Financial Policies Proposed Revisions
Chapter 12, Page 1 Approved April 2, 2015
Revised & Adopted February 27, 2020
Revised & Adopted October 7, 2020
TOWN OF PROSPER
ADMINISTRATIVE REGULATIONS
CHAPTER 12: VEHICLE/EQUIPMENT REPLACEMENT FUND PROGRAM
The purpose of the Town’s Vehicle/Equipment Replacement Fund (VERF) Program is to establish policy and
procedures to ensure that adequate funds will be available to purchase replacement vehicles, equipment,
and technology infrastructure, and to fund the VERF related to the purchases, thereby stabilizing the
budgeting for future year replacements. Also, to provide for such replacements and purchases, and
administer the disposition of the replaced vehicles, equipment, and technology infrastructure. VERF Fund
Balance will not be included in the calculation of required Fund Balances for the General Fund. The
calculation of required Fund Balances is address in Chapter 13. However, the VERF is created by Town
Council and may also be discontinued by Town Council with residual Fund Balances being returned to the
related funds.
SECTION 12.01: POLICY
A. Policy Overview
1. All fleet vehicles, equipment, and technology infrastructure will be owned by the VERF, and
assigned to the user departments.
2. All user departments will be charged a monthly replacement fee for each item allocated for their
use from the VERF. Such fee will provide funds to purchase future replacement vehicles,
equipment, and technology infrastructure.
3. All items replaced will be surrendered simultaneously with the acquisition of the replacement. A
determination will be made prior to the acquisition in regards to the disposition of the item being
replaced.
4. Proceeds for replaced items sold as surplus property will be credited to the VERF.
5. The VERF is for the purchase and replacement of vehicles, equipment, and technology
infrastructure only. New items, additions and/or upgrades, may be requested by departments
during the budget process. If approved, items will be added to the VERF after acquisition, and the
monthly replacement fee for units will be assessed accordingly.
SECTION 12.02 ORGANIZATIONAL RESPONSIBILITIES
Throughout the process, it is critical that Town staff works together to ensure that requirements are met,
and that the Town of Prosper achieves the identified goal that created the need for the supplemental funding.
Chapter 12, Page 2 Approved April 2, 2015
Revised & Adopted February 27, 2020
Revised & Adopted October 7, 2020
A. Town Departments
Departments operating vehicles and equipment (including computers) are responsible for:
1. contributing monthly to the VERF according to this policy;
2. requesting replacement units during the annual budget process; and
3. appointing members to the internal vehicle and equipment review committee.
The internal review committee for vehicles and equipment is comprised of the Purchasing Manager,
the Finance Director, and one representative from each user department. The user department
representatives are appointed by their respective department heads. Committee duties include:
a. reviewing the Vehicle and Equipment Procurement Request Forms submitted annually for both
scheduled and unscheduled replacements, identifying the items warranting replacement per this
policy, and prioritizing these items for budgetary consideration;
b. making recommendations regarding departmental requests to purchase used vehicles or
equipment from the VERF; and
c. recommending revisions to the replacement criteria.
B. Town Council Subcommittees
The Town Council Subcommittees are responsible for reviewing staff recommendations on behalf of the
Town Council. The purpose and scope of each subcommittee is defined below.
1. Council Technology/VERF Subcommittee
The Council Technology/VERF Subcommittee for technology infrastructure is comprised of
Councilmembers appointed by Town Council, and staff support to include the Town Manager, the
Director of Information Technology, the Finance Director, and the Purchasing Manager.
Subcommittee duties include:
a. periodically reviewing the Town’s existing technological capabilities, and making
recommendation for improvements;
b. periodically reviewing and making recommendations on the Town’s VERF as it relates to the
acquisition, implementation, maintenance and upgrading of the Town’s technology, software,
and computer equipment; and
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Revised & Adopted October 7, 2020
c. making recommendations to promote the use of technology to increase efficiency of operations
within the Town.
2. Council Finance Subcommittee
The Council Finance Subcommittee is comprised of Councilmembers appointed by the Town Council,
and staff support to include the Town Manager and the Finance Director. Subcommittee duties
include:
a. periodically reviewing and making recommendations to the Town’s VERF as it relates to the
acquisition, replacement and upgrading of the Town’s vehicles and equipment.
C. Purchasing Manager
The Purchasing Manager is responsible for maintaining the VERF Policy, maintaining updated
replacement schedules for vehicles and equipment, and for overseeing the activities of the VERF
Committee for vehicles and equipment. The Purchasing Manager also coordinates with user
departments to facilitate individual replacements.
D. Finance Director
The Finance Director is responsible for managing the VERF, setting the annual budget for vehicle,
equipment, and technology infrastructure replacements, and reviewing and proposing modifications
and/or replacement lists based on budgetary constraints.
E. Director of Information Technology (IT)
The Director of IT is responsible for maintaining updated replacement schedules for technology
infrastructure, and for overseeing the activities of the VERF Technology Sub-Committee. The Director
of IT also coordinates with user departments to facilitate individual replacements.
F. Town Manager
The Town Manager is responsible for approving the VERF policy and revisions thereto, and for reviewing
and deciding departmental requests to purchase retired items from the VERF.
G. Town Council
The Town Council reviews and approves the list of proposed replacements, and the amount of annual
contributions into the VERF during the budget process each year.
SECTION 12.03: REPLACEMENT REQUEST PROCESS
Departments will complete a Vehicle and Equipment Procurement Request Form to initiate the replacement
process. Requests must be submitted annually during the budget process. If the requested unit is not
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Revised & Adopted February 27, 2020
Revised & Adopted October 7, 2020
scheduled for replacement, the user department will provide additional justification and support for the
request. The VERF Committee will meet to review all requested replacements.
SECTION 12.04: REPLACEMENT CRITERIA
The Vehicle/Equipment Replacement Criteria (Exhibit A) identifies the estimated life expectancy of the
Town’s vehicles and equipment. Age and mileage or hours are the primary criteria for replacement. The
replacement criteria for technology infrastructure will be set by the Director of IT, in compliance with
direction from the VERF Technology Sub-Committee. The criterion are only intended as a guide for the
replacement decision; items meeting or exceeding the criteria are not automatically approved for
replacement. Meeting the criteria makes a unit eligible for replacement, but still subject to additional
scrutiny, considering items such as physical condition, resale value, etc. Also, items that do not meet the
criteria may still be eligible for early replacement for reasons like excessive maintenance costs, or a total loss
declaration by the Town’s insurer.
SECTION 12.05: REPLACEMENT FUNDING
The VERF is an internal service fund used to account for the replacement of Town vehicles , equipment, and
technology infrastructure. Contributions are made to the VERF based on a replacement schedule for each
item. Departments using vehicle(s), equipment, or technology infrastructure will contribute funds from their
operational budget into the VERF; these contributions are then used to replace the items, which mitigates
the impact on the operating budget. All items in the VERF shall be funded at a ratio of eighty percent (80%).
While the individual item funding percentage may vary, the overall goal is eighty percent (80%) funding in
total by fund (General, Water/Sewer, and Stormwater Drainage). The amount of the annual contribution for
each item is determined as follows:
CONTRIBUTION = ITEM ACQUISITION PRICE / EXPECTED USEFUL LIFE
Example: Chevrolet Tahoe purchased for Police Department: $60,000*
Expected useful life: 4 years
Contribution = ($60,000 x .80/4) = $12,000/year
*Acquisition price is inclusive of all after-market installs required to place the unit into
operations.
