SCHOOL BOND How to make your Districts Facilities Plan a OVERVIEW Reality October 21, 2016 PARTICIPANTS Mike Waterman, Director of Business Services Bozeman Public Schools Lora Tauck, Business Manager Ekalaka Public Schools Bridget Ekstrom, Senior Vice President, Public Finance D.A. Davidson & Co. Dan Semmens, Bond Counsel Dorsey & Whitney LLP Denise Williams, Executive Director MASBO 2 BUILDING BLOCKS FOR A SUCCESSFUL PROJECT AND FINANCING V. Post-Financing Phase Ph Co ases mp of let Pro ion je ct IV. Construction Phase
3 III. Financing Phase II. Election Phase I. Capital Improvement Planning Phase KEYS TO SUCCESS AND PITFALLS TO AVOID ~ M I K E WAT E R M A N , BO Z E M A N P U B L I C S C H O O L S ~ Keys You gotta spend money to make money Let those with strong backs do the heavy lifting Under promise, over deliver 4 Mike Waterman | (406) 522-6097 | [email protected] KEYS TO SUCCESS AND PITFALLS TO AVOID ~ LO RA TA U C K , E KA L A KA K- 1 2 S C H O O L D I S T R I C T ~ Keys A School Board that is unified on the bond issue If the entire board cant support the issue, it is difficult for a community to support it! Positive downstream conditioning in the Community! Necessary to pass the bond, necessary to stifle the rumors before, during and after construction Identify your supporters and let them help you Prepare for being unprepared You dont know what you dont know Call on those who do! Pitfalls
Positive downstream conditioning is positively exhausting Unforeseen events drain your brain & your contingency fund 5 Lora Tauck | (406) 775-8602 | [email protected] KEYS TO SUCCESS AND PITFALLS TO AVOID ~ DA N S E M M E N S , D O R S E Y & W H I T N E Y L L P ~ Keys Allow a lot of time Focus on what the District needs now or in the short term If you cant say it simply, maybe you shouldnt say it at all Sample y r a t n e an Elem estion m e z o B Qu 6 Ba l l o t Ekalaka Elem entary Samp le Ballot Question Dan Semmens | (406) 721-6025 | [email protected]
KEYS TO SUCCESS AND PITFALLS TO AVOID ~ B R I D G E T E K S T R O M , D . A. DAV I D S O N & C O. ~ Keys Strive for a favorable union Marry the Districts (i) needs/wants with (ii) taxpayer impact estimates Know the numbers but keep communications simple Understand formulas for taxes and how the bonds impact the Districts taxpayers Clean house in advance Work on items now that will help your chance of passing the bond and also obtaining a favorable rating Pitfalls Plan for a potential project budget gap Retain Project/Budget Flexibility. Use conservative estimates Dont procrastinate 7 Start planning at least 6 months before you call an election and possibly longer (see Clean House above ) Bridget Ekstrom | (406) 556-6965 | [email protected] SAMPLE SCHOOL DEBT LIMITATION Manhattan School Districts General Obligation Bonds GREATER OF CALCULATION 1 OR 2:
Elementary High School (1) CALCULATION 1: 100% of Taxable Valuation $7,152,270 $11,135,219 (2) CALCULATION 2: 2016/17 Statewide Average Taxable Valuation Per ANB X School Districts ANB for 2016/17 $33,670 427 $82,390 227 $14,377,090 $18,702,530 1.00 1.00 $14,377,090 $18,702,530 $1,884,529 $604,948 $12,492,561
