Capital Debt Affordability Committee Treasurer Nancy K. Kopp, Chair

Louis L. Goldstein Treasury Building

80 Calvert Street, Assembly Room

Annapolis, MD 21401

Agenda

September 7, 2016 at 2:00 PM

1) Treasurer’s Opening Comments

2) 2016 Legislative Session General Assembly Actions Department of Legislative Services: Patrick Frank, Manager – 2016 Legislative Session

3) Review of the Size and Condition of Tax Supported Debt: Summary of fiscal year 2016 bond issuances Amount issued in prior five fiscal years Amount outstanding Amount authorized but unissued Current projections for new issuances Debt service projections Status of refunding potential Status of Affordability Ratios

A) General Obligation Bonds State Treasurer’s Office: Christian Lund, Director of Debt Management

B) Capital Leases State Treasurer’s Office: Christian Lund, Director of Debt Management

C) GARVEE Bonds Maryland Transportation Authority: Alison Williams, Debt Management

Director

D) Maryland Stadium Authority Maryland Stadium Authority: David Raith, Chief Financial Officer

E) Bay Restoration Bonds Maryland Water Quality Financing Administration: Jag Khuman, Director

F) Consolidated Transportation Bonds Maryland Department of Transportation, Office of Finance: David

Fleming, Chief Financial Officer

The next CDAC meeting will be September 15, 2016 at 10:00AM. All materials from today’s presentation can

be found on the STO website: treasurer.state.md.us/reports.aspx

2016 Legislative Session General Assembly Action

2016 Legislative Session General Assembly Highlights Bonds Authorized by the General Assembly • New General Obligation (GO) Bond Debt Authorized Totals $995.0 Million: The

Capital Debt Affordability Committee (CDAC) modified its authorization policies in 2015. Previously, the policy was to increase authorization each year while limiting GO bond debt service to 8% of State revenues and debt outstanding to 4% of revenues. The Department of Budget and Management recommended that debt be limited to $995.0 million beginning in fiscal 2017. Senate Bill 191 (Chapter 27) authorized $995.0 million in net new debt, which includes $1,005.1 million in new authorizations that are offset by reducing prior year authorizations by $10.1 million.

• Exhibit 1 shows how authorizations fluctuated prior to fiscal 2017 as the State managed

its authorizations to provide an increasing capital program within affordability limits.

Exhibit 1

General Obligation Bond Authorizations Fiscal 2011-2020

($ in Millions)

Source: Department of Legislative Services

$0

$200

$400

$600

$800

$1,000

$1,200

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Department of Legislative Services

2

• Qualified Zone Academy Bonds (QZABs): Senate Bill 379 (Chapter 198) authorizes $4.6 million in QZABs. This is the federal allocation that must be issued by the end of calendar 2016. QZABs support the Aging Schools Program.

• New Academic Revenue Debt Authorization Totals $24.5 Million: CDAC recommended that academic revenue bond debt issued in fiscal 2017 be limited to $22.0 million. Committee narrative in the 2014 Joint Chairmen’s Report requested that an additional $2.5 million be authorized to support University System of Maryland (USM) projects in fiscal 2015 and 2016. The full amount was not provided. The Spending Affordability Committee recommended that the limit be increased to $24.5 million. As introduced, Senate Bill 1182 (Chapter 61) authorized $24.5 million in academic revenue bonds. This provides $17.0 million for facilities renewal projects budgeted within the USM system office and $7.5 million to support a new bioengineering building at the University of Maryland, College Park.

Reserve Fund Operating Budget Appropriation Restricts Funds for Capital Projects • An amendment adopted by the General Assembly restricts $80.0 million of the Revenue

Stabilization Account’s (Rainy Day Fund) operating budget appropriation so that the funds can be used to support other programs. This includes $42.3 million for capital projects. The amendment requires that the Administration spend either all or none of these restricted appropriations on these other programs and capital projects.

• If the Administration does not approve the uses specified for these funds, the restricted

funds will be reverted to the General Fund. The Administration has indicated that it plans to fund $30.2 million for three projects in the capital budget introduced during the 2017 legislative session although it is unclear the impact this will have on the overall debt level or fiscal 2018 funding for the programs affected. Exhibit 2 shows the appropriations in the Reserve Fund and the amount of appropriations proposed by the Administration for the 2017 legislative session.

