SUBSTITUTE ORDINANCE NO. BL2017-726

An ordinance amending Title 5 to add a requirement for the Department of Finance to maintain a written debt management policy for the metropolitan government.

WHEREAS, Article 6 of the Charter of The Metropolitan Government of Nashville and Davidson County (the “Charter”) sets forth the provisions for the adoption of the annual budget and other financial duties, including the requirement that the Metropolitan County Council (the “Council”) shall adopt a balanced budget (Section 6.03) and the Council shall adopt the annual budget not later than June 30 of each year which will become effective on July 1 and in the event the Council fails to adopt a budget it shall be conclusively presumed to have adopted the budget as submitted by the Mayor; and

WHEREAS, the Council as its next order of business after the adoption of an the operating budget is shall be the adoption of an annual tax on real and personal property and merchants’ ad valorem in the General Services District (GSD) and a School tax, which, together with an annual tax on real and personal property and a merchants’ ad valorem in the Urban Services District (USD) determined by the Council, which (mandatorily shall be adopted by resolution of the Urban Council), must be that is sufficient together with other anticipated revenues, fund balances, and applicable reserves to equal the total amount appropriate for each of the several funds (Section 6.07); and

WHEREAS, Article 7 of the Charter further provides that there shall be debt service funds for the amortization of general tax bonds and urban tax bonds respectfully and that the property tax levies shall assure sufficient funds to adequately fund such debt service funds to meet the interest and redemption charges for payment of the bonds redeemed in that fiscal year (Section 7.20); and

WHEREAS, the Council recognizes that the Metropolitan Employee Benefit Board and its polices can impact the fiscal obligations of the Metropolitan Government in connection with pension and other post-employment benefits; and

WHEREAS, the Council recognizes the requirement and the necessity of providing adequate funds annually to timely repay the debt created by the issuance of all bonds, and assuring the maintenance of a good bond rating with the national rating services to benefit from lower interest charges; however, it is mindful that, although the necessary infrastructure needs should be met, basic government services should be first addressed sufficiently and that additional debt payments authorizations should be limited to an amount that does not unduly burden the taxpayers of Metropolitan Government; and

WHEREAS, adherence to a debt management policy signals to national ratings agencies and to capital markets that a government is well managed and is therefore likely to meet its debt obligations in a timely manner; and

WHEREAS, TCA 9-21-151b(1) authorizes the state funding board to develop model finance transaction policies for use by public entities; and the State Funding Board on December 15, 2010, adopted a statement on debt management that reflects four principles for strong financial management in the public sector (1) understand the transaction,  (2)  explain to citizens what is being considered, (3) avoid conflicts of interest, (4) disclose costs and risks ; and

WHEREAS, the Metropolitan Government originally issued a debt management policy in 2006, revised per Resolution No. RS2011-94, but it was not codified and is in need of updating; and

WHEREAS, on December 6, 2011 the Metropolitan Council adopted Resolution RS2011-94, the Debt Management Policy for the Metropolitan Government of Nashville and Davidson County; and

WHEREAS, it is fitting and proper for the metropolitan government to adopt maintain a codified, written policy to manage the city's debt obligations.

NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY:

Section 1. That Title 5 of the Metropolitan Code be amended by adding Section 5.04.105 as follows:

    Section 5.04.105 – Debt management policy required

  1. Definitions – As used in this section,
    1. "debt" shall refer to payment obligations created by any category of financial instruments used to pay for or finance capital projects, including general obligation bond debt, bond anticipation notes in the form of commercial paper, revenue bond debt, commercial paper obligations and amounts owed under any other financial instrument used to pay for or finance capital projects.
    2. "debt management policy" shall refer to a written policy approved by the Mayor adopted by the council and approved by the mayor that includes requirements of the state funding board’s model finance transaction policy and at least the following:
      1. The maximum appropriate amount of debt (by category) and debt service (by category) that should be outstanding at any time approved in a capital spending plan;
      2. Multiple metrics by which the metropolitan government monitors, measures, and evaluates its financial condition including without limitation the amount of debt and debt service;
      3. A discussion of available metrics for measuring the amount of debt and debt service, including without limitation total debt, general obligation debt, accrued pension or OPEB obligation, debt service, debt as a percent of the fair market value of taxable property, and debt per capita and the reasons why the metrics selected for section 5.04.105(A)(2)(b) are most appropriate;
      4. A discussion of available metrics for measuring debt service including without limitation debt service as a percent of expenditures, revenues, property tax revenue, or per capita, and the reasons why the metrics selected for section 5.04.105(A)(2)(b) are most appropriate;
      5. A discussion of what factors regarding financial performance trends, including projections of key economic variables and population trends must be considered in determining the maximum appropriate amount of debt to be approved in a capital spending plan and debt service that should be outstanding at any one time;
      6. A discussion of the purposes for which each category of debt may be utilized;
      7. A discussion of what impact if any the metropolitan government's net pension obligation, including a discussion of what impact if any the net pension obligation has on the amount of debt (by category) that is advisable.
      8. A strategy for managing the metropolitan government's unfunded OPEB obligation, including a A discussion of what impact if any the metropolitan government's unfunded OPEB obligation has on the amount of debt (by category) that is advisable.
  2. The department of finance The Metropolitan Government shall at all times maintain a debt management policy.
  3. The department of finance shall post the debt management policy on the publicly accessible portion of the metropolitan government's website.
  4. The metropolitan government shall not issue or incur any debt in violation of the debt management policy unless approved in advance by the metropolitan council by resolution.

Section 2. This resolution Ordinance shall take effect sixty (60) days from and after its adoption, the welfare of The Metropolitan Government of Nashville and Davidson County requiring it.

Sponsored by: Bob Mendes

LEGISLATIVE HISTORY

Introduced: May 16, 2017
Passed First Reading: May 16, 2017
Referred to: Budget & Finance Committee
Deferred: June 6, 2017
Substitute Introduced: June 20, 2017
Passed Second Reading: June 20, 2017
Passed Third Reading: July 6, 2017
Approved: July 10, 2017
By: Mayor's signature

Requests for ADA accommodation should be directed to the Metropolitan Clerk at 615/862-6770.