$18,097,582 2016 Bond Election $7,300,000 $12,400,000 Net Debt Capacity Remaining $5,192,561 $5,697,582 Total X Debt Limit Rate of 100% Maximum Debt Capacity DEBT CAPACITY USING CALCULATION 2: Less: Outstanding Loans/Bonds Remaining Debt Capacity 8 Calculation 2 provides the greater debt capacity and is used for Manhattan Schools SAMPLE BOND ISSUE MILL LEVY IMPACT D.A. Davidson & Co. Apr-16
Manhattan Schools MILL LEVY IMPACT ANALYSIS $19,700,000 Bond - 20 Year Bond Terms - - - - - - Estimated Mill Levy Computation: Par Amount: Total Estimated Interest Over Life of Bond (1): Estimated Annual Bond Payment Over 20 Y ears (1): Est State Aid for Debt Service Available for Bonds (2): EQUALS: Estimated Net Annual Debt Service DIVIDED BY : District's FY 2015/16 Mill Value: EQUALS: Estimated Number of Annual Mills Required: Slightly Conservative Interest Rate Range Estimates (+50 over current rates) ELEM (37% cost allocation) Prior HS HS (63% cost Bond (coming allocation) $7,300,000 $12,400,000 $3,467,667 $538,384 $21,014 $517,370 $6,470.358 79.96 $5,890,230 $914,512
$20,371 $894,141 $10,245.328 87.27 offtax rolls) $292,900 $20,371 $272,529 $10,245.328 26.60 - - - - - - NET HS COMBINED INCREASE ELEM/HS $19,700,000 $621,612 $0 $621,612 $10,245.328 60.67 $9,357,897 $1,159,996 $21,014 $1,138,982 140.63 Estimated Tax Increase for Individual RESIDENTIAL TAXPAYER: 2015/16 Tax Year 2015/16 Tax Year "MARKET VALUE" of "TAXABLE VALUE" of Residential Property(3) Residential Property(3) Estimated
$215.89 $117.82 $235.64 $35.91 $71.82 $81.91 $163.82 $189.85 $379.71 $15.82 $31.64 $183,628 (Town of Manhattan Median Home) $2,479 $198.22 $216.35 $65.94 $150.41 $348.63 $29.05 $242,390 (Gallatin County Me iannha Hom
e) $183,628 (Town ofdMa tta n Median Home) $3,272 $2,479 $261.63 $285.56 $87.04 $198.52 $460.15 $0.00 $38.35 $0.00 * All property owners (including farming and ranching operations, commercial businesses, home owners etc) should use the following formula to calculate the estimated tax impact of the Bond issue. " TaxableValue" X Mills/1,000 =Estimated Annual Tax Impact of theBonds (1) Based on estimated true interest cost rates with a conservative sample rate for 20-year bank qualified bonds (BQ) of 3.19% with original issue premium generated for the Project for costs. (2) T he estimated State Aid for Debt Service figure above has been calcuated using current variables for Manhattan School Districts and are subject to change annually. (3) Based upon Class 4 residential property. T he "Market Valuation" for tax purposes will be different than the valuation of most residential real property for resale purposes. T o better calculate the estimated tax impact of the bond issue, property owners should look up their exact taxable value as shown on their personal tax statement and use the formula shown above in grey. According to the 2014 reappraisal by the State Department of Revenue, the median home in Manhattan was $183,628 and the median home in Gallatin County was $242,390. 9 (4) T ax Impacts are based on property tax legislation adopted at the 2015 Legislative Session, which implemented the 2014 Department of Revenue reappraisal effective for the 2015/16 and 2016/17 tax years. T ax impact information varies every year depending on such factors as District Mill Value, State reimbursement (if any), method of calculating taxable valuation and actual debt service.