Department of Legislative Services

3

Exhibit 2

Capital Projects Funded with Restricted Rainy Day Fund Appropriations ($ in Thousands)

Project

Amount in Reserve Fund

Amount Proposed in 2017

Board of Public Works Facilities Renewal $15,000 $15,000 Public Safety Communication System 9,190 9,190 Demolition of Baltimore City Correctional Complex 6,581 0 Aging Schools 6,109 0 Agricultural Cost Share Program 6,000 6,000 Total $42,880 $30,190 Source: Fiscal 2017 Operating Budget Bill and Department of Budget and Management

General Obligation Bonds

1

2016 Update on

Maryland General Obligation Bonds

for the

Capital Debt Affordability Committee

September 7, 2016

2

Topics of Discussion

1) FY 2016 and FY 2017 YTD General Obligation (GO) Bond Issuances

2) Amount of GO Bonds Issued in Prior Five Fiscal Years

3) Outstanding GO Debt and Amounts Authorized but Unissued

4) Current Projections for Future Issuances

5) Summary of Projected Debt Activity

6) Status of Refunding Potential

7) Use of Variable Rate Debt, Derivatives and GICS

3

Fiscal Year 2016 GO Bond Issuances

Series Dates of

Sales

($ in millions)

Overall True

Interest Cost

(TIC)

Tax-Exempt:

New Money

Competitive

Tax-Exempt:

New Money

Negotiated

Tax-Exempt:

Refunding

Competitive

Taxable

Taxable:

Federal Tax

Credit

2015 Second

Series A 8/3/15 $450.0

2.78% 2015 Second

Series B 8/3/15 $50.0

2015 QZAB 12/17/15 $4.6 0.00%(a)

2016 First

Series 6/8/16 $1,036.0(b) 2.17%

Fiscal Year 2016 General Obligation Bond Issues Totaled $1.54 Billion

(a) The 2015 Qualified Zone Academy Bonds (QZABs) are special, federally-authorized taxable bonds where the

bondholders receive federal tax credits in lieu of interest payments.

(b) Maryland typically holds two sales each year in February/March and July/August. Because the first sale was

delayed until June, the State combined the two sales to save issuance costs. The State will resume its normal

practice of two sales a year in CY 2017.

4

GO Bonds Issued in Prior Five Fiscal

Years (2012 – 2017 YTD)

$6.16 billion in General Obligation Bonds issued since July 1, 2012:

$5.99 billion in tax-exempt bonds (decrease of $400m from previous 5 years)

• $4.39 billion in tax-exempt, new money bonds (73%)

• $1.60 billion in tax-exempt, refunding bonds (27%)

$169.0 million in taxable bonds (decrease of $91.3m from previous 5 years)

• $140.0 million in taxable bonds (83%)

• $29.0 million in taxable, direct subsidy Qualified Zone Academy

Bonds (QZABs) (17%)

5

Outstanding GO Debt and Amounts

Authorized but Unissued

General obligation debt outstanding:

• $9.465 billion was outstanding as of June 30, 2016

• $557.7 million retired since June 30, 2016

• $8.907 billion outstanding as of September 7, 2016

$1.986 billion of general obligation debt was authorized but unissued as of July 1, 2016 (which includes the FY 2017 authorization amount of $995.0 million).

Current Projections for Future

Issuances

For planning purposes only, the Committee in October 2015 voted 4-1 to

hold authorizations to $995 million annually through FY 2021. The

following authorizations and issuances incorporates that plan:

6

Fiscal Year Authorizations Issuances

2017 $995 $1,036

2018 $995 $1,035

2019 $995 $1,014

2020 $995 $998

2021 $995 $995

Projections as of the 2015 CDAC Report. All figures preliminary and subject to change.

Events Following the October 2015

CDAC Report

Both the Spending Affordability Committee and the Governor’s Proposed Capital

Budget recommended an authorization amount of $995 million for FY 2017.

The net final authorization amount for FY 2016 approved in the 2016 Legislative

Session was $995 million.

7

Fiscal

Year

Debt Outstanding

Start of Year

New

Issues Redeemed

Debt Outstanding

End of Year Debt Service

2017 $8,961 $1,036 $786 $9,211 $1,191

2018 $9,211 $1,035 $836 $9,410 $1,250

2019 $9,410 $1,014 $853 $9,571 $1,311

2020 $9,571 $998 $898 $9,671 $1,339

2021 $9,671 $995 $908 $9,756 $1,358

2022 $9,756 $993 $939 $9,810 $1,396

2023 $9,810 $986 $973 $9,823 $1,435

2024 $9,823 $993 $995 $9,820 $1,460

2025 $9,820 $995 $1,007 $9,808 $1,475

Summary of Projected Debt Activity

Under Governor’s Plan ($995 Annually)

8

Future Issuances assume a 5.0% interest rate. All dollars in millions

All debt matures within 15 years and principal payments begin in year 3. Projections as of 2015 CDAC Report. Preliminary and

subject to change.

