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The Citrus Heights City Council on Thursday will consider a recommendation from the city manager’s office to adopt a revised debt management policy, specifying when long-term and short-term debt are considered appropriate.
A debt management policy was first adopted by the city in 2017, in accordance with SB 1029, a newly passed state law that effectively required cities to have a debt policy in place 30-days prior to taking on debt. The city subsequently voted last year to take out a $12 million line of credit, allowing the city to incur debt for the first time since becoming a city in 1997.
The revised policy being considered says the city “will promote the use of debt only in those cases where public policy, equity, and economic efficiency favor debt over cash (pay-as-you-go) financing” and says “whenever possible, the debt shall be self supporting.”
Additionally, the revised policy says:
- Long-term Capital Projects: Debt will be used primarily to finance long-term capital projects – paying for the facilities or equipment over their useful life and concurrent with the stream of benefits from these facilities.
- Special Circumstances for Debt Issuance: Debt may be used in special circumstances for other than long-term capital projects, only after careful policy evaluation by the City Council and management.
The City of Citrus Heights has undergone a shift in policy regarding debt following the retirement of former City Manager Henry Tingle in 2016, who was credited with keeping the city debt-free. Current Mayor Jeannie Bruins called the change a “a big paradigm shift” when voting to authorize the $12 million line of credit last year.
In a statement just prior to the vote last year, Bruins said she supported allowing the city to take on short-term debt, “given the current needs that we have, given the very limited scope of this line of credit, and what our priorities are: to continue to be financially sound, to get debt-free again as soon as we can.”
City leaders at the time said the line of credit was needed to get the city by until 2022, when a “revenue neutrality” agreement with the county will end and provide the city with an additional $5-6 million per year from property tax revenue. The credit line has been used to purchase the former Sylvan Middle School lot at Sylvan Corners, as well as provide funding for the second phase of major roadway improvements on Auburn Boulevard.
The city has expressed an intent to pay off the line of credit by 2024, using extra funds from property tax revenue.
The “revenue neutrality” agreement dates back to when Citrus Heights first incorporated and reluctantly agreed to have its property taxes be given to the county for 25 years, to compensate for projected negative fiscal impacts the county would incur from Citrus Heights splitting off to govern itself as a city.
The revised debt management policy will be considered for approval during the council’s upcoming meeting on Nov. 14, which begins at 7 p.m. and will be held at City Hall.
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