SAMPLE STATE AID FOR DEBT SERVICE 10 This estimate remains preliminary until the bond election is passed and the debt service budget is prepared. The districts share of the bond payment is the ratio of the district mill value per ANB to the Statewide mill value per ANB. Districts whose mill value per ANB exceeds the statewide mill value do not qualify for Debt Service GTB state funding. The Pro-rate % is the percentage of state funding provided in the previous year. Source: Montana Office of Public Instruction TRENDS IN STATE AID FOR DEBT SERVICE 11 MUNICIPAL BOND MARKET UPDATE AAA Municipal Trends for 20-year Maturity, 10-Year Maturity, 1-Year Maturity 2.16% 1.51% 0.78% 12 Source: Thomson Reuters. SAMPLE MUNICIPAL BOND MARKET RATES BASED ON RATING Municipal Market Data Benchmark Information September "AAA" 30, INSURED2016 "AA" "A" "BAA" 1 2
COMMISSION Summary of Notable School Facility Developments 14 Denise Williams | (406) 461-3659 | [email protected] SCHOOL FUNDING INTERIM COMMISSION School Facilities Findings Identified 3 tiers of facility needs: Tier 1: Operations and regular maintenance (O&M) State should help Tier 2: Major maintenance fund these tiers Tier 3: New construction State support of Quality Schools Facility Grant Program (QSFGP) has been inconsistent Revenue stream for Debt Service GTB has decreased, leading to reduced reimbursement levels Local effort in facilities (a.k.a. skin in the game) helps ensure prudent planning and ongoing maintenance Capital improvements planning is more effective when: 15 districts are provided greater budgetary flexibility state support for school facilities is consistent state programs are flexible districts have a long-term facilities plan based on an updated facility condition inventory SCHOOL FUNDING INTERIM
COMMISSION School Facilities - Recommendations State policy needs to encourage local effort and long-range planning in managing and maintaining school district facilities 1. LC ICAP minor changes to the INTERCAP loan program 2. LC EFBT allow transfers from GF to Building Reserve 3. LC GRT1 replacing QSFGP with formula facility grant program requiring updated facility inventory and plan and local match 16 4. LC GRT2 revising QSFGP to require updated facility inventory and plan and local match SCHOOL FUNDING INTERIM COMMISSION 1. LC ICAP minor changes to the INTERCAP loan program Can use to finance: Construction of buildings used primarily for the storage and maintenance of vehicles and equipment Cost of nonpermanent modular classrooms necessary for student instruction Allows an approved building reserve levy to be used to repay a loan up to 15 years only for projects authorized by voters Allows repayment from an applicable budgeted fund of the district 17 SCHOOL FUNDING INTERIM COMMISSION 2. LC EFBT allow transfers from General Fund to Building Reserve Fund
Similar to transfers to Compensated Absences Fund For major maintenance projects 18 Roofing systems Heating, a/c and ventilation systems Energy-efficient window and door systems and insulation Plumbing systems Electrical and lighting systems Information technology infrastructure, including internet SCHOOL FUNDING INTERIM COMMISSION 3. LC GRT1 replacing QSFGP with formula facility grant program Eliminate School Facility and Technology Account Deposit riverbed and timber revenues in Guarantee Account (about $5 million) Guarantee Account pays $1 million technology payment to schools Guarantee Account sends the greater of $10 million of 20% of interest and income to new Facility Grant Program account All districts get credit that flows with local planning and effort Credit sits in a separate (new) account until claimed by district Debt Service GTB is paid from the State General Fund 19 SCHOOL FUNDING INTERIM
COMMISSION 4. LC GRT2 revising QSFGP to require updated facility inventory and plan and local match Eliminates Facility and Technology Account Deposit riverbed and timber revenues in Guarantee Account (about $5 million) Guarantee Account pays $1 million technology payment to schools Creates School Debt Service Assistance Account Funded with lottery net revenue (about $12 million) Pays Debt Service GTB (about $10 million) Creates Major Maintenance Grant Program Account Intended - Overflow from SDSAA (about $2 million - 95total mills revenue funding is $10 from:captured from TIFDs (About $2 20 million) million) - Workers comp dividends (amount unknown) - Transfer from Guarantee Account to bring to $10 million SCHOOL FUNDING INTERIM COMMISSION 4. LC GRT2
(continued) ESTIMATED IMPACT ON STATE GENERAL FUND Gains/ (Losses) Savings Loss of lottery net revenue Eliminates NRD payment Repeals STEM scholarship program Captured 95 mills from TIFDs Additional needed to replace lost revenue to Guarantee Account 21 $ 12 million $ 5 million $ 0.4 million $ 2 - $3 million $ 2 million
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