The following debt outstanding and debt service is projected for GO

Bonds, using the Governor’s capital plan assumptions for

authorizations.

9

Status of Refunding Potential

An analysis is prepared by the State’s financial advisor before each bond sale to

determine the financial feasibility of a refunding.

Benchmarks are 3% net present value savings and an Opportunity Cost Index

(OCI) which is greater than 70%. The OCI is a measure of the refunding

savings in comparison to projected savings in the future.

There were no refundings in FY 2016.

The State has been aggressive in pursuing refunding savings, resulting in a debt

service savings of $138 million over the past five fiscal years to date.

The State’s financial advisor does not believe a refunding is prudent at this time.

The State will reevaluate refunding potential in advance of the 2017 First Series

sale.

10

Use of Variable Rate Debt, Bond Insurance,

Derivatives, and Guaranteed Investment

Contracts (GICS)

The State is authorized to issue variable interest rate bonds in an amount

no more than 15% of the outstanding general obligation indebtedness.

The State has not issued any variable rate debt as of August 31, 2015

and has not executed any derivatives. The State did not enter into any

new GICs related to the issuance of general obligation bonds in FY

2016.

Because of the State’s strong credit profile, perception in the market and

maintenance of its AAA credit rating, there has been no need for bond

insurance.

Status of Affordability Ratios

11

Status of Affordability Ratios

12

7.6% 7.8% 7.7% 7.5% 7.5% 7.6% 7.7% 7.4% 7.3%

3.5% 3.5% 3.4% 3.4% 3.3% 3.2% 3.1% 3.0% 2.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25

Debt Service as a Percentage of Revenue Debt Outstanding as a Percentage of Personal Income

Projections as of the 2015 CDAC Report. All figures preliminary and subject to change.

Capital Leases

1

An Update of

Tax-Supported Leases

for the

2016 Capital Debt Affordability

Committee

2

Topics of Discussion

Status of

• Capital Lease Guidelines

• Tax-Supported Leases in the CDAC Analysis

• Tax-Supported Energy Leases that are included in the CDAC Analysis

• Tax-Supported Energy Leases that are not included in the CDAC Analysis

• Capital Equipment and Energy Lease Activity in Fiscal Year 2016

• Projections of Future Tax-Supported Lease Financings

Capital Lease Guidelines

• STO on behalf of BPW, determines the size, timing, and method to finance

capital assets for State agencies and manages the lease procurement and

payment of debt service.

• Capital Facility Lease terms range from 15 – 25 years.

• Energy Performance Contract (EPC) Leases for energy conservation

projects at State facilities are limited to a 15 year term and require the

ESCO to post a bond to guarantee the energy savings. – DGS in cooperation with STO monitors whether the guarantee continues to cover debt

service on an annual basis.

– If the guarantee lapses or falls below the annual debt service amount, the lease is included in

tax-supported debt ratios.

• Capital Equipment Lease terms are limited to 3, 5 or 10 years.

• Equipment is required to:

– Have a useful life at least as long as the financing term and the cost

should be a material amount;

– Be re-possessable and easily identifiable.

3

4

Tax-Supported Equipment Leases in the

CDAC Analysis

The following table summarizes the current tax-supported equipment leases included in the 2016 CDAC Affordability Analysis.

*Maryland Stadium Authority reports the Stadium Authority Capital leases in their debt.

FY 2016 Tax-Supported Lease Financings Outstanding

State Agency Equipment and Facilities Financed

Principal Amount

Outstanding as of

6/30/16

Debt Service for FY 2016

State Treasurer’s Office on behalf of

State Agencies

Capital Equipment Leases

Various communications, computers and other

equipment $15,490,121* $4,651,508*

State Treasurer’s Office on behalf of

State Agencies

Energy Performance Projects 1,035,693* 5,046,709*

Department of Transportation Headquarters Office Building 14,580,000 2,790,975

MAA Shuttle Buses - BWI 1,200,000 1,365,950

Department of General Services Hilton Street Facility 455,000 242,981

Prince George’s County Justice Center 16,011,497 1,515,793

Transportation Authority State office parking facility 18,011,000 427,321

Department of Health and Mental

Hygiene

Public Health Lab 158,200,000 13,988,313

Total Tax-Supported Leases $224,978,311 $30,029,550

5

Tax-Supported Energy Leases that are

not included in the CDAC Analysis

The following table summarizes the current energy leases not included in the 2016 CDAC analysis. An energy lease is not included in the

CDAC analysis if it has a surety guaranty, which ensures that debt service will be fully offset by utility savings.

