funding considerations september 17, 2015. 1. general obligation bonds 2. building reserve levy 3....
TRANSCRIPT
PARTICIPANTS
Janelle MickelsonSchool Finance Division Administrator, OPI
Dan SemmensBond Counsel, Dorsey & Whitney LLP
Bridget EkstromSenior Vice President, D.A. Davidson & Co.
Julie FlynnBond Program Officer, Montana Board of Investments
1. General Obligation Bonds2. Building Reserve Levy3. Intercap Loan
PRIMARY FUNDING MECHANISMS FOR CAPITAL PROJECTS
Factors to consider when selecting a funding mechanism:
Urgency of need of funding
(immediate or future)
Funding resources(eligible for state aid)
Election requirements Cash flow of resources
Term limits on debt Spending restrictions
Dollar limits on debt Payment schedule
Intercap Loan Building Reserve Levy
GO Bonds
Immediate/Emergency need for funding
No immediate need for funding Immediate need for funding
Not eligible for facility reimbursement
Not eligible for facility reimbursement
Eligible for facility reimbursement
Election not required under certain circumstances
Election required Election required
Full or partial cash draws Set amount of cash received over time
All cash is received at one time
Maximum term of 15 years Maximum term of 20 years Maximum term of 20 years
Loan repayment can be made from any legally available fund
Financial transactions are made from building reserve fund only
Project costs are made from building fund. Debt payments are made from debt service fund
Debt capacity limitations apply Debt capacity limitations do not apply
Debt capacity limitations apply
Dollar amount limited for real property and new construction, as well as debt capacity
Dollar amount is limited to debt capacity
Dollar amount is limited to debt capacity
Principal and interest payments made bi-annually. Adjusted interest rates
No principal or interest payments Interest payments made bi-annually. Principal payments made annually
PRIMARY FUNDING MECHANISMS FOR CAPITAL PROJECTS
Eligible Districts:District mill value per ANB is less than the
corresponding statewide mill value per ANB
Eligible Debt:General Obligation Bonds
DEBT SERVICE GUARANTEED TAX BASE AID (GTBA)AKA: SCHOOL FACILITY REIMBURSEMENTS
DEBT SERVICE GUARANTEED TAX BASE AID (GTBA)AKA: SCHOOL FACILITY REIMBURSEMENTS
School Facility Entitlements: $300 per ANB for Elementary $370 per ANB for approved and accredited Junior High or
Middle School $450 per ANB for High School
State share of entitlement:(1-(district mill value per ANB/Facility guaranteed mill value per ANB))
School Facility Reimbursement: State share of entitlement times the lesser of the total
facility entitlement or the district current year debt service obligation
DEBT SERVICE GUARANTEED TAX BASE AID (GTBA)AKA: SCHOOL FACILITY REIMBURSEMENTS
In the first year of an eligible bond, an eligible district will receive both an advance and a reimbursement. No GTBA is paid on the bond in the final year.
Districts only budget for the advance in the first year, not the reimbursements.1st Year
Budget Actual
Subsequent Years
Budget Actual
Final Year
Budget ActualAdvance Advance Property
TaxesProperty
TaxesProperty
TaxesProperty
Taxes
Property Taxes
Property Taxes
Fund Balance Reapprop.
Fund Balance Reapprop.
Fund Balance Reapprop.
Fund Balance Reapprop.
Facility Reimb.
Facility Reimb.
(Debt Payment)
(Debt Payment)
(Debt Payment)
(Debt Payment)
(Debt Payment)
(Debt Payment)
Fund Balance = 0
Fund Balance = Facility Reimb.
Fund Balance = 0
Fund Balance = Facility Reimb.
Fund Balance = 0
Fund Balance = 0
DEBT SERVICE GUARANTEED TAX BASE AID (GTBA)AKA: SCHOOL FACILITY REIMBURSEMENTS
The amount available for facility reimbursements/advances is subject to:
the appropriation by the State Legislature each biennium the amount of cash available in the school facility and technology special
revenue account
Within the available appropriation, the OPI first distributes the state advances. From the remaining appropriation, the OPI distributes state reimbursement for school facilities.