The annual contribution amount is divided by twelve (12) for monthly transfers from the
department’s budget to the VERF via journal entry. Proposed VERF transactions are
reviewed and approved as part of the Town’s annual operating budget process.
1. Proceeds from sold vehicles will be credited to the VERF, as will income earned from investment of
VERF balances and all claims paid on VERF items.
2. If a department’s item reaches its expected useful life but continues in service, the department will
not be required to make additional contributions for that unit.
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Revised & Adopted February 27, 2020
Revised & Adopted October 7, 2020
3. In the event that Town Manager approval is received to purchase a retired or replaced item from the
VERF, the purchase price shall be ten percent (10%) of the original cost of the item. This amount is
intended to compensate for the loss of sale proceeds that would otherwise be deposited in the VERF.
The retained item will be removed from the VERF, and will not be funded for future replacement.
4. Replacement contributions will be discontinued for units sold or retired before the expiration of their
useful life.
5. The acquisition price for VERF items will be reviewed on an annual basis during the budget process,
and adjusted accordingly to reflect current market prices. This may result in an adjustment to the
annual contributions in order to accommodate future replacement costs.
The Town of Prosper Vehicle Equipment/Replacement Fund (VERF) Program was revised and adopted the
7th day of October, 2020.
___________
Harlan Jefferson, Town Manager
Chapter 13, Page 1 Revised & Adopted July 2017
TOWN OF PROSPER
ADMINISTRATIVE REGULATIONS
CHAPTER 13: FUND BALANCE POLICY
SECTION 13.01: PURPOSE AND OVERVIEW
The purpose of this policy is to establish guidelines for fund balance levels within each of the Town
of Prosper’s funds. It is essential that the Town maintain adequate levels of fund balance to mitigate
financial risk that can occur from unforeseen revenue fluctuations, unanticipated expenditures, or
adverse circumstances. The Town of Prosper avoids appropriating fund balance for recurring
expenses. However, in the event that fund balance is used to support recurring expense, the budget
will clearly identify the uses of fund balance and provide an explanation of the circumstances
requiring the use of fund balance. In addition, the budget will also address the future potential uses
of fund balance for operating expenditures and a course of action to replenish fund balances to target
levels.
This policy ensures the Town maintains adequate fund balances in various operating funds for
capacity to:
1. Provide sufficient cash flow for daily financial needs,
2. Secure and maintain investment grade bond ratings,
3. Offset significant downturns or revenue shortfalls, and
4. Provide funds for unforeseen expenditures related to emergencies.
SECTION 13.02: DEFINITIONS AND CATEGORIES
A. Fund Balance
Defined as the difference between a fund’s assets and liabilities reported in a governmental fund,
which is more a measure of liquidity than of net worth. This would be most similar to working
capital as used in the private sector. For financial reporting purposes, the Governmental
Accounting Standards Board (GASB) requires the Town to divide its fund balance into the
following sub-categories using defined flow assumptions:
According to the Governmental Accounting Standards Board (GASB) statement number 54, fund
balance must be allocated into one of the following five categories:
1. Nonspendable Fund Balance – includes amounts that either
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a. are not in a spendable form, or
b. are legally or contractually required to be maintained intact.
Examples include prepaid items, inventory, redevelopment properties held for resale, or
endowments.
2. Restricted Fund Balance – includes amounts for which constraints have been placed on the
use of the resources either
a. externally imposed by creditors (such as through a debt covenant), grantors,
contributors, or laws or regulations of other governments,
b. imposed by law through constitutional provisions or enabling legislation, or
c. imposed by Town Charter.
Examples include Contingency Appropriations in the Town Charter, grants, and debt
covenants.
3. Committed Fund Balance – includes amounts that can be used only for the specific purposes
determined by a formal action of the government's highest level of decision-making
authority. Commitments may be changed or lifted only by the government taking the same
formal action that imposed the constraint originally. Examples include any Council-imposed
use or limitation set by Town Ordinance or Resolution.
4. Assigned Fund Balance – includes amounts intended to be used by the government for
specific purposes. In governmental funds other than the general fund. assigned fund balance
represents the amount that is not restricted or committed. This indicates that resources in
other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
5. Unassigned Fund Balance – is the residual classification of the general fund and includes all
amounts not contained in the other classifications. Unassigned amounts are technically
available for any purpose.
Note: The above fund balance categories only apply to governmental funds.
6.1. Restricted Fund Balance – While the Fund Balance Policy is intended to focus more on
unrestricted portions of fund balance. it is important to note a Town Charter provision in
Section 7.08 as amended in May 2011 that imposes a legal restriction on a Contingent Reserve
of the General Fund. It reads, "Provision shall be made in the annual budget maintaining a
contingency reserve fund balance designation in an amount not less than twenty percent
(20%) of the total general fund expenditures, to be used in case of unforeseen items of
expenditure or revenue shortfalls. This shall apply to current operating expenses and shall
not overlap with any other amount of reserves maintained by the Town. Such contingency
reserve appropriation shall be under the control of the Town Manager and distributed by him
Chapter 13, Page 3 Revised & Adopted July 2017
or her only in the event of an emergency or after supplemental appropriation by the Town
Council. The proceeds of the contingency reserves shall be disbursed only by transfer to
departmental appropriation, the spending of which shall be charged to the departments or
activities for which the appropriations are made.''
7.2. Committed Fund Balance – The Town Council is the Town's highest level of decision-making
authority and the formal action that is required to be taken to establish, modify, or resc.:ind
a fund balance commitment is an ordinance or resolution adopted by the Town Council. The
formal action must either adopt or rescind the commitment, as applicable, prior to the last
day of the fiscal year for which the commitment is made. The amount subject to the constraint
may be determined in the subsequent period.
8.3. Assigned Fund Balance – The Town Council authorizes the Town Manager or his/her
designee as the official authorized person to assign fund balance to a specific purpose
approved by this fund balance policy.
9.4. Flow Assumptions for the Order of Expenditure of Fund Balance – While multiple categories
of fund balance are available for expenditure (for example, a construction project is being
funded partly by a grant, funds set aside by the Town Council, and unassigned fund balance),
the Town will start with the most restricted category and spend those funds first before
moving down to the next category with available funds. Normally this would result in the
use of restricted, then committed, then assigned, and lastly, unassigned fund balance.
The Town reserves the right to selectively spend unassigned resources first to defer the use
of these other classified funds if determined to be in the Town's best interest.
B. Level of Fund Balance
1. The Government Finance Officers Association (GFOA) has issued Best Practice recommendations
providing practical guidance for determining appropriate levels of fund balance for both the
General Fund and for proprietary funds. Each year in preparation for the annual budget process,
finance staff will review the events of the prior year in regards to Best Practice criteria to
determine the need for any revisions to Fund Balance policies.
10.2. Minimum Unassigned Fund Balance – It is the goal of the Town to achieve and
maintain an unassigned fund balance in the general fund equal to five percent (5%) of
budgeted expenditures for unanticipated expenditures, unforeseen revenue fluctuations, or
other adverse circumstances. The unassigned fund balance level, however, may be reduced
during unusual financial circumstances. However, if such a situation occurs, the Town will
implement necessary corrective action within a five-year plan to restore the unassigned fund
balance to the equivalent of five percent (5%) of budgeted expenditures. This amount is in
addition to the twenty percent (20%) restricted fund balance amount required by the Town
Charter.
