Legal Documents of Mountain City

The town shall establish all terms and conditions relating to the issuance of debt and will invest all bond proceeds pursuant to the terms of its investment policy, if any. Unless otherwise authorized by the town, the following shall serve as the debt policy for determining structure.

1. Term. All capital improvements financed through the issuance of debt will be financed for a period not to exceed the useful economic life of the improvements and in consideration of the ability of the town to absorb such additional debt service expense. The term of debt shall be determined by, but not limited to, the economic life of the assets financed, conditions in the capital markets, the availability of adequate revenue streams to service the debt and the existing pattern of debt payable from such identifiable fund or enterprise activity, but in no event will the term of such debt exceed forty (40) years, as outlined in Tennessee Code Annotated.
2. Capitalized interest. From time to time, certain financings may require the use of capitalized interest from the date of issuance until the town is able to realize beneficial use and/or occupancy of the financed project. Interest may be capitalized through a period permitted by federal law and Tennessee Code Annotated if it is determined that doing so is beneficial to the financing by the legislative body and is appropriately memorialized in the legislative action authorizing the sale and issuance of the debt.
3. Debt service structure. General obligation debt issuance shall be planned to achieve relatively net level debt service or level principal amortization considering the town's outstanding debt obligations, while matching debt service to the useful economic life of facilities. Absent events or circumstances determined by its legislative body, the town shall avoid the use of bullet or balloon maturities (with the exception of sinking fund requirements required by term bonds) except in those instances where such maturities serve to make existing overall debt service level or match specific income streams. Debt which is supported by project revenues and is intended to be self-supporting should be structured to achieve level proportional coverage to expected available revenues.
4. Call provisions. In general, the town's debt should include a call feature no later than ten (10) years from the date of delivery of the bonds. The town will avoid the sale of long-term debt which carries longer redemption features unless a careful evaluation has been conducted by the mayor and town recorder and/or financial professionals, if any, with respect to the value of the call option.
5. Original issuance discount/premium. Debt with original issuance discount/premium will be permitted.
6. Deep discount bonds. Deep discount debt may provide a lower cost of borrowing in certain capital markets. The mayor and town recorder and/or financial professionals, if any, should carefully consider their value and effect on any future refinancing as a result of the lower-than-market coupon. (Ord. #1269, Jan. 2012)