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					                        Debt Management Policy



                GROWING A NEW FINANCIAL FUTURE

                       BUTLER COUNTY, OHIO

Debt Affordability                                Capital Management Plan

                     Allocation of Increased Revenues




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                                                 PURPOSE STATEMENT

The purpose of the Debt Management Policy is to apply              The Capital Management Plan section recommends the
common sense business approaches to foster critical changes        establishment of a Debt Service Fund to service current debt
in public fiscal policy. These recommendations primarily           and funding options for future capital improvement projects. It
focus on three areas:                                              also recommends the creation of an ad hoc committee to create
                                                                   a list of capital assets of facilities and establish a one and five
              Debt Affordability                                  year capital maintenance plan.
              Capital Management Plan                             The Increased Revenue Allocation section establishes a policy
              Increased Revenue Allocation                        for the distribution of revenues when economic conditions
                                                                   improve. This policy provides for the realization of maximum
                                                                   reserve and debt service fund levels, while prioritizing the
The Debt Affordability section provides parameters for the use     payment of higher interest bearing debt.
and restoration of reserves. It also establishes a communicative
measurement for analyzing debt and establishing General Fund
debt capacity level.




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                                                DEBT MANAGEMENT POLICY
    Benefits of a Debt Management Policy:
     Creates a multiyear financial plan which requires consideration of affordability of actions or plans prior to adoption into annual
     budget. (Standard & Poor’s Top 10 Management Characteristics of Highly Rated Credits In U.S. Public Finance)

     Creates a debt affordability model to evaluate future debt profile. (Standard & Poor’s Top 10 Management Characteristics of Highly Rated
     Credits In U.S. Public Finance)

     Provides guidance to decision makers and improves the quality of financial decisions by promoting consistency and continuity
     in financial planning and decision making.

     Demonstrates commitment to long-term planning for government liabilities. (Standard & Poor’s Top 10 Management Characteristics of
     Highly Rated Credits In U.S. Public Finance)

    Adherence to Debt Management Policy:
     Ensures regular economic and revenue reviews to identify shortfalls early. (Standard & Poor’s Top 10 Management Characteristics of
     Highly Rated Credits In U.S. Public Finance)

         Helps to ensure that government maintains a sound debt position.

         Demonstrates to capital markets government is well managed.

         Demonstrates the ability to pay obligations in a timely manner. (Government Finance Officers Association)




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                                                        DEBT AFFORDABILITY

    Benefits of Debt Affordability Policy:
     Issuance of debt commits current and future government revenues. Debt commitments may limit government’s flexibility to
     respond to declining revenues and changing service priorities. Establishing a policy on the maximum amount of debt and debt
     service enhances capital budgeting and related policy decisions on debt issuance. (Standard & Poor’s Top 10 Management Characteristics
     of Highly Rated Credits In U.S. Public Finance)

    Adherence to Debt Affordability Plan:
     To reduce cost of government and ensure debt is issued and managed in a fiscally sound manner. Protects Butler County’s
     financial condition and credit rating.

    Stabilization of General Fund Reserves
     A formalized financial reserve policy is a consistent feature of highly rated credits. (Standard & Poor’s Top 10 Management
     Characteristics of Highly Rated Credits In U.S. Public Finance)

              General Fund Reserves:
               In furtherance of Butler County’s financial well-being; to maintain an adequate cash flow, preserve service delivery in
               economic recessions, and preserve Butler County’s current Aa1 Moody rating, the Commissioners will strive to annually
               realize maximum levels of reserves. To support those efforts each January the OMB will establish the minimum and
               maximum level of reserves.

               Minimum level of reserves:
               Minimum level of reserves is 10% of the following year’s General Fund budget. (Established OMB 2010)

               Maximum level of reserves:
                15% to 20% of the following year’s General Fund budget. (Established OMB 2010)

                  Emergency Reserves: Reserves above the minimum level are considered expendable as emergency reserves.
                   Emergency reserves are accessible when as the result of an emergency or an unexpected reduction in revenues
                   would result in a negative General Fund ending balance. Once expended restoration of emergency reserves must
                   begin in the fiscal year following their use at a rate of 20% of the reserves used with the goal of full restoration
                   within 5 years.




