed the proposed language changes to be incorporated into the Debt Policy as proposed for the Board's consideration today.

    CONSEQUENCE OF NEGATIVE ACTION:

    The policy will not be formally updated and reaffirmed by the Board.

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