* The listing does not include the Maryland Stadium Authority projects.

Energy lease project * Debt Service for FY 2016

Debt Outstanding

as of 6/30/2016

Maryland School for the Deaf $383,326 $141,559

DPSCS – Hagerstown Prison 255,946 1,582,893

DHMH- Deer’s Head Hospital 205,295 711,332

Spring Grove Hospital 194,960 6,645,325

Department of Agriculture 1,588,714 1,281,854

DGS - Multi-Service Centers 649,125 11,064,072

University of Baltimore 1,999,457 4,789,792

UMCP 21,450 13,835,678

UMCES (Horn Point Lab) 483,258 1,102,576

State Police 56,638 3,547,664

Workforce Technology 263,232 1,196,650

DPSCS – Jessup 1,600,404 7,314,883

Maryland Aviation Administration 1,828,852 13,335,267

State Highway Administration 493,823 4,227,120

Maryland Transit Administration 1,006,742 4,227,120

Total $11,031,220 $75,003,785

6

Tax-Supported Energy Leases

included in the CDAC Analysis

Energy lease project

Debt Service

for FY 2016

Debt Outstanding

as of 6/30/2016

UMS – Baltimore Campus (UMBC) $388,320 -

DGS – District Court 907,233 188,614

DGS - State Office Complex 291,257 441,082

DHMH - Rosewood Center 318,956 186,797

DHMH - Rosewood Center 488,395 151,096

St. Mary's College of Maryland 3,603,398 755,848

Veterans Affairs 169,101 419,145

DHMH – Springfield Hospital 156,934 -

Stadium Authority (Ravens) 716,435 1,489,205

Stadium Authority (Oriole Park) 1,712,050 3,796,248

Maryland Port Administration 42,320 9,035,353

Total $8,794,399 $16,463,390

The following table summarizes the current energy leases included in the 2016 CDAC analysis. An energy lease is included in the CDAC

analysis if it lacks a surety guaranty, meaning debt service may not be offset by utility savings.

7

Capital Equipment and Energy Lease

Activity in Fiscal Year 2016

Equipment • Provides financing of capital equipment to state agencies.

• Capital Equipment lease contracts financed $8.6 million during Fiscal Year 2016.

Summary of the Lease Terms for Equipment

Financed in Fiscal Year 2016

3-yr leases $1,633,399.07 5-yr leases 7,015,907.99

Total $8,649,307.06

Energy • Provides financing for energy conservation projects for State agencies.

• Lease payments are made from the participating agencies’ annual utility appropriations using savings achieved through the implementation of energy performance contracts.

• Capital Energy lease contract financed $5.2 million during Fiscal Year 2016.

Summary of the Lease Terms for Energy Projects

Financed in Fiscal Year 2016

Energy lease $5,282,358

Total $5,282,358

8

Projections of Future Tax-Supported

Lease Financings

in the CDAC Analysis

Types of Financing Period CDAC projections as of June 2016*

Equipment Leases (1) Fiscal Years 2017 – 2019 $20 million for FY 2017, $10 million

for FY 2018, and $5 million in FY

2019.

Energy Leases (2) Fiscal Years 2017 – 2019 $5 million for FY 2017, $16 million

for FY 2018, and $15 million through

FY 2019.

(1) Fiscal Year 2017- 2019 estimates are based on agency surveys.

(2) DGS estimates that approximately $5 million in energy projects will be financed in FY 2017, $16

million will be financed in FY 2018 and $15 million will be financed in FY 2019. All of the projected

Energy Lease financings include projects that will have surety bond guarantees that equal or exceed the

debt service payments through out the term of the lease; therefore, these projects are not included in the

CDAC Affordability Analysis.

* Preliminary, subject to change.

GARVEE Bonds

CDAC September 2016

MARYLAND TRANSPORTATION AUTHORITY

Summary of

Grant Anticipation Revenue Vehicles “GARVEE” Bonds,

Series 2007 & Series 2008 Alison B. Williams Director, Debt Management

1

Grant Anticipation Revenue Vehicles (“GARVEE”) Bonds

Purpose Grant Anticipation Revenue Vehicles (“GARVEE”) Bonds are authorized by State statute

to leverage federal aid to finance the cost of transportation facilities. GARVEEs were used as a part of the funding plan for the Intercounty Connector (“ICC”) project, in addition to various other debt instruments and cash. The use of GARVEEs for the ICC allowed the project to be constructed sooner than otherwise would have been possible and with less reliance on the State’s available funds.

