Oswego is looking at adopting a debt issuance and management policy that would set funding guidelines for future projects including the move to bring in Lake Michigan water to the village.
“The village has historically followed informal debt guidelines,” Oswego Finance Director Andrea Lamberg said in a report to trustees at a recent Village Board Committee of the Whole meeting.
It is a “best practice” for municipal government to have a formal policy approved by the Village Board, she said.
The financial practice of authorizing municipal bonds and other types of debt to fund public infrastructure is a “valuable strategy” for government to “spread the cost of significant long-term assets over their useful life,” the finance director said.
“The Village Board has elected to issue debt for the connection to Lake Michigan as a water source,” Lamberg noted.
Staff reviewed best practices recommended by the Government Finance Officers Association and worked with a bond counsel as well as the village’s financial advisor to prepare a draft policy, Lamberg said.
Lamberg gave a summary of some of the highlights of the draft policy.
“The purpose of the policy is to provide comprehensive guidelines and promote sound decision-making,” she said.
Overall, the objective is to obtain financing only when necessary, according to Lamberg.
Further, debt will not be used to finance general operating expenses or fund operating deficits, and capital projects with an estimated cost of $500,000 or less will “ideally be funded with funds on hand,” according to the report.
As for repayment, “when possible, the village will repay debt using a specific revenue source other than the property tax levy and the village will use conservative revenue assumptions to ensure the identified revenue source is sufficient to cover debt service on those bonds,” Lamberg said in her report.
The debt issuance and management policy would be reviewed annually, she said.
“The data in the policy would not change the way the village approaches debt. The village is already using these criteria and has historically used these criteria,” Lamberg said.
However, “a credit rating agency could look unfavorably upon a village that does not have a formal policy adopted by the board,” Lamberg said.
Staff has forwarded the draft policy in advance of pursuing a rating with Moody’s for a bond issuance for the Lake Michigan water connection, she said.
It’s ideal to have a favorable bond rating, Oswego Village Administrator Dan Di Santo.
“We are trying to find out, before we issue this much debt, any way we can improve our bond rating and get a good one,” Di Santo told trustees.
Linda Girardi is a freelance reporter for The Beacon-News.