If the legislative appropriation for the state reimbursement for school facilities is less than the school facility entitlement amount for which districts qualify or if the cash available in the special revenue is less than the entitlement amount, the OPI will prorate the state reimbursement based on total amount for which districts qualify.
Whenever the state reimbursement is prorated, the prorate percentage is applied to the state advance in the ensuing year.
House Bill 373 ~ Doubles Debt Capacity Limitations for Schools.
Senate Bill 157~ Generally Revises Tax Reappraisal Laws.
House Bill 114 ~ Treatment of Tax Increment Revenues.
NOTABLE 2015 LEGISLATIVE SESSION LAWSIMPACTING SCHOOL FINANCE AND BOND ISSUES
PROCUREMENT
Select Project Team. Traditional Low Bid Delivery of Project. Energy Performance Contracts. Alternative Project Delivery Contracts.
Design-BidGeneral Contractor Construction
ManagementOther
Have Owner’s Representative? Include Costs in Budget
Using In-house Expertise.
BOND MARKET UPDATE“AAA” MUNICIPAL MARKET DATA INDEX20-YEAR MATURITY8/31/05-8/31/15
Latest 2.88% August 31, 2015Min 2.10% November 30, 2012Max 5.74% October 15, 2008Average 3.71%
Source: Thomson Reuters
BOND MARKET UPDATEMUNICIPAL YIELD CURVES AS OF8/31/15
General Obligation Bonds"AAA" "AA" "A" "BAA"
1 2016 0.23 0.27 0.39 0.782 2017 0.59 0.65 0.78 1.293 2018 0.86 0.95 1.11 1.624 2019 1.12 1.23 1.45 1.945 2020 1.33 1.46 1.71 2.186 2021 1.61 1.76 2.04 2.517 2022 1.80 1.98 2.27 2.738 2023 1.93 2.13 2.45 2.889 2024 2.05 2.26 2.59 3.02
10 2025 2.16 2.37 2.72 3.1411 2026 2.28 2.50 2.86 3.2612 2027 2.37 2.60 2.96 3.3513 2028 2.46 2.70 3.07 3.4514 2029 2.55 2.79 3.17 3.5515 2030 2.63 2.87 3.25 3.6316 2031 2.71 2.95 3.33 3.7117 2032 2.76 3.00 3.38 3.7718 2033 2.81 3.05 3.43 3.8219 2034 2.85 3.09 3.47 3.8620 2035 2.88 3.12 3.50 3.8921 2036 2.92 3.16 3.54 3.9322 2037 2.95 3.19 3.57 3.9623 2038 2.98 3.22 3.60 3.9924 2039 3.01 3.25 3.63 4.0125 2040 3.04 3.28 3.66 4.04 Source: Thomson Reuters
MILL LEVY IMPACT ANALYSISSAMPLED.A. Davidson & Co. Aug-15
Bozeman Elem DistrictEstimated MILL LEVY IMPACT ANALYSIS$16,000,000 GO Bond - 20 Years (2017-2036)
Mill Levy Computation:Lower Rate
Range (Not BQ)Higher Rate
Range (Not BQ)
Par Amount: $16,000,000 $16,000,000 Total Estimated Interest Over Life of Bond (1): $10,974,713 $12,142,675
Estimated Annual Bond Payment Over 20 Years (1): $1,348,736 $1,407,134DIVIDED BY: District's FY 2015/16 Mill Value: $127,702.815 $127,702.815
EQUALS: Estimated Number of Annual Mills Required: 10.56 11.02
Estimated Tax Increase for Individual RESIDENTIAL TAXPAYER:2015/16 Tax Year 2015/16 Tax Year Estimated Estimated Estimated Estimated
"MARKET VALUE" of "TAXABLE VALUE" of "ANNUAL" "MONTHLY" "ANNUAL" "MONTHLY"Residential Property(2) Residential Property(2) Tax (3) Tax (3) Tax (3) Tax (3)
$50,000 $675 $7.13 $0.59 $7.44 $0.62
$100,000 $1,350 $14.26 $1.19 $14.88 $1.24$150,000 $2,025 $21.39 $1.78 $22.31 $1.86
$200,000 $2,700 $28.52 $2.38 $29.75 $2.48$239,768 (Bozeman City Average) $3,272 $34.56 $2.88 $36.05 $3.00
$300,000 $4,050 $42.77 $3.56 $44.63 $3.72$400,000 $5,400 $57.03 $4.75 $59.50 $4.96
* 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.Look up the Property's "Taxable Value" from Personal Tax Statement or County Website (http://itax.gallatin.mt.gov/)" Taxable Value" X Mills/1,000 = Estimated Annual Tax Impact of the Bonds
See footnotes as follows:
(1) Based on estimated true interest cost rates with conservative sample rates for not bank qualified bonds (BQ) of 3.85% and 4.35% and additional premium generated for the Project for costs.
