FY 2017 Budget Highlights

EXHIBIT E DEBT POLICY FOR FREDERICK COUNTY MARYLAND I. Introduction II. A. Debt policy is the combined practices of Frederick County (also referred to as the "County") with respect to long-term debt management. Debt policies are written guidelines and restrictions that affect the amount and type of debt issued by Frederick County. B. This debt policy is to be used in conjunction with the operating and capital budgets, the Capital Improvement Program (CIP) and other fiscal policies. C. Adherence to debt policies signals to the rating agencies and the capital markets that Frederick County is well managed and will meet its obligations in a timely manner. Following this debt policy will enhance the quality of debt related decisions by imposing order and discipline and by promoting consistency and continuity in decision making. Adherence to this debt policy will help to ensure that Frederick County maintains a sound financial position and credit quality is protected. This debt policy demonstrates the County's commitment to long-term financial planning and will be positively regarded by the municipal market when reviewing Frederick County's credit quality. D. Frederick County's debt policy is intended to apply to most forms of long-term obligations including General Obligation Debt, capital leases, State revolving loan funds, conduit debt, and interfund borrowings. Vested leave and health care benefits, while they fit the definition of long term debt, are not intended to be covered by this policy. Qualifying Uses of Debt/Prohibitions on the Use of Debt Much of the CIP is expected to be funded with debt. Capital assets usually have a long useful life and will serve future, as well as current, taxpayers. It would be inequitable and an unreasonable fiscal burden to make current taxpayers pay for many projects out of current tax revenues. Accordingly, debt issues are advisable, necessary and equitable. A. Debt issued for projects should have a term equal to or less than the useful life of the asset financed. B. Prior to considering debt as a source of funding capital projects, the County shall determine if other potential revenue sources, such as pay-as-you-go (Paygo), intergovernmental aid or private contributions are available. C. The County may share funding with municipalities in their projects if it is clear that the County will receive the benefit of these projects. D. The County will consider issuing debt to improve leased property only if the County has a non-cancellable lease on the property that exceeds the economic life of the asset. E. The County will only issue debt to construct or acquire public facilities for which it expects to sustain future annual operational and maintenance costs. F. The County has no intent to issue long-term debt to reduce the unfunded liability of the Pension Trust. 1

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