11.3. Non-governmental fund balances – The fund balance categories discussed above do
not apply to proprietary funds according to GASB 54. While not required by the GASB, tThe
Town recognizes the need to apply a minimum balance policy to the propri etary funds
maintained by the Town. Therefore, the Town shall strive to maintain a minimum ending
working capital balance (current assets minus current liabilities) of at least twenty-five
percent (25%) of budgeted non-capital expenditures for each of the proprietary funds. If the
Chapter 13, Page 4 Revised & Adopted July 2017
working capital level should fall below the desired minimum. the Town will implement
necessary corrective action within a five-year plan to restore the working capital balance to
twenty-five percent (25%) of budgeted non-capital expenditures.
The Town of Prosper Fund Balance Policy was revised and adopted on the 11th day of July, 2017.
Chapter 13, Page 4
Revised & Adopted July 2017
Harlan Jefferson, Town Manager
Chapter 15, Page
1
Adopted July 2017
Amended June xx,2022
TOWN OF PROSPER
ADMINISTRATIVE REGULATIONS
CHAPTER 15: DEBT MANAGEMENT POLICY
SECTION 15.01: PURPOSE AND OVERVIEW
The Town of Prosper recognizes that the foundation of any well-managed debt program is aare
comprehensive debt management and post issuance policies that are fully integrated with the long-
term capital plan and related five-year operating budget forecasts. y This policy outlinesing the need
to identify all possible non-debt capital plan funding sources first, and then establishes parameters for
issuing new debt and managing the existing debt portfolio. ;It identifiesying permissible and
preferredthe types, structures and amounts of permissible debt; providing guidance to decision
makers regarding the purposes for which debt may be issued. This policy is aligned and compliments
Chapter 16: Debt Post Issuance-Monitoring and Compliance Policy.; and verifying that the IRS
regulations regarding post issuance compliance are met to preserve the tax- exempt status of the
Town’s bonds.
Adherence to a debt management policy helps ensure that the Town maintains the current or an
improved bond rating in order to minimize borrowing costs and preserve access to credit.
The Town’s Debt Management Policy (“the Debt Policy”) provides guidance for staff to promote:
1. Ensure hHigh quality debt management decisions;
2. Ensure sSupport for debt issuances both internally and externally;
3. Impose oOrder and discipline in the debt issuance process;
4. Promote cConsistency and continuity in the decision making process;
5. A positive perception of the debt management program Ensure that the debt management
decisions are viewed positively by rating agencies, investment community and taxpayers;
and
6. Demonstrate aA commitment to long-term financial planning objectives.
SECTION 15.02: SCOPE
This Policy applies to all debt instruments issued by the Town regardless of the funding source.
Funding sources can be derived from, and debt secured by, ad valorem taxes, general Town revenues,
enterprise fund revenues or any other identifiable source of revenue that may be identified for
appropriate pledging for bonded indebtedness.
SECTION 15.03: OBJECTIVES
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Adopted July 2017
Amended June xx,2022
The primary objective of this Policy is to ensure that the Town establishes and maintains a solid
position with respect to its debt service and bond proceed funds and that proceeds from long-term
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debt will not be used for current operations but rather for capital improvements, and related
expenses, and other long-term assets in accordance with state law and Town ordinances.
The Town will seek all possible federal and state reimbursement for mandated projects and/or
programs. The Town will pursue a balanced relationship between issuing debt and pay-as-you-go
financing as dictated by prevailing economic factors and as directed by the Town Council.
Other objectives include:
1. Bonds shall be paid back within a period not to exceed, and preferably sooner than, the
expected useful life of the capital project;
2. Decisions shall be made based on a number of factors and will be evaluated against long-
term goals rather than a short-term fix; and
3. Debt service and bond proceed funds shall be managed and invested in accordance with all
federal, state and local laws and in conjunction with the Tax Compliance Certificate of each
bond issue to assure availability to cover project costs and debt service payments when due.
SECTION 15.04: IMPLEMENTATION
The Policy requires:
1. Payment of principal and interest on all outstanding debt in full and timely manner;
2. Incurrence of debt for those purposes permissible under State law and the home-rule charter
of the Town;
3. Development, approval and financing of capital improvements in accordance with Town Code
and the capital improvement budgeting process;
4. Structuring of principal and interest retirement schedules to: 1) achieve a low borrowing cost
for the Town, 2) accommodate the debt service payments of existing debt, and 3) respond to
perceptions of market demand. Shorter maturities shall always be encouraged to
demonstrate to rating agencies that debt is being retired at a sufficiently rapid pace;
5. Selection of a method of sale that shall maximize the financial benefit to the Town;
6. Effective communication with bond rating agencies to ensure complete and clear
understanding of the credit worthiness of the Town; and
7. Full, complete, and accurate disclosure of financial conditions and operating results in every
financial report, bond prospectus and Annual Information Statement ("AIS"). All reports shall
conform to guidelines issued by the Government Finance Officers Association ("GFOA"),
Securities and Exchange Commission ("SEC"), and the Internal Revenue Service (IRS) to meet
the disclosure needs of rating agencies, underwriters, investors, and taxpayers.
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Amended June xx,2022
SECTION 15.05: STRUCTURE OF DEBT
Debt service shall be structured to the greatest extent possible to:
1. Target projected cash flows and pledged revenues;
2. Minimize the impact on future tax levies;
3. Target a consistent and as rapid as feasible payment of principal;
4. Maintain a level overall annual debt service payment structure; and
5. Target the equal or the lesser of the useful life of the asset being financed, or the maximum
legal maturity for the obligations issued to finance the acquisition and construction of the
asset.
A. Fixed Interest versus Variable Interest
The Town generally issues fixed rate bonds primarily to protect the Town against interest rate
risk. The Town has the option to issue variable rate bonds if market conditions warrant and
Council approves it.
B. Other Considerations
Bonds are generally issued such that:
1. The average life is 20 years or less for general obligation bonds and revenue bonds, the Town
may choose a longer term for revenue bonds for projects whose lives are greater than 20
years.
2. Debt service interest is paid in the first fiscal year after a bond sale, and principal is targeted
to commence no later than the second fiscal year after the debt is issued. However, the Town
may defer principal for a longer period of time in order to maintain a specific I&S tax rate or
a certain level of debt service.
3. Call provisions for bond issues shall be made as short as possible consistent with the lowest
interest cost to the Town. The targeted maximum length to call is 10 years. However, the
Town may opt for a call date longer than 10 years in order to achieve the necessary goals of
the particular issue.
3.
SECTION 15.06: FINANCING ALTERNATIVES
The Town shall develop a level of cash and debt funded capital improvement projects that provide
the citizens with the desired amount of Town services at the lowest cost. Town staff shall assess all
financial alternatives for funding capital improvements prior to issuing debt.
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Amended June xx,2022
Long-term general obligation debt, including certificates of obligation, or revenue bonds shall be
issued to finance significant and desirable capital improvements. Proceeds of general obligation debt
will be used only for the purposes approved by voters in bond elections or set forth in the notices of
intent for certificates of obligation or to refund previously issued general obligation b onds,
certificates of obligation or revenue bonds. All bonds shall be sold in accordance with applicable law.
A. Pay-As-You-Go Financing
Pay-as-you-go financing should be considered before issuing any debt. Pay-as-you go financing
may include: intergovernmental grants from federal, state and other sources, current revenues
or fund balances, private sector contributions, and public/private partnerships. Once the Town
has determined that pay-as-you-go is not a feasible or sufficient financing option, the Town may
use bonds, loans, or other debt financing sources as deemed appropriate by Town staff and
approved by Council.