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 Debt Capacity:
 Debt Analysis:
  To educate, assure, and communicate to the people of Butler County that their tax dollars are spent in a transparent and accountable
  manner, beginning in January 2011 the Butler County Commissioners through the Office of Management and Budget shall publish
  for taxpayer review a Debt Analysis utilizing the following three models:
          1. Debt measured against the population on a per capita;
          2. Per-capita debt measured as a percent of the Butler County’s per capita personal income; and
          3. General Fund debt service as a percent of General Fund revenues.
          4. County to County comparison, based on size*(See page 6)

 Debt Capacity:
  General Fund debt service** as a percentage of General Fund revenues is 11.4%. Butler County strives to maintain a level below
  a warning of 11.4% and above any percentage considered as a danger point.

   * Based on Comprehensive Annual Financial Report (CAFR).
   **The term General Fund debt service does not include revenue debt service or sales tax specific debt service.




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                               2008 Revenue and Expenditure Comparison
               Butler County   Lake County   Mahoning   Lorain County   *Stark County   Lucas County




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                                                        County
Revenue           $ 93,090,437.00     $ 54,665,745.00   $ 66,191,532.00      $ 52,817,029.00    $ 57,969,132.00    $ 145,155,243.00
Expenditures      $ 107,709,626.00    $ 53,500,109.00   $ 62,840,379.00      $ 55,755,439.00    $ 63,450,983.00    $ 129,560,712.00

Excess
Revenue
Over/(Under)
Expenditures      $ (14,619,189.00)   $ 1,165,636.00    $   3,351,153.00     $ (2,938,410.00)   $ (5,481,851.00)   $ 15,594,531.00


Excess
Revenue
Over/(Under)
Expenditures
as a Percent of
Revenue                     -0.86%              1.02%               1.05%             -0.95%             -0.92%              1.12%
Residents                 360,765            234,030             237,978            304,373            379,214             440,456
Revenue per
Resident**        $         258.04    $       233.58    $         278.14     $        173.53    $        152.87    $        329.56

Expenditures
per Resident
**                $         298.56    $       228.60    $         264.06     $        183.18    $        167.32    $        294.15


* Stark County- The revenue, expenditures, and excess revenue over/(under) expenditures were taken from
2007 C.A.F.R. as the 2008 C.A.F.R. has not yet been released due to a pending investigation.
** The amounts have been rounded.
                                          CAPITAL MANAGEMENT PLAN




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   Benefits of a Capital Plan:
    A formalized capital improvement plan assists in the assessment of future infrastructure requirements. (Standard & Poor’s Top 10
     Management Characteristics of Highly Rated Credits In U.S. Public Finance)

    Establishing a pay-as-you-go financing strategy is a sound financing policy. (Standard & Poor’s Top 10 Management Characteristics of
     Highly Rated Credits In U.S. Public Finance)

    Debt Service Fund – Servicing Current Capital Improvement General Fund Debt
     To promote transparency and maintain a balanced General Fund budget, beginning July 2011 the Commissioners will dedicate a
     percentage of General Fund revenues into the Debt Service Fund. (The Advisory Committee based upon a report of the Auditor
     to date projected the percentage to be 11.26% to 11.76% for the next two years.) In July 2012, the Debt Service Fund shall pay
     all General Fund debt obligations.

    Capital Improvement Projects – Financing Future Capital Improvement Projects
     Recognizing the long useful life of capital improvements the OMB will provide the Commissioners with funding alternatives
     prior to presentation or finalization of any capital improvement project or plan.

     The Office of Management and Budget will consider, in turn, the following capital improvement funding options:
      1. Grants;
      2. Developer contributions;
      3. Revenues dedicated for the capital improvement project;
      4. Funds restricted for capital improvement;
      5. Revenue streams that permit pay-as-you-go funding;
      6. Fund debt service.

     In August 2011, the Commissioners will create a policy that no General Fund debt will be issued for capital improvement project
     until the obligation is placed within the Debt Service Fund budget and a percentage of General Fund revenues are allocated into
     the Debt Service Fund to pay for the project.




 Capital Maintenance Plan




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  To preserve and protect public property and taxpayer investment and maintain safe cost effective buildings, which provide an
  effective environment for workers and the taxpayers, beginning in January 2011, the Commissioners will create an ad hoc Capital
  Maintenance Committee, which will directly report to the Commissioners every October and as needed throughout the year. The
  purpose of the Committee is to create a one and five year comprehensive capital maintenance plan.