Security

GARVEE bonds are secured by a pledge of federal transportation funds received by the State which approximate $548.64 million annually. In addition, there is a subordinate pledge of certain State Transportation Trust Fund (“TTF”) tax sources. The GARVEEs were also structured to include debt service reserve funds for additional security.

Limitations to Debt Issuance

Statute limits the total amount that can be issued for GARVEEs to an aggregate principal amount of $750.0 million, with a maximum maturity of 12 years. Under State law, the proceeds could only be used for the ICC. Legislation enacted by the 2005 General Assembly specified that GARVEE bonds be considered tax-supported debt. Current Status: Debt Outstanding as of June 30, 2016: $279,780,000 Ratings GARVEEs are currently rated AAA by Standard and Poor’s, Aa1 by Moody’s Investors Service and AA by Fitch Ratings.

Use of Variable Rate Debt, Bond Insurance, Derivatives and Guaranteed Investment Contracts

The GARVEE bonds are fixed rate bonds, and were issued without bond insurance due to the subordinate pledge of the TTF and the availability of debt service reserve funds. The Authority has not used derivatives or guaranteed investment contracts. Trends in GARVEE Debt A total of $750.0 million in GARVEE bonds have been issued by the Maryland Transportation Authority. The first issuance occurred in May 2007 and totaled $325.0 million with a true interest cost of 3.99%. In December 2008, the Authority sold the remaining $425.0 million of GARVEE bonds with a true interest cost of 4.31%. GARVEE debt outstanding and required debt service for the past seven (7) fiscal years and projections until the debt is repaid are shown in Graph 4.1. The final GARVEE bond matures on March 1, 2020 and no further issuances are projected, except in the event of a refunding opportunity.

2

Maryland Stadium Authority

Maryland Stadium Authority Briefing

Capital Debt Affordability Committee

September 7, 2016

1

Maryland Stadium Authority Debt Issued over the past five years

Fiscal Year

Amount Purpose

2012 $105,450,000 $11.1 million - Revenue Bond for Warehouse and Oriole Park Improvements $94.35 million - Series 2011 Refunding Bonds (Terminate Swap with AIG for Series 1998A and 1999)

2013 $26,990,000 $14.1million – Series 2012 Hippodrome Performing Arts Center Refunding Bonds $12.9 million - Series 2012 Montgomery County Conference Center Refunding Bonds

2014 $8,635,000 Refund the Series 2010 Revenue Bond for Oriole Park Improvements

2015 $9,535,000 Refund the Series 2011 Revenue Bond for Oriole Park Improvements, reduce the outstanding balance refunded by $500,000 by negotiating a lower debt service reserve

2016 $320,000,000 First series of bonds issued for Baltimore City Public Schools. Revenue bond with the pledge being lottery, Baltimore City Beverage taxes, a percentage of the casino facility rental fee, a portion of table game proceeds, and funds from the education grant from Baltimore City Public Schools.

2

Maryland Stadium Authority Amount of Outstanding Debt and Revenues

Fiscal Year

Amount Outstanding

Tax Supported Bonds and Equipment

Revenue Bond

Energy (not tax

supported debt)

Debt Service for Tax

Supported and

Equipment

Revenues (Lottery/

Camden Yards Operating

Revenue and $2 ticket charge)

2013 $219,601,249 $193,005,129 $19,435,000 $7,161,120 $34,488,483 $24,602,696

2014 $185,442,082 $168,862,603 $10,010,000 $6,569,479 $32,760,702 $23,440,000

2015 $168,421,865 $145,021,979 $17,455,000 $5,944,886 $31,447,251 $21,851,391

2016 $466,291,738 $125,181,285 $335,825,000 $5,285,453 $26,394,035 $21,837,615

2017 $439,642,623 $105,883,444 $329,170,000 $4,589,179 $48,900,045 $21,893,973

2018 $412,060,220 $85,806,273 $322,400,000 $3,853,947 $48,819,476 $21,817,415

2019 $383,684,063 $65,281,548 $315,325,000 $3,077,515 $48,364,517 $21,359,802 2020 $354,102,509 $43,910,000 $307,935,000 $2,257,509 $48,265,285 $21,258,143 2021 $337,531,417 $35,920,000 $300,220,000 $1,391,417 $34,193,622 $7,193,770 2022 $320,156,576 $27,520,000 $292,160,000 $476,576 $34,208,009 $7,201,477 2023 $304,015,000 $20,275,000 $283,740,000 $0 $32,142,326 $7,211,633 2024 $287,555,000 $12,615,000 $274,940,000 $0 $31,664,302 $7,215,824 2025 $272,825,000 $6,080,000 $266,745,000 $0 $29,337,127 $7,434,296 3