B. General Obligation Bonds
General obligation bonds may be used if the following criteria are met:
1. The size of the issuance is $1 million or above;
2. The GO bond funds are used for new and expanded facilities, major repair or renovations to
existing facilities, or quality-of-life projects;
3. The useful life of the capital asset acquired/constructed/improved will be ten (10) years or
more, or the funds will extend the useful life of an asset for more than ten (10) years; and
4. Voter authorization is given through approval in a bond election in accordance with State law.
GO bonds may be used to fund quality-of-life projects that include, but are not limited to, the
Town’s parks, libraries, non-public safety facilities, internet and entertainment, sports and
amusement-type facilities.
C. Certificates of Obligation
COs will be issued for the following projects/acquisitions:
1. Finance permanent improvements and land acquisition;
2. Acquire equipment/vehicles;
3. Leverage grant funding;
4. Renovate, acquire, construct facilities and facility improvements;
5. Construct street improvements;
6. Provide funding for master plans/studies;
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7. Infrastructure projects (including street, water and sewer and draining drainagework)
8. Emergency Town facilities rehabilitation (storm water drainingdrainage, etc.)
9. Major core service facilities (police, fire, streets, etc.)
Notwithstanding the policy set forth herein, certificates of obligation or other long-term debt may
be considered if the following criteria are met:
1. The need for the project is urgent and immediate;
2. The project(s) is necessary to prevent an economic loss to the Town;
3. Source of revenue is specific and can be expected to cover the additional debt;
4. The expected debt is the most cost effective financing option available.
In addition, the average final maturity of non-voter approved debt shall not exceed the average
life of the project financed. Capital items shall have a value of at least $5,000 and a life of at least
four years.
D. Reimbursement Resolutions
Reimbursement resolutions, if required for funds to be advanced prior to issuance of Ggeneral
Oobligation bondsdebt, may be used for projects funded through General Obligation Bonds and
Certificates of Obligation bonds.
E. Certificates of Obligations - Enterprise Fund
Certificates of obligation for an enterprise system will be limited to only those projects, which
can demonstrate the capability to support the certificate debt either though its own revenues, or
another pledged source other than ad valorem taxes and meet the same criteria as outlined above.
F. Revenue Bonds
Revenue bonds will may be issued for projects that generate revenues that are sufficient to repay
the debt. Except where otherwise required by state statutes, revenue bonds may be issued
without voter approval and only in accordance with the laws of Texas.
G. Other debt obligations
The use of other debt obligations, permitted by law, including but not limited to public property
finance act contractual obligations, pension obligation bonds; tax notes and lease purchase
obligations will be reviewed on a case-by-case basis. The findings above will be considered for
the use of these obligations.
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SECTION 15.07: METHODS OF SALE
The Town’s debt obligations may be sold by competitive or negotiated sale methods. The selected
method of sale depends upon the option which is expected to result in the lowest cost and most
favorable terms to the Town given the financial structure used, market conditions , and prior
experience. When considering the method of sale, the Town may consider the following issues:
1. Financial conditions;
2. Market conditions;
3. Transaction-specific conditions;
4. Town-related conditions;
5. Risks associated with each method;
6. Complexity of the Issue – Municipal securities with complex security features require greater
marketing and buyer education efforts on the part of the underwriter, to improve the
investors’ willingness to purchase;
7. Volatility of Bond Yields – If municipal markets are subject to abrupt changes in interest rates,
there may be a need to have some flexibility in the timing of the sale to take advantage of
positive market changes or to delay a sale in the face of negative market changes;
8. Familiarity of Underwriters with the Town’s Credit Quality – If underwriters are familiar with
the Town’s credit quality, a lower True Interest Cost (TIC) may be achieved. Awareness of the
credit quality of the Town has a direct impact on the TIC an underwriter will bid on an issue.
Therefore, where additional information in the form of presale marketing benefits the
interest rate, a negotiated sale may be recommended. The Town strives to maintain an
excellent bond rating. As a result, the Municipal Bond Market is generally familiar with the
Town’s credit quality; and
9. Size of the Issue – The Town may choose to offer sizable issues as negotiated sales so that
pre-marketing and buyer education efforts may be done to more effectively promote the bond
sale.
A. Competitive Sale
In a competitive sale, bonds are awarded in a sealed bid sale to an underwriter or syndicate of
underwriters that provides the lowest TIC bid. TIC is defined as the rate, which will discount the
aggregate amount of debt service payable over the life of the bond issue to its present value on
the date of delivery. It is customary for bids to be submitted electronically through a secure
website.
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B. Negotiated Sale
In a negotiated sale, the Town chooses an underwriter or underwriting syndicate that is
interested in reoffering a particular series of bonds to investors. The terms of the sale, including
the size of the underwriter’s discount, date of sale, and other factors, are negotiated between the
two parties. Although the method of sale is termed negotiated, individual components of the sale
may be competitively bid. The components are subject to a market analysis and reviewed prior
to recommendation by staff. Negotiated sales are more advantageous when flexibility in the sale
date is needed or when less conventional bond structures are being sold. Negotiated sales are
also often used when the issue is particularly large or if the sale of the debt issuance would be
perceived to be more successful with pre-marketing efforts.
C. Private Placement
A private placement is a negotiated sale of debt securities to a limited number of selected
investors including financial institutions, government agencies, or authorities. The Town may
engage a placement agent to identify likely investors if deemed necessary. A private placement
may be beneficial when the issue size is small, when the security of the bonds is somewhat
weaker, or when a governmental lending agency or authority can provide beneficial interest
rates or terms compared to financing in the public market.
SECTION 15.08: REFUNDING OF DEBT
All forms of refunding debt shall be approved by Council in accordance with Town ordinances and
the Department of Finance and Administration in accordance with state law.
A. Advance Refunding
Advanced refunding and forward delivery refunding transactions for savings may be considered
when the net present value savings as a percentage of the par amount of refunded bonds is
approximately three percent.
B. Current Refunding
Current refunding transactions issued for savings maybe considered when the net present value
savings as a percentage of the par amount of refunded bonds is approximately three percent.
C. Refunding for Debt Restructuring
From time to time, the Town may also issue refunding debt for other purposes, rather than net
present value savings, such as restructuring debt, changing covenants, or changing the repayment
source of the bonds.
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Amended June xx,2022
SECTION 15.09: DEBT LIMITS
The total principal amount of general obligation bonds together with the principal amount of all other
outstanding tax indebtedness of the Town to be repaid from the Debt Service Fund will be targeted
to not exceed six four percent of the total assessed valuation of the Town's tax rolls.
The Town will target an I&S tax rate that makes up 3540% or less of the Town’s total tax rate (M&O
tax rate plus I&S tax rate).
The Enterprise Fund will target the net revenues available for debt service to exceed 125 times the
outstanding revenue-backed debt service payments.
SECTION 15.10: MATURITY LEVELS
A. Revenue Debt
The term maximum maturity of revenue debt shall not exceed the expected useful life of the
capital asset being financed and in no case shall it exceed thirty years.
B. General Obligation Debt
The term maximum maturity of general obligation debt shall be targeted not to exceed twenty
years.
SECTION 15.11: MANAGEMENT OF DEBT SERVICE FUND
A. Interest Earnings
Interest earnings on bond and loan proceeds shall be used solely to fund direct or related capital
expenditures, or to service current and future debt payments.
