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Debt

Office of Origin: Board of Trustees
Date Adopted: 03-23-11
Last Date Modified & Approved:

Policy Statement:

In support of its mission and strategic plan, the College will maintain a Debt Policy. The College’s use of debt plays a critical role in ensuring adequate funding for the capital plan as well as providing a cost-effective source of funding for other purposes. By linking the objectives of its Debt Policy to its strategic objectives, the College ultimately increases the likelihood of achieving its mission. The Debt Policy is intended to be a “living” document that will evolve over time to meet the changing needs of the College.

Scope
The Debt Policy covers all forms of debt including long-term, short-term, fixed-rate, and variable-rate debt. It also covers other forms of financing including both on-balance sheet and off-balance sheet structures, such as leases and other structured products used with the intent of funding capital projects.

Objectives
The objectives of this policy are to:

A. Outline the College’s philosophy on debt

B. Establish a control framework for approving and managing debt

C. Define reporting guidelines

D. Establish debt management guidelines

The Debt Policy formalizes the link between the College’s Strategic Plan and the issuance of debt. Debt is a limited resource that must be managed strategically in order to best support College priorities.

The policy establishes a control framework to ensure that appropriate discipline is in place regarding capital rationing, reporting requirements, debt portfolio composition, debt servicing, and debt authorization. It establishes guidelines to ensure that existing and proposed debt issues are consistent with financial resources to maintain an optimal amount of leverage, a strong financial profile, and a strategically optimal credit rating. This policy also requires that all debt issuances are in compliance to State of Michigan and Federal Government laws and regulations and that appropriate procedures are developed to ensure compliance.

Under this policy, debt is being managed to achieve the following goals:

A. Maintain access to financial markets: capital, money, and bank markets;

B. Manage the College’s credit rating to meet its strategic objectives while maintaining the highest acceptable creditworthiness and most favorable relative cost of capital and borrowing terms;

C. Optimize the College’s debt mix (i.e., short-term and long-term, fixed-rate and floatingrate, traditional and synthetic) for the College’s debt portfolio;

D. Manage the structure and maturity profile of debt to meet liquidity objectives and make funds available to support future capital projects and strategic initiatives; and

E. Coordinate debt management decisions with asset management decisions to optimize overall funding and portfolio management strategies.

F. Ensure that all debt issuances are in compliance with all Federal and State Laws and Regulations.

The College may use debt to accomplish critical priorities by more prudently using debt financing to accelerate the initiation or completion of certain projects, where appropriate. As part of its review of each project, the College evaluates all funding sources to determine the optimal funding structure to achieve the lowest cost of capital.

The Vice President of Financial Services is responsible for implementing this policy and the related procedures and for all debt financing activities of the College. The policy and any subsequent, material changes to the policy will be approved by the College’s Board of Trustees. The approved policy provides the framework under which debt management decisions are made.

Responsibility: Vice President, Financial Services

References: NA