Maryland Stadium Authority

Fixed Rate Debt Ratings

Series S&P Moody’s Fitch

2004 AA+ Aa2 AA

2011 AA+ Aa2 AA

2012 HPAC AA+ Aa2 AA

2012 MCCC AA+ Aa2 AA

2016 AA- Aa3 AA

4

Maryland Stadium Authority Maryland Stadium Authority

Summary of Swaps and Variable Rate Demand Bonds

as of June 30, 2015

Sports Facilities Lease Revenue Refunding Bonds

Football Stadium Issue

Series Name Series 2007

Tax Status Tax-Exempt

Dated Date 2/8/2007

Original Issue Par 73,500,000

Current Outstanding 47,900,000

Maturity 3/1/2008 – 2026

Remarketing Agent Goldman Sachs & Co.

Current Remarketing Rate 5 Basis Points

Liquidity/LOC Provider SBPA: Sumitumo

LOC Expiration 12/15/2019

Current LOC Fee 36 Basis Points

Current Reset Frequency 7-Day

Date of Last Reset 8/24/16

Reset Rate 0.58%

Hedges Synthetic Fixed Rate (MSA paid Fixed Amounts = 5.69% - 5.8%,

receives SIFMA)

Counterparty Barclays

5

Maryland Stadium Authority

Variable Rate Debt Ratings

Series S&P Moody’s Fitch

2007 Short Term A-1+ VMIG 1 F1+

2007 Long Term AA+ Aa2 AA

6

Maryland Stadium Authority Baltimore City Public Schools Construction and Revitalization Program

Revenue Bond, Series 2016 ◦ Negotiated sale on April 20, 2016

Par Amount of $320 million Received orders in excess of $1.0 billion

Premium of $66.1 million to be used for construction Tax-exempt 30 year debt 5% coupon Average annual debt service is $20.8 million

7

Maryland Stadium Authority Current projections for new issuances

◦ FY 2017 Evaluating the possibility of terminating the swap on the series 2007

Convert the variable rate debt to a fixed rate debt Termination fee approximately $13.8 million with a potential discount by Barclays Projected present value savings of $575,500 Does not meet the thresholds for a refunding Other benefits including interest rate risk

◦ FY 2018 Issue $300 million in Baltimore City Public School Revenue Bonds

Proceeds to be used for the balance of the Year 1 projects ($70 million) and the Architect and Pre-construction of the Year 2 projects ($230 million)

Structured the same way as the first series, unless we don’t receive a AA blended credit

8

Bay Restoration Bonds

Bay Restoration Fund (BRF) Capital Debt Affordability Committee Briefing

September 7, 2016

Jag Khuman, Director Maryland Water Quality Financing Administration

1800 Washington Boulevard Baltimore, MD 21230

410-537-3119

jag.khuman@maryland.gov

www.mde.maryland.gov/wqfa

mailto:jag.khuman@maryland.govhttp://www.mde.state.md.us/wqfa

FY Amount ($ Million) Primary Purpose 2008 $ 50.00 Provide grants for the Enhanced 2009 - Nutrient Removal (ENR) 2010 - upgrades at the 67 major Waste 2011 - Water Treatment Plants (Estimated 2012 - Total ENR Capital Cost $1.25 billion) 2013 - 2014 $100.00 2015 - 2016 $180.00 ______________________ Total $330.00 Page 2

Bay Restoration Fund Debt Issued in Prior Fiscal Years

Series 2008 Series 2014 Series 2015 Debt Issued: $50,000,000 $100,000,000 $180,000,000 Issue Date: 4/29/2008 5/14/2014 12/03/2015 Ratings: Aa2 (Moody’s) Aa2 (Moody’s) Aa2 (Moody’s) AA (S&P) AA (S&P) True Interest Cost: 4.03% 2.55% 2.59% Interest: Fixed Rate Fixed Rate Fixed Rate Final Bond Maturity: 3/1/2023 3/1/2029 3/1/2030 Security: BRF (WWTP)Fee BRF (WWTP)Fee BRF (WWTP) Fee Debt Service Reserve: None None None Optional Redemption After: 3/1/2018 3/1/2024 3/1/2024 Refunding Potential: Yes/Will consider No/Low Savings No/Low Savings refunding next bond sale FY 2017 Page 3

Bay Restoration Fund Existing Bonds/Refunding Potential

BRF Current Outstanding Debt & Annual Debt Service ($ Million)