B. Debt Service Reserves – General Obligation Bonds
Debt service reserves for general obligation bonds shall not be required.
C. Debt Service Reserves – Revenue Bonds
Debt service reserves for revenue bonds shall be maintained at levels required by controlling
bond ordinances.
D. IRS Rules and RegulationsLegal Regulatory and Covenant Requirements
The Town shall comply with all IRS rules and regulationsFederal and State laws, SEC regulations
and related contractual and covenant requirements. including, but not limited to, arbitrage.See
Chapter 16: Debt Post Issuance Monitoring and Compliance.
Chapter 15, Page
10
Adopted July 2017
Amended June xx,2022
SECTION 15.12: RATINGS
Adherence to a debt management policy helps insure that the Town maintains the current or an
improved bond rating in order to minimize borrowing costs and preserve access to credit. Toward
that end, the Town will take the following steps.
1. Strive to maintain good relationships with bond rating agencies as well as disclose financial
reports and information to these agencies and to the public.
2. Obtain a rating from at least one nationally recognized bond-rating agency on all issues being
sold in the public market.
3. Make timely disclosure of annual financial information or other requested information to the
rating agencies.
SECTION 15.13: CONTINUING DISCLOSURE
The Town will take all appropriate steps to comply with federal securities laws, including, but not
limited to, Securities and Exchange Commission Rule 15c2-12 (the "Rule"). The Town will make
annual and event disclosure filings to the MSRB via EMMA, as required by the Rule and its continuing
disclosure undertakings.
SECTION 15.14: SELECTION OF FINANCIAL ADVISOR
The Town shall retain an independent financial advisor for advice on the structuring of new debt,
financial analysis of various options, including refunding opportunities, the rating review process,
the marketing and marketability of Town debt obligations, issuance and post- issuance services, the
preparation of offering documents (each, an "Official Statement") and other services, as necessary.
The Town will seek the advice of the financial advisor on an ongoing basis. The financial advisor will
perform other services as defined by the agreement approved by the Town Council. The financial
advisor will not bid on nor underwrite any Town debt issues in accordance with MSRB rules.
SECTION 15.15: SELECTION OF BOND COUNSEL
The Town shall retain bond counsel for legal and procedural advice on all debt issues. Bond counsel
shall advise the Town Council in all matters pertaining to its bond ordinance(s) and /or resolution(s).
No action shall be taken with respect to any obligation until a written instrument (e.g., Certificate for
Ordinance or other legal instrument) has been prepared by the bond attorneys certifying the legality
of the proposal. The bond attorneys shall prepare all ordinances and other legal instruments required
for the execution and sale of any bonds issued which shall then be reviewed by the Town Attorney
and the Director of Finance. The Town will also seek the advice of bond counsel on all other types of
debt and on any other questions involving state law and federal tax or arbitrage law. Special counsel
may be retained to protect the Town's interest in complex negotiations.
Chapter 15, Page 10 Adopted July 2017
The Town of Prosper Debt Management Policy was approved the 11th day of July, 2017.
Harlan Jefferson, Town Manager
Chapter 16, Page 1 Adopted July 2017
TOWN OF PROSPER
ADMINISTRATIVE REGULATIONS
CHAPTER 16: DEBT POST ISSUANCE POLICY
SECTION 16.01: PURPOSE AND OVERVIEW
It is the policy of tThe Town of Prosper will establish all necessary debt post issuance
procedures to ensure compliance with all federal, state, contractual and covena nt
requirements.to actively pursue the following Post-Issuance Tax Compliance Procedures (the
"Procedures") to ensure that all applicable post-issuance requirements of federal income tax
law are met to preserve the tax-exempt status of the Town's bonds.
SECTION 16.02: GENERAL PROCEDURES
A. The Tax Compliance Certificate
1. The Tax Compliance Certificate ("Tax Certificate") issued for each bond issue describing the
requirements and provisions of the Code must be followed in order to maintain the tax-
exempt status of the interest on such bonds.
2. The Tax Certificate will contain the reasonable expectations of the Town at the time of
issuance of the related bonds with respect to the use of the gross proceeds of such bonds
and the assets to be financed or refinancedor refinanced with the proceeds thereof.
2.3. The pProcedures put in place by the Town supplement and support the covenants and
representations made by the Town in the Tax Certificate related to specific issues of tax-
exempt bonds. In order to comply with the covenants and representations set forth in the
bond documents and in the Tax Certificate, the Town will monitor all Town bond issues
using the post issuance compliance requirements.
B. ProceduresState Compliance
The local government code and other state statutes contain various requirements related to
filing a debt issuance for review by the attorney general and filing debt related information with
the Comptroller of Public Accounts.The procedures supplement and support the covenants and
representations made by the Town in the Tax Certificate related to specific issues of tax-exempt
bonds. In order to comply with the covenants and representations set forth in the bond
documents and in the Tax Certificate, the Town will monitor all Town bond issues using the post
issuance compliance requirements.
C. Federal- SEC Continuing Disclosure Requirements
The Securities and Exchange Commission has promulgated various requirements
for underwriters of municipal debt requiring issuers to file specified continuing
disclosures on an annual basis as well as event notices of a material nature within
Chapter 16, Page 2 Adopted July 2017
ten business days of the occurrence of the event. Specific financial and operating
data to be included in the annual continuing disclosure filings are listed in each of
the Town’s Official Statements. It should be noted that once a disclosure is
committed to in an official statement that requirement remains in effect until all
debt from that specific official statements is retired even if less stringent
requirements are included in future official statements.
SECTION 16.03: DESIGNATION OF RESPONSIBLE PERSON
The Finance Director shall maintain an inventory of bonds and assets financed which contain the
pertinent data to satisfy the Town's monitoring responsibilities. Any transfer, sale or other
disposition of bond-financed assets shall be reviewed and approved by the Town Council in
accordance with state law, federal tax law and the Town’s ordinances.
SECTION 16.04: EXTERNAL ADVISORS/DOCUMENTATION
The Town shall consult with bond counsel and other legal counsel and advisors, as needed,
throughout the issuance process to identify requirements and to establish procedures necessary
Chapter 16, Page 3 Adopted July 2017
or appropriate so that the bonds will continue to qualify for tax-exempt status. Those requirements
and procedures shall be documented in the Tax Certificate and/or other documents finalized at
or before issuance of the bonds. Those requirements and procedures shall include future
compliance with applicable arbitrage rebate requirements and all other applicable post-issuance
requirements of federal tax law throughout (and in some cases beyond) the term of the bonds.
1. The Town also shall consult with bond counsel and other legal counsel and advisors as
needed following issuance of the bonds to ensure that all applicable post-issuance
requirements are met. This shall include, without limitation, consultation in connection with
future long-term contracts with private parties for the use of bond- financed or refinanced
assets.
2. The Town shall engage expert advisors (a "Rebate Service Provider") to assist in the
calculation of the arbitrage rebate payable with respect to the investment of the bond
proceeds, unless the Tax Certificate documents that arbitrage rebate will not be applicable
to an issue of bonds.
3. Unless otherwise provided by the resolution or other authorizing documents relating to the
bonds, unexpended bond proceeds shall be held in a segregated bond account. The
investment of bond proceeds shall be managed by the Town. The Town shall prepare
regular, periodic statements regarding the investments and transac tions involving bond
proceeds.