(2) Based upon Class 4 residential property. The "Market Valuation" for tax purposes will be different than the valuation of most residential real property for resale purposes. To 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 the City of Bozeman was $239,768.
(3) Tax 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. Tax 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.
Effective January 1, 2015, the tax rates in the following table apply to the property classifications shown until January of 2017, when any new changes may be implemented statutorily. The taxable value is calculated by applying the tax rate to the appraised market value of property, which is then multiplied by the number of mills levied by each taxing jurisdiction to calculate the taxes payable by each property owner.
__________________1 The tax rate for the portion of the assessed value of a single-family residence in excess of $1.5 million is equal to the residential tax rate multiplied by 1.4.2 The tax rate for commercial property is the Residential Tax Rate multiplied by 1.4.
2015 REVALUATION - SB 157CHANGES TO TAX RATES EFFECTIVE BEGINNING IN 2015/16 – CLASS 4 PROPERTY
Class Four Tax Rates Applied to “Assessed Value” to Calculate “Taxable Value” Effective January 1, 2015 (Fiscal Years 2015/16 & 2016/17)
Residential Property Commercial & Industrial Property
Residential Tax Rate
Portion of Assessed Value in Excess of $1.5 million
Commercial Tax Rate Golf Courses
1.35% 1.89%1 1.89%2 0.945%
“PRIOR” TAX RATE AND VALUATION CALCULATION FOR COMPARISON
Prior to January 1, 2015, Class Four property was subject to a six-year reappraisal cycle and the Legislature, in an effort to prevent large property tax increases resulting from the periodic statewide reappraisals, provided for the phase-in of increases in valuation, less the amount exempted, and the phased-in tax rate reduction, which are shown in the table below.
- - - Prior Tax Rates Effective January 1, 2009 through December 31, 2014 - - -
Information to Calculate Annual Taxable Value for Class Four Property Resulting from the Last Six Year Cycle Reappraisal
Annual (Cumulative)
Phase-In Amount ofReappraisal Value
Annual Exemption Applied to “Phase-In Value” to Calculate
“Taxable Market Value”
Tax Rate Applied to “Taxable Market
Value” to Calculate
Tax Year Residential Commercial “Taxable Value”2014/15 16.67% (100.02%) 47.0% 21.5% 2.47%
2013/14 16.67% (83.35%) 45.5 20.3 2.54
2012/13 16.67% (66.68%) 44.0 19.0 2.63
2011/12 16.67% (50.01%) 41.8 17.5 2.72
2010/11 16.67% (33.34%) 39.5 15.9 2.82
2009/10 16.67% (16.67%) 36.8 14.2 2.93
VALUATION CALCULATIONSAMPLE: BILLINGS ELEMENTARYBelow are the assessed, taxable market and taxable valuations of real and personal property located within the Billings Elementary District for the fiscal years shown.
__________________1 Fiscal year 2015/16 assessed valuation is based on the current reappraisal effective January 1, 2015.2 Taxable Market Valuation is no longer available commencing in 2015/16. The 2015 Legislature eliminated the calculation to determine Taxable Market Valuation by eliminating the homestead and comstead exemptions, which exemptions were applied to assessed valuation of applicable property to determine the Taxable Market Valuation of such property.3 Fiscal year 2009/10 was the first year for the prior six-year valuation cycle where the 2009 reappraisal amounts were used to determine taxable value.