  The Committee shall be chaired by a designee of the Commissioners and shall include a department head from every department
  with its own physical plant and other department heads as desired in a shared physical plant. The one year plan will include a list of
  capital assets of facilities and a schedule of inspection and routine maintenance for every County building. The chair of the ad hoc
  Capital Maintenance Committee shall seek professional volunteers willing to dedicate their time and expertise to assist the
  Committee in completing the one and five year comprehensive plan.

  Beginning January 2012, the ad hoc Capital Maintenance Committee will begin to create a five year schedule of replacement and
  renewal for every County building and major operating systems within each building. The five year plan shall consider stated
  objectives of the one year comprehensive capital improvement maintenance plan, project the useful life of operating systems within
  all County buildings, and estimate replacement costs, and analyze the effective use of the properties, including leased spaces.

   Each report shall bifurcate expenses between two categories; expenses with a useful life of less than one year and expenses with a
   useful life of more than one year. Routine regular maintenance is an expense with a useful life of less than one year. Capitalized
   maintenance is an expense with a useful life of more than one year.

   Routine regular maintenance shall be paid through a line item in the annual General Fund budget. Each year the OMB shall
   estimate the cost of routine regular maintenance based upon the prior year’s routine regular maintenance expenditures.

   Capitalized maintenance shall be paid through the Capital Improvement Fund. Beginning January 2011, the Commissioners will
   budget .5% percent of General Fund Revenues to Capital Improvement Fund. Dedicated revenues shall continue until the restricted
   Capital Improvement Fund achieves a maximum level of $5 million. Once expended restoration of Capital Improvement Fund
   must begin in the fiscal year following their use at a rate of 20% of the Capital Improvement Fund used with the goal of full
   restoration within 5 years.

  Absent extraordinary circumstances no County debt shall issue for maintenance or repair of a capital improvement.


                                    INCREASED REVENUE ALLOCATION



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 Benefits of Increased Revenue Allocation Policy:
  A formalized increased revenue allocation policy ensures all aspects of Butler County’s Debt Management Policy are
  realized.

   Provides guidance to decision makers and improves the quality of financial decisions by promoting consistency and
   continuity in financial planning and decision making.

   Assists in creating a prioritized spending plan and establishes contingency plans for operating budgets. (Standard & Poor’s Top 10
   Management Characteristics of Highly Rated Credits In U.S. Public Finance)

 Adherence to Increased Revenue Allocation Plan:
  Ensures the financial future of Butler County; and

   Protects taxpayer investment in capital investments and ensures continuity of services.

 Increased Revenue Allocation Policy:
  At the end of each fiscal year, the OMB will determine whether revenues are increasing. As General Fund revenues increase it is
  the resolve of the Commissioners to distribute the increased revenues amongst a series of accounts to ensure future financial
  stability and protect taxpayer investments.

  This policy takes into consideration the advance payment of certain debts, as permissible under law. When revenues begin to
  increase the increased revenues will be distributed: 20% to General Fund Reserves until the maximum threshold of 20% is realized;
  20% to the Capital Improvement Fund until the maximum threshold of $5 million is realized; 40% to the Debt Service Fund; and
  20% to restore operating budgets.




   Increased Revenue Allocation Policy – continued -




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   In direct proportion to the amount of increased revenues realized in the Debt Service Fund the Commissioners will authorize
   payment of General Fund debt obligations which permit advance payment, commencing with the highest interest bearing short
   term notes, the Fiber Optic Highway debt until the notes are retired. Thereafter in direct proportion to the amount of increased
   revenues realized in the Debt Service Fund the Commissioners will authorize payment of General Fund debt obligations which
   permit advance payment to the Old Jail Rehabilitation project.

   Upon retirement of the Fiber Optic Highway and the Old Jail Rehabilitation short term notes, the Commissioners will distribute
   increased revenues: 20% to General Fund Reserves until the maximum threshold of 20% is realized; 20% to the Capital
   Improvement Fund until the maximum threshold of $5 million is realized; 30% to the Debt Service Fund; and 30% to restore
   operating budgets. It is the resolve of the Commissioners to continue to use increased revenues to pay General Fund obligations
   which permit advance payment without penalty until all short term notes are retired or maximum debt capacity is achieved or
   advantageous financial markets dictate conversion of short term notes into long term obligations.

   Thereafter, the Commissioners will reassess the distribution of increased revenues.




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