SECTION 16.05: ARBITRAGE REBATE AND YIELD
Unless the Tax Certificate documents that arbitrage rebate will not be applicable to an issue
of bonds, the Town shall be responsible for:
1. Engaging, by contract, the services of a Rebate Service Provider, procured in accordance
with State law and Town ordinances.
2. Providing to the Rebate Service Provider, as may be requested, additional documents and
information pertaining to the expenditure of proceeds from each bond issue being annually
reviewed.
3. Monitoring the services of the Rebate Service Provider.
4. Assuring payment of the required rebate amounts, if any, no later than sixty (60) days after
each five (5) year anniversary of the issue date of the bonds, and no later than sixty (60)
days after the last bond of each issue is redeemed.
5. During the construction period of each capital project financed in whole or in part by bonds,
monitoring the investment and expenditure of bond proceeds and consulting with the
Rebate Service Provider to determine compliance with the applicable exceptions with any
arbitrage rebate requirements.
6. Retaining copies of all arbitrage reports and account statements as described below under
"Record Keeping Requirements.”
Chapter 16, Page 4 Adopted July 2017
SECTION 16.06: USE OF BOND PROCEEDS AND BOND-FINANCED OR
REFINANCED ASSETS
The Town, in the Tax Certificate and/or other documents finalized at or before the issuance of
the bond, shall be responsible for the following tasks:
1. Monitoring the use of bond proceeds and the use of bond-financed or refinanced assets (e.g.,
facilities, furnishing or equipment) throughout the term of the bonds to ensure compliance
with covenants and restrictions set forth in the Tax Certificate.
2. Maintaining records identifying the capital assets or portion of capital assets that are
financed or refinanced with proceeds of the bonds, including a final allocation of bond
proceeds, as described below under Record Keeping Requirements.
3. Consulting with bond counsel and other legal counsel and advisors in the review of any
contracts or arrangements involving private use of bond-financed or refinanced assets
to ensure compliance with all covenants and restrictions s et forth in the Tax Certificate.
4. Maintaining records for any contracts or arrangements involving the use of bond- financed
or refinanced assets, as described below under Record Keeping Requirements.
5. To the extent that the Town discovers that any applicable tax restrictions rega rding use
of the bond proceeds and bond-financed or refinanced assets may have or may be violated,
consulting promptly with bond counsel and other legal advisors to determine a course of
action to remediate all non-qualified bonds, if such counsel advises that a remedial action is
necessary.
SECTION 16.07: RECORD KEEPING REQUIREMENT
The Town shall be responsible for maintaining the following documents for the term of the
issuance of bonds (including refunding bonds, if any) plus at least three years.
1. A copy of the bond closing transcript(s) and other relevant documentation delivered to the
Town at or in connection with closing of the issuance of bonds, including any elections
made by the Town in connection therewith.
2. A copy of all material documents relating to capital expenditures financed or refinanced by
bond proceeds, including (without limitation) construction contracts, purchase orders,
invoices, requisitions and payment records, draw requests for bond proceeds and evidence
as to the amount and date for each draw down of bond proceeds, as well as documents
relating to costs paid or reimbursed with bond proceeds and records identifying the asset
or portion of assets that are financed or refinanced with bond proceeds, including a final
allocation of bond proceeds.
3. A copy of all contracts and arrangements involving the use of bond-financed or refinanced
assets.
Chapter 16, Page 5 Adopted July 2017
Harlan Jefferson, Town Manager
4. A copy of all records of investments, investment agreements, arbitrage reports and
underlying documents in connection with any investment agreements, and copies of all
bidding documents, if any. [Paying agent account statements, bank statements for reserve
funds, etc.]
The Town of Prosper Debt Post Issuance Policy was approved the 11th day of July, 2017.
Chapter 17, Page 1 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
TOWN OF PROSPER
ADMINISTRATIVE REGULATIONS
CHAPTER 17: FINANCIAL MANAGEMENT POLICY
SECTION 17.01: PURPOSE AND OVERVIEW
This policy is developed to help guide the Finance Department, and staff in financial management and
budgeting matters. The overriding goal of the Financial Management Policy is to enable the Town to
achieve a long-term stable and positive financial condition while accomplishing the Town’s long-term
strategic goals. All financialconducting its operations will be under the direction of the Town Manager,
consistent with the council-manager form of government established in the Town Charter.
The rapid growth experienced by the Town produces both financial opportunities and challenges.
Often many years of sustained growth must occur before major capital expenditures for new facilities
and infrastructure are justified and affordable. Often by the time needed improvements are made
growth has slowed and only a limited amount of new revenue is available. If property tax revenues
are not reserved for those future improvements including related staffing increases, significant
financial stress and the need for major tax rate increases will occur. The purpose of the Financial
Management Policy is to provide guidelines for the financial management staff in planning and
directing the Town’s day-to-day financial affairs and in developing recommendations to the Town
Manager.
SECTION 17.02: SCOPE
The scope of the Town’s Financial Management Policies spans accounting, auditing, financial
reporting, internal controls, annual operating and multi-year capital budgeting, revenue management,
cash management, expenditure control, and debt management.
SECTION 17.03: ACCOUNTING, AUDITING, AND FINANCIAL REPORTING
A. Accounting
The Town’s Accounting Manager is responsible for establishing and maintaining the chart of
accounts, and for properly recording financial transactions.
B. Funds
Self-balancing groups of accounts are used to account for the Town’s financial transactions in
accordance with generally accepted accounting principles. Each fund is created for a specific
purpose except for the General Fund, which is used to account for all transactions not accounted
for in other funds. In essence, the General Fund is intended for governmental tax supported
operations of the Town. Funds are created and fund names are changed by Town Council
Chapter 17, Page 2 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
approval through resolution either during the year or in the Town Council’s approval of the
annual operating budget ordinances. (See Fund Balance Policy)
C. External Auditing
At the close of each fiscal year, and at such other times as may be deemed necessary, the Town
Council shall call for an independent audit to be made of all accounts of the Town. The auditors
must be a certified public accounting firm capable of conducting the Town’s audit in accordance
with generally accepted auditing standards, generally accepted government auditing standards,
and contractual requirements. No more than five (5) consecutive annual audits shall be
completed by the same firm. The certified public accountant selected shall have no personal
interest, directly or indirectly, in the financial affairs of the Town or any of its officers, be a
member of the Government Audit Quality Center of the AICPA and have a minimum of ten other
government audit and single audit clients.
The report of the audit, with the auditor’s recommendations will be made to the Town Council.
Upon completion of the audit, the Independent Auditor’s Report and Annual Financial Report
shall be published on the Town’s website and copies of the audit placed on file in the office of the
person performing the duties of Town Secretary, as public record. (See Town Charter Article
VII, Section 7.18 Independent Audit)
D. External Financial Reporting
The Town will prepare and publish a Annual Comprehensive Annual Financial Report (ACFR).
The ACFRComprehensive Annual Financial Report will be prepared in accordance with generally
accepted accounting principles, and will be presented annually to the Government Finance
Officers Association (GFOA) for evaluation and awarding of the Certification of Achievement for
Excellence in Financial Reporting. The ACFRComprehensive Annual Financial Report will include
the General Fund Budget and Actual information as a basic financial statement and therefore
included in the audit opinion. It will be published and presented to Town Council within 180 days
after the end of the fiscal year.
E. Internal Financial Reporting
The Finance Department will prepare internal financial reports sufficient for management to
plan, monitor, and control the Town’s financial affairs throughout the year.
