C. CASH MANAGEMENT
1. Debt Management
C.1.01 - Definitions:
“Flexible Call Variable Rate Debt” is bonded indebtedness reset on a periodic basis that is issued with a pledge to repay from the debt service taxes collected by the System. It does not have a fixed rate of interest, but has an interest rate that is reset periodically, usually weekly or monthly. The variable call feature allows the bonds to be retired whenever the System decides not to place the bonds back on the market at the time of the next reset. This allows for a call feature that is flexible.
C.1.02 - Limit of Variable Debt:
The System may sell variable rate debt when the System’s chief financial officer certifies to the Board that the sale by the System will not cause the flexible call variable rate debt to exceed 25% of total tax-exempt bond financed debt outstanding (and authorized).
C.1.03 - Use of Variable Rate Debt:
The System may sell variable rate debt when the System’s chief financial officer certifies to the Board that the opportunity cost of fixed debt is 2% or more than the expected cost of variable rate debt. The chief financial officer shall use five-year historical averages to determine this margin.
C.1.04 - Fixed Debt Conversion:
The System shall retain the option to convert variable rate debt to fixed rate debt at any time with a notice of 45 days.
C.1.05 - Early Retirement with Cost Savings:
The System will use cost savings from the use of variable rate debt to pay off principal early, through the use of a 30-day call option.
LSCS Policy Manual Section adopted by the Board of Trustees on August 7, 2008