Board Policy 3120 - Debt Management

I. Policy Statement

1. The Prince George’s County Board of Education (Board) recognizes that the foundation of any well-managed debt program is a comprehensive debt policy. The Board recognizes a binding commitment to full and timely repayment of all debt as a necessary element to ensure that Prince George’s County Public Schools (PGCPS) maintains a sound debt position.
2. The Board is committed to making debt decisions based on the result of deliberate consideration of all relevant factors involved.

II. Purpose

The purpose of this policy is to establish guidelines governing the issuance, management and evaluation of and reporting of all debt.

III. Definitions

Within the context of this policy, the following definitions apply.

1. Capital Lease Debt – A capital lease is treated as if the lessee has purchased the asset using debt financing.
2. Cost minimization – The process or strategy of reducing expenses and achieving efficiency in the use of resources within an organization.
3. Debt coverage ratio test – A measure of the cash flow available to pay current debt obligations.
4. Debt term restriction – A clause in a legally binding agreement that seeks to protect the current lender by restricting the amount of additional debt that the borrower might incur.
5. Lease/purchase financing – A form of alternative financing which allows the rental of an item/property for a specified period of time with the promise to purchase the item/property at the end of the lease term.

IV. Standards

1. The Superintendent/designee shall be responsible for providing the following information regarding lease/purchase financing for review and approval by the Board’s Operations, Budget, and Fiscal Affairs (OBFA) committee:
   1. Debt term restrictions
   2. Available finding to support the acquisition of lease/purchase financing
   3. Alignment with the PGCPS strategic plan
   4. Cost minimization
   5. Risk management; and
   6. Acceptable ranges for debt management.
2. Acceptable ranges for debt management consist of the following:
   1. Financing or capital lease debt shall be considered to finance items which include but are not limited to equipment, buses and textbooks, not to exceed 5% of the total unrestricted budget.
   2. Individual revenue streams considered for proposed debt service must meet a 2.0% debt coverage ratio test.
   3. Exceptions to these ranges may be granted by the Board where alternative funding sources are identified and determined appropriate.
3. Upon review and approval of the Superintendent’s/designee’s proposal regarding lease/purchase financing, the OBFA will make recommendations to the Board regarding the issuance of debt obligations and the management of outstanding debt.
4. The Superintendent/designee shall provide to the Board, at a minimum, the following information:
   1. Information about the solicitation to financial institutions, including responses received and the financial institution that provided the best overall response and the lowest interest cost over the term of the financing.
   2. The maximum principal amount of borrowing.
   3. The maximum term of the debt.
   4. The maximum interest rate to be borne by the debt.
   5.  A schedule of debt service payments for the life of the debt.
5. All debt shall be authorized by a Resolution of the Board to issue the requested debt.
6. The Superintendent/designee shall provide a quarterly report to the Board on the status of debt obligations, including a list of projected needs, a comparison of revenue projections sufficient to pay for the debt service and the balance.

V. Implementation Responsibilities

The Superintendent is directed to develop an administrative procedure to implement this policy.

VI. References

1. Legal
2. Other Board Policies
   Board Policy 3130 – Budgets
3. Superintendent’s Administrative Procedures
4. Other

History

Policy Adopted 6/1/06

Policy Amended 6/7/07

Policy Amended 6/26/25

Documents

• Board Policy 3120 - Debt Management.pdf