SECTION 17.04: INTERNAL CONTROLS
A. Written Procedures
The Finance Director is responsible for developing town-wide written guidelines on accounting,
cash handling, grant management, and other financial matters.
B. Department Directors Responsibilities
Chapter 17, Page 3 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
Each department director is responsible to the Town Manager to ensure that good internal
controls are followed throughout his or her department, that all guidelines on accounting and
internal controls are implemented, and that all independent auditor internal control
recommendations are addressed.
SECTION 17.05: OPERATING BUDGET
A. Preparation
The Town’s annual “Operating Budget” is the Town’s legally adopted by ordinance and may only
be amended by similar actionannual financial operating plan. It consists of governmental and
proprietary funds, including the general obligation and revenue supported Debt Service Fund, but
excluding Capital Projects Funds which are adopted on a multi-year project basis . The budget is
prepared by the Finance Department with the cooperation of all Town departments, and is
submitted to the Town Manager who makes any necessary changes and transmits the document
on or before the fifteenth (15th) day of August of the fiscal year to Town Council.
The proposed budget and all supporting schedules shall be filed with the person performing the
duties of Town Secretary when submitted to the Town Council and shall be open to public
inspection by anyone interested. Thereafter, the Town Council should enact the final budget
prior to fiscal year end. The operating budget shall be submitted to the GFOA annually for
evaluation and consideration of awarding the Award for Distinguished Budget Presentation.
B. Balanced Budget
The final adoption of the operating budget by the Town Council shall constitute the official
appropriations as proposed by expenditures for the current year and shall constitute the basis
of official levy of the property tax as the amount of tax to be assessed and collected for the
corresponding tax year. Estimated recurring expenditures will not exceed proposed recurring
revenue. Non-recurring expenditures may be funded from recurring revenues, non-recurring
revenues or other sources or from plus the undesignated fund balance in excess of the
contingency reserve. from the previous fiscal year. Unused appropriations may be transferred
during the year by the Town Manager within the level of budgetary control to any item required
for the same general purpose. Items ordered during the year but not yet received will be
encumbered and carried over to the new year,
C. Budgetary Control
The level of budgetary control is the department level budget in the General Fund, Utility Fund,
and the fund level in all other funds. Under conditions which may arise and which could not
reasonably have been foreseen in the normal process of planning the budget, the Town Council
may, by the affirmative vote of a majority of the full membership of the Town Council, amend or
change the budget to provide for any additional expense in which the general welfare of the
citizenry is involved. These amendments shall be by ordinance, and shall become an attachment
to the original budget.
Chapter 17, Page 4 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
D. Tax Rate Management
The property tax rate is divided into two categories by state law: Maintenance & Operations (M &
O) and Debt Service (also referred to as the Interest & Sinking Fund or I & S). Debt service tax
rate is strictly limited to payment of principal and interest on general obligation debt.
Maintenance and operations can be used for a wider range of purposes but is limited by state law
regarding how much revenue may increase before triggering a mandatory election. For this
reason, once reduced, it is very difficult to increase. Recognizing the need to manage its debt levels
and to have adequate revenue capacity to staff and operate future facilities without requiring a tax
rate increase the Town will determine annually how much of the M & O rate can be designated a
“Capital Dedicated/Future Facility Staffing". This levy will be used to reduce needed debt issuance
but will ultimately be available to transfer back to the General Fund once growth has slowed but
new facilities are still being brought on-line.
D.E. Contingency Reserve
Provisions shall be made in the annual budget maintaining a contingency reserve fund balance
designation in an amount not less than twenty percent (20%) of the total general fund
expenditures, to be used in case of unforeseen items of expenditure or revenue shortfalls. (See
Town Charter Article VII, Section 7.08). It is also the goal of the Town to achieve and maintain
an unassigned fund balance in the General Fund equal to five percent (5%) of budgeted
expenditures for unanticipated expenditures, unforeseen revenue fluctuations, or other adverse
circumstances. These contingency reserves are further detailed in the Town’s Fund Balance
Policy.
E.F. Planning
The budget process will be coordinated in concert with the Town Council’s major strategic
planning objectives. A one-year budget is adopted each year and a four-year financial plan is
presented to help manage the decisions made for the next fiscal year and the impact it has on
future fiscal responsibilities.
F.G. Reporting
G. Periodic financial reports will be prepared to enable the department directors to manage their
budgets and to enable the Finance Department to monitor and control the budget as authorized
by the Town Council. Summary financial reports will be presented to the Town Council each
month. Such reports will include current year revenue and expenditures in comparison to budget
and prior year actual revenues and expenditures. Performance Measures and Productivity
Indicators
Chapter 17, Page 5 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
Where appropriate, performance measures and productivity indicators will be used as
guidelines and reviewed for efficiency and effectiveness. This information will be included in
the annual budgeting processes.
SECTION 17.06: CAPITAL IMPROVEMENT PROGRAM
A. Preparation
The Town’s Capital Improvement Program will include all capital projects. The Capital
Improvement Program will be prepared annually to be a comprehensive five -year (5) capital
program as an attachment to the annual budget.
B. Program Planning
The program as submitted shall include:
1. A clear general summary of its contents;
2. A list of all capital improvements which are proposed to be undertaken during the five
(5) fiscal years succeeding the budget year, with appropriate supporting information as
to the necessity for such improvements;
3. Cost estimates, method of financing, and recommended time sche dules for each
improvement; and
4. The estimated annual cost of operating and maintaining the facilities to be constructed
or acquired.
The above information may be revised and extended each year with regard to capital
improvements still pending or in process of construction or acquisition. The Capital
Improvement Program will be updated and presented to the Town Council, annually.
C. Alternate Resources
Where applicable, assessments, impact fees, or other user-based fees should be used to fund
capital projects, which have a primary benefit to certain property owners.
D. Debt Financing
Recognizing that debt is usually a more expensive financing method,. A alternative financing
sources will be explored before debt is issued. When debt is issued, it will be used to acquire
major assets with expected lives, which equal or exceed the average life of the debt issued. The
exceptions to this requirement are the traditional costs of marketing and issuing the debt,
capitalized labor for design and construction of capital projects, and small component parts,
which are attached to major equipment purchases.
Chapter 17, Page 6 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
E. Reporting
Periodic financial reports will be prepared to enable the department managers to manage their
capital budgets and to enable the Finance Department to monitor the capital budget as
authorized by the Town Council.
SECTION 17.07: REVENUE MANAGEMENT
A. Simplicity
The Town will strive to keep the revenue system simple, which will result in a decrease of
compliance costs for the taxpayer or service recipient and a corresponding decrease in
avoidance to pay.
B. Administration
The benefits of revenue will exceed the cost of producing the revenue. The cost of collection will
be reviewed annually for cost effectiveness. Where appropriate, the Town will use the
administrative processes of state or federal collection agencies in order to reduce administrative
costs.
C. Dedication of Revenues
Revenues will not be dedicated for specific purposes unless required by law or contractual
provisions.generally accepted accounting practices (GAAP). All non-restricted revenues will be
deposited into the General Fund and appropriated by the budget process.
D. Financial Stability
Current revenues will fund current expenditures and one-time revenues will not be used for
ongoing operations. Non-recurring revenues will be used only for non-recurring expenditures.
Care will be taken not to use these revenues for budget balancing purposes.
E. Property Tax Revenues
Property shall be assessed at 100% of the fair market value as appraised by the Collin and
Denton Appraisal Districts. Reappraisal and reassessment shall be done regularly, as required
by state law.
