Legal Documents of Pittman Center

Code of Pittman Center

Table of Contents » Title 5 Municipal Finance and Taxation » Chapter 5 Debt Policy » § 5-507 Use of variable rate debt.
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Title 5
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Title 5, Chapter 1
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§ 5-101
Pittman Center
Title 5 : Municipal Finance and Taxation
Chapter 5 : Debt Policy

5-507 : Use of variable rate debt.

  1. The town recognizes the value of variable rate debt obligations and that cities have greatly benefitted from the use of variable rate debt in the financing of needed infrastructure and capital improvements.
  2. However, the town also recognizes there are inherent risks associated with the use of variable rate debt and will implement steps to mitigate these risks, including:
    1. The town will annually include in its budget an interest rate assumption for any outstanding variable rate debt that takes market fluctuations affecting the rate of interest into consideration.
    2. Prior to entering into any variable rate debt obligation that is backed by insurance and secured by a liquidity provider, the town board of mayor and aldermen shall be informed of the potential affect on rates as well as any additional costs that might be incurred should the insurance fail.
    3. Prior to entering into any variable rate debt obligation that is backed by a letter of credit provider, the town board of mayor and aldermen shall be informed of the potential affect on rates as well as any additional costs that might be incurred should the letter of credit fail.
    4. Prior to entering into any variable rate debt obligation, the town board of mayor and aldermen will be informed of any terms, conditions, fees, or other costs associated with the prepayment of variable rate debt obligations.
    5. The town shall consult with persons familiar with the arbitrage rules to determine applicability, legal responsibility, and potential consequences associated with any variable rate debt obligation.
    6. The town will avoid over-reliance on variable rate debt due to the volatility seen in credit markets. Variable rate debt should not exceed twenty five percent (25%) of the total debt. (Ord. #241, June 2012, as replaced by Ord. #329, Jan. 2024 Ch2_01-18-24)