Page 4

Fiscal Year Ending Outstanding Debt Annual Debt Service 2008 50.000 0.000 2009 46.825 4.655 2010 44.185 4.710 2011 41.560 4.616 2012 38.820 4.614 2013 35.995 4.617 2014 133.055 4.614 2015 129.980 8.248 2016 301.615 14.330 2017 292.880 23.431 2018 273.590 31.756 2019 253.375 31.717 2020 232.075 31.827 2021 209.715 31.829 2022 186.245 31.823 2023 161.605 31.824 2024 140.360 27.216 2025 118.055 27.214 2026 94.715 27.134 2027 70.375 27.297 2028 44.905 27.697 2029 18.250 28.049 2030 0.007 18.798 2031 0.000 0.000

Debt Authorized through FY 2015: $530,000,000 Debt Issued through FY 2016: $330,000,000 Future Authorized Debt Issuance: $200,000,000 Projected Future Debt Issuance: $100,000,000 Assumptions for future debt issuance

• Wt. Avg. Coupon Rate of 4.50% per year • Annual Level Debt Service • Maximum 15-Year Bond Term • Final Debt Service Payment by FY 2030

Page 5

Bay Restoration Fund Total Debt Authorized and Amount Unissued

Projected Debt Issuance, Debt Service Payments & Annual Revenue ($ Millions)

Page 6

1 . Actual revenue through FY 2016 BRF fee increase in FY 2013. * One time additional revenue of ~$13.6M resulting from audit settlement.

Fiscal Year New Issues Debt Outstanding at

6/30 Debt Service for

FY Revenue (Cash) 1

2008 50.000 50.000 0.000 55.068 2009 0.000 46.825 4.655 53.356 2010 0.000 44.185 4.710 54.818 2011 0.000 41.560 4.616 54.598 2012 0.000 38.820 4.614 54.552 2013 0.000 35.995 4.617 92.767 2014 100.000 133.055 4.614 108.466 2015 0.000 129.980 8.248 111.785 2016 180.000 301.615 14.330 123.708 *

2017 100.000 392.880 23.431 114.021 2018 0.000 373.590 36.256 115.161 2019 0.000 346.908 42.684 116.313 2020 0.000 318.850 42.794 117.476

FY 2017 Bond Sale projected for March/April 2017.

Projected Debt Issuance, Debt Service Payments & Annual Revenue ($ Million)

Fiscal Year New Issues Debt Outstanding at

6/30 Debt Service for

FY Revenue (Cash) 1

2021 0.000 289.428 42.796 118.651 2022 0.000 258.578 42.790 119.838 2023 0.000 226.226 42.791 121.036 2024 0.000 196.922 38.183 122.246 2025 0.000 166.195 38.181 123.468 2026 0.000 134.054 38.101 124.703 2027 0.000 100.517 38.264 125.950 2028 0.000 65.436 38.664 127.210 2029 0.000 28.738 39.016 128.482 2030 0.000 0.000 29.765 129.767 2031 0.000 0.000 0.000 65.532

Page 7

Continued….

1. Actual revenue through FY 2016 BRF fee increase in FY 2013

Consolidated Transportation Bonds

Presented by David Fleming

Chief Financial Officer Office of Finance

September 7, 2016

Maryland Department of Transportation

Structure: Fixed rate Interest only first 2 years As required by statute Maximum maturity of 15 years Level debt service payments

Additional Bonds Test: Pledged taxes at least 2.0x maximum annual debt service Net revenue at least 2.0x maximum annual debt service

-1-

Management Practice: Pledged Taxes at least 2.5x maximum annual Debt Service Net Revenue at least 2.5x maximum annual Debt Service

Fiscal Year 2015 Actual: Pledged taxes coverage 6.0x Net revenue coverage 3.6x

Fiscal Year 2016 Estimated : Pledged taxes coverage 6.3x Net revenue coverage 3.9x

-2-

Amount issued in prior 5 fiscal years: $1.030 billion new construction $ 260 million refunding

-3-

Series

Sale Date

New Money

Refunding

True Interest Cost (TIC)

Series 2015 Third Issue

12/2/2015

$300.0

2.47%

Series 2015 Second Issue 6/3/2015 $136.0 2.75%

Series 2015 Refunding 6/3/2015 $259.72 1.85%

Series 2015 2/11/2015 $265.54 2.59%

Series 2014 6/11/2014 $100.0 2.66%

Series 2013 Second Issue 11/20/2013 $225.0 2.90%

Series 2013 2/13/2013 $165.0 2.45%

Series 2012 5/23/2012 $115.0 2.36%

Total $1,306.54 $259.72

($ in millions)