All delinquent taxes will be pursued and turned over to a private attorney. A penalty will be
assessed to compensate the attorney as allowed by state law, and in accordance with the
attorney’s contract.
Chapter 17, Page 7 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
F. User-Based Fees
For services associated with a user fee or a fee to offset charge, the direct and indirect costs of
that service will be imposed. There will be a periodic review of fees and charges to ensure that
fees provide adequate coverage of costs of services. User charges may be classified as “full cost
recovery,” “partial cost recovery,” and “minimal cost recovery,” based on Town Council policy.
G. Impact Fees
Impact fees are currently imposed for water, wastewater, and roadway in accordance with
applicable Town ordinances and state law. Impact fees will be re-evaluated at least every five
years, as required by law.
H. Utility Rates
The Town will review utility rates periodically, and if necessary, adopt new rates that will
generate revenues required to fully cover operating expensesditures, meet the legal restrictions
of all applicable bond covenants, and provide for an adequate level of working capital needs and
debt service requirements. This policy does not preclude drawing down cash balance to finance
current operations. However, it is best that any extra cash balance be used instead to finance
capital projects.
I. Interest Income
Interest earned from investment of available cash resources, whether pooled or not, will be
distributed to the funds in accordance with the average monthly cash balances.
J. Revenue Monitoring
Revenues actually received will be regularly compared to budgeted revenues and variances will
be investigated. This process will be summarized in the appropriate budget report.
SECTION 17.08: EXPENDITURE CONTROL
A. Appropriations
The level of budgetary controls is explained in Section 17.05.C. Budgetary Control. When budget
amendments between departments and/or funds are necessary, Town Council must approve
these. Budget appropriation amendments at lower levels of control shall be made in accordance
with the applicable administrative procedures.
B. Purchasing
All purchases shall be in accordance with the Town’s Purchasing Policy.
Chapter 17, Page 8 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
C. Lapse of Appropriations
Every appropriation, except an appropriation for capital expenditures, shall lapse at the close of
the fiscal year to the extent that it has not been expended or encumbered. An appropriation for
a capital expenditure shall continue in force until the purpose for which it was made has been
accomplished or abandoned. The purchase of any such appropriation shall be deemed
abandoned if three (3) years pass without any disbursement form or encumbrance of the
appropriation. Any funds not expended, disbursed or encumbered shall be deemed excess funds.
SECTION 17.09: ASSET MANAGEMENT
A. Investments
The Town’s investment practices will be conducted in accordance with the Public Funds
Investment Act (PFIA) and the Town Council approved Investment Policy and Strategy.
B. Cash Management
The Town’s cash flow will be managed to maximize the cash available to invest.
C. Investment Performance
A quarterly report on investment performance will be provided by the Finance Director for
presentation to the Town Council.
D. Fixed Assets and Inventory
These assets will be reasonably safeguarded and properly accounted for, and prudently insured.
SECTION 17.10: FINANCIAL CONDITION AND RESERVES
A. No Operating Deficits
Current expenditures will be paid with current revenues and prior year surplus. Deferrals,
short-term loans, or one-time resources will be avoided as budget balance techniques. Reserves
will be used only for emergencies or non-recurring expenditures.
B. Operating Reserves
In accordance with GASB-54, it is the policy of the Town to classify fund balances as Non-
spendable, Restricted, Committed, Assigned, or Unassigned and develop policy for establishment
and activity of each classification. See Fund Balance Policy that defines such categories.
Chapter 17, Page 9 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
C. Minimum Unassigned Fund Balance
It is the goal of the Town to achieve and maintain an unassigned fund balance in the General
Fund equal to five percent (5%) of budgeted expenditures for unanticipated expenditures,
unforeseen revenue fluctuations, or other adverse circumstances. This amount is in addition to
the twenty percent (20%) restricted fund balance amount required by the Town Charter.
D. Risk Management Program
The Town will aggressively pursue every opportunity to provide for the public’s and Town
employees’ safety and to manage its risks.
E. Loss Financing
All reasonable options will be investigated to finance losses. Such options may include risk
transfer, insurance, and risk retention.
F. Enterprise Fund Self-Sufficiency
The Town’s enterprise funds’ resources will be sufficient to fund operating and capital
expenditures. The enterprise funds will pay (where applicable) their fair share of general and
administrative expenses in lieu of property taxes and/or franchise fees. If an enterprise fund is
temporarily unable to pay all expenses, then the Town Council may waive general and
administrative expenses in lieu of property taxes and/or franchise fees until the fund is able to
pay them.
G. Special Purpose Districts Cash Reserves
The Town has two Special Purpose Districts: Crime Control and Prevention Special Purpose
District; and Fire Control, Prevention and Emergency Medical Services Special Purpose District.
It is the desire of the Town to maintain a cash reserve balance equal to twenty-five thousand
dollars in each of the Special Purpose Districts beginning in fiscal year 20-21 and future fiscal
years.
H. Contingent Budget Measures
Economic downturns including recessions are inevitable even in a rapidly growing
community. The dynamic economy of both Texas and Dallas Fort Worth metroplex and
Prosper’s location in the northern growth path make it likely that even recessions will be more
a “pause” rather than a “stop”. However, the town must ensure that a structurally balanced
Chapter 17, Page 10 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
budget is maintained even if debt issuance and staffing additions must be paused until the
economy recovers.
SECTION 17.11: DEBT MANAGEMENT
A. General
The Town’s borrowing practices will be conducted in accordance with the Town Council
approved Debt Management and Debt Post Issuance Policies.
B. Self-Supporting Debt
When appropriate, self-supporting revenues will pay debt services in lieu of tax revenues.
C. Analysis of Financing Alternatives
The Town will explore all financing alternatives in addition to long-term debt including leasing,
grants and other aid, developer contributions, impact fees, and use of reserves.
D. Voter Authorization
The Town shall obtain voter authorization before issuing General Obligation Bonds as required
by law. In general, voter authorization is not required for the issuance of Revenue Bonds and
Certificates of Obligation.
SECTION 17.12: STAFFING AND TRAINING
A. Adequate Staffing
Staffing levels will be adequate for the fiscal functions of the Town to function effectively.
Comparison of workload and staffing levels of comparison cities will be explored before adding
staff.
B. Training
The Town will support the continuing education efforts of all financial staff including the
investment in time and materials for maintaining a current perspective concerning financial
issues. Staff will be held accountable for communicating, teaching, and sharing with other staff
members all information and training materials acquired from seminars, conferences, and
related education efforts.
C. Awards, Credentials
Chapter 17, Page 11 Approved October 18, 2017
Revised & Approved October 7, 2020
Revised & Approved October 1, 2021
Revised & Approved June xx, 2022
The Town will support efforts and involvements which result in meeting standards and receiving
exemplary recitations on behalf of any of the Town’s fiscal policies, practices, processes,
products, and personnel. Staff certifications may include Certified Public Accountant, Certified
Management Accountant, Certified Internal Auditor, Certified Payroll Professional, Certified
Government Finance Officer, Professional Public Buyer, Certified Cash Manager, PFIA
investment training, and others as approved by the Town Manager upon recommendation of the
Finance Director.
SECTION 17.13: GRANT MANAGEMENT
A. General
The Town’s grant management practices will be conducted in accordance with the Town’s
Grant Management Policy.
The Town of Prosper Financial Management Policy was approved on the 1st of October, 2021.
Harlan Jefferson, Town Manager