FiscalYear
AssessedValuation1
Percent of
Change
Taxable Market
Valuation2
Percent of
ChangeTaxable Valuation
Percent of
Change
2015/16$11,650,594,23
5 11.67% --- --$194,587,61
4 11.04%
2014/15 10,433,356,848 0.44$6,572,130,53
5 1.81% 175,238,139 (1.99)2013/14 10,387,538,696 1.73 6,455,299,303 4.89 178,803,178 1.572012/13 10,211,165,363 0.59 6,154,532,525 2.83 176,034,060 (0.55)2011/12 10,151,163,735 0.88 5,985,087,238 12.18 177,014,509 1.032010/11 10,062,184,398 2.08 6,623,402,263 n/a 175,218,296 4.522009/103 9,856,792,513 n/a 5,335,244,057 4.33 167,648,090 0.982008/09 n/a n/a 5,114,046,567 (6.99) 166,020,027 5.352007/08 n/a n/a 5,498,218,964 7.59 157,587,840 6.482006/07 n/a n/a 5,110,110,578 7.03 147,991,032 3.362005/06 n/a n/a 4,774,317,563 6.65 143,178,931 4.412004/05 n/a n/a 4,476,606,150 n/a 136,732,413 n/a
Low-interest Loan Program Variable Interest Rate
Rates change every February 16 Average rate over last 15 years: 2.85% Current rate: 1.25%
15-year Loan Term or useful life of project 187 different school districts have utilized
INTERCAP Over 300 school loans for $42 million have
been financed 10% of our $77 million portfolio is with
schools
INTERCAP
www.investmentmt.com
INTERCAP
20-9-471 MCA – Schools may finance through INTERCAP without a vote for the following… New and used vehicles and equipment Remodel or Renovate within existing walls Energy retrofit projects Cash-flow purposes
New construction and purchase of real property must be voter-approved
Finance using General Obligation Bonds Building Reserve Fund Loan General Fund Loan www.investmentmt.co
m
INTERCAP
General Obligation Bonds Title 20 Chapter 9 Part 4 MCA 15-year term or useful life of the project,
whichever is less Must be within District’s legal debt limit Provide copy of Resolution calling for bond
election 20-9-421 and 20-20-201 MCA
Copy of the Ballot Notice of Election
Include when and where it was posted and published Copy of Certificate of Election Bond Counsel required at borrower’s expensewww.investmentmt.co
m
INTERCAP
Building Reserve Fund Loans Title 20 Chapter 9 Part 502 MCA Statute sets a 5-year limit for pledging the fund Loan maturity date will match levy expiration For loan to be repaid with NEW levy, provide:
Copy of Resolution calling for the election Copy of ballot, notice of election, where and when
posted/published and certificate of election For loan to be repaid with an EXISTING levy,
provide: Copy of Resolution calling for the election Previous and current years’ balance sheet and income
statements for the building reserve fund Next year’s budget for the building reserve fundwww.investmentmt.co
m
INTERCAP
www.investmentmt.com
General Fund LoansTitle 20 Chapter 9 Part 471 MCA15-year term, or useful life of projectEquipment, vehicles, renovation within
existing building Provide previous and current years’ balance sheet
and income statements for general fundNew construction and real property acquisition
Election information New portion of building cannot constitute more than
20% of existing square footage 20% square footage limitation may not be
exceeded within any 5-year period
INTERCAP
Funds always available – no deadlines 100% financing No up-front costs No pre-payment penalty Variable interest rate – currently 1.25% Maximum loan amount depends on legal debt
authority Loan term maximum is 15 years, the useful life
of the project, or other statutory limit Application on website www.investmentmt.com
Under $1 million, staff approved Over $1 million, Board of Investments Loan Committee
approved at quarterly meeting www.investmentmt.com
INTERCAP
Montana Board of Investments
Bond Program OfficeLouise Welsh Julie FlynnSr. Bond Program Officer Bond Program Officer
[email protected] [email protected]
(406) 444-0891 (406) 444-0257
www.investmentmt.com