Amount outstanding: FY16 - $2.15 billion Legislative debt ceiling increased to $4.5 billion effective June 1, 2013

Amount authorized but unissued: FY16 - $2.85 billion authorized FY16 - $ 700 million unissued

Maryland Department of Transportation Consolidated Transportation Bonds

-4-

Status of refunding potential Refunding analysis is periodically completed by the department’s

financial advisor Benchmarks are 3% net present value savings and an Opportunity

Cost Index of at least 70% Potential refunding opportunities have been identified for FY17

at this time. Approximately $250 million with a net present value savings

potential of $20 million (8% of Refunded Bonds)

Variable rate debt, swaps and bond insurance None

Bond Insurance Not needed because of MDOT’s stable credit profile

-5-

Preliminary projections for new issuances Debt Debt

Outstanding Outstandingat Beginning New at End

Fiscal Year of Year Issues Redeemed of Year

2017E $2,146 $810 $207 $2,7492018E $2,749 $905 $222 $3,4322019E $3,432 $695 $199 $3,9282020E $3,928 $455 $219 $4,1642021E $4,164 $370 $289 $4,2452022E $4,245 $395 $333 $4,3072023E $4,307 $475 $370 $4,4122024E $4,412 $405 $343 $4,4742025E $4,474 $355 $366 $4,4632026E $4,463 $385 $394 $4,454

(E = based on July 2016 Estimate)

-6-

Sheet1

Current Projections for New Issuances

($ in millions)

DebtDebt

OutstandingOutstanding

at BeginningNewat End

Fiscal Yearof YearIssuesRedeemedof Year

2017E$2,146$810$207$2,749

2018E$2,749$905$222$3,432

2019E$3,432$695$199$3,928

2020E$3,928$455$219$4,164

2021E$4,164$370$289$4,245

2022E$4,245$395$333$4,307

2023E$4,307$475$370$4,412

2024E$4,412$405$343$4,474

2025E$4,474$355$366$4,463

2026E$4,463$385$394$4,454

(E = based on July 2016 Estimate)

Sheet2

Sheet3

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026DS Projected New Issues 7 37 77 149 219 271 322 369 411 461DS Current Outstanding 301 305 272 234 241 235 228 162 148 130Total Debt Service 308 342 349 383 460 506 550 531 559 591

0

100

200

300

400

500

600

700

Debt service preliminary projections for the next 10 years ($ in millions)

-7-

Chart1

201720172017

201820182018

201920192019

202020202020

202120212021

202220222022

202320232023

202420242024

202520252025

202620262026

Total Debt Service

DS Current Outstanding

DS Projected New Issues

308

301

7

342

305

37

349

272

77

383

234

149

460

241

219

506

235

271

550

228

322

531

162

369

559

148

411

591

130

461

Sheet1

20132014201520162017201820192020202120222023202420252026

Total Debt Service188211246264308342349383460506550531559591

DS Current Outstanding180203232258301305272234241235228162148130

DS Projected New Issues8814673777149219271322369411461

Rating Agency Updates:

Standard & Poor’s – AAA

Moody’s – Aa1 Fitch – AA+

as of December 2015

-8-

05 GARVEE Presentation.pdfGrant Anticipation Revenue Vehicles (“GARVEE”) Bonds

06 MSA CDAC Presentation 2016.pdfSlide Number 1Maryland Stadium AuthorityMaryland Stadium AuthorityMaryland Stadium AuthorityMaryland Stadium AuthorityMaryland Stadium AuthorityMaryland Stadium AuthorityMaryland Stadium Authority

07 BRF-CDAC-2016_jag.pdfBay Restoration Fund (BRF) �Capital Debt Affordability Committee Briefing�September 7, 2016Slide Number 2Slide Number 3 �BRF Current Outstanding Debt & Annual Debt Service ($ Million)Slide Number 5Projected Debt Issuance, Debt Service Payments & Annual Revenue ($ Millions)Projected Debt Issuance, Debt Service Payments & Annual Revenue ($ Million)

08 MDOT CDAC presentation September 2016 0825 -Final.pdfMaryland Department of TransportationMaryland Department of Transportation Consolidated Transportation BondsMaryland Department of Transportation� Consolidated Transportation BondsMaryland Department of Transportation Consolidated Transportation BondsSlide Number 5Maryland Department of Transportation Consolidated Transportation Bonds�����Maryland Department of Transportation�Consolidated Transportation Bonds�����Maryland Department of Transportation Consolidated Transportation BondsMaryland Department of Transportation� Consolidated Transportation Bonds