Bonds, Capital Projects and Debt Service Supplement 16

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1 Bonds, Capital Projects and Debt Service Supplement 16 Terry Dean NMASBO Boot Camp October 2017 Bonds, and Debt Service Take away items How to compute bonding capacity AuthorizaGon for short-term borrowing from state bank or credit union? How is your bonding capacity affected by a capital lease purchase? Generally, from the date of a bond elecgon, how long do you have to issue/sell outstanding bonds? What is arbitrage? Is it a bad thing? 1

Bonds, and Debt Service General Advice Listen to your Financial Adviser Bonds Generally Capital projects and improvements are funded from three primary sources: bond issues local taxes state funds

2 Bonds, and Debt Service General Advice Listen to your Financial Adviser Bonds Generally Capital projects and improvements are funded from three primary sources: bond issues local taxes state funds General ObligaGon Bonds Bonding Capacity 6% of assessed valuagon. Lease purchase arrangements Be careful with payment dates Record keeping Bond maturity +3 Debt payment data base The F word. Arbitrage investment income derived from the investment of tax exempt bond proceeds 2

3 Bonds General process NM ConsGtuGon ArGcle IX Sec. 9. [Use of borrowed funds.] Any money borrowed by the state, or any county, district or municipality thereof, shall be applied to the purpose for which it was obtained, or to repay such loan, and to no other purpose whatever. Sec. 11. [School district indebtedness; restric9ons.] A. no school district shall borrow money except for the purpose of erecgng, remodeling, making addigons to and furnishing school buildings or purchasing or improving school grounds or any combinagon of these purposes, and in such cases only when the proposigon to create the debt has been submi`ed to a vote of such qualified electors B. No school district shall ever become indebted in an amount exceeding six percent on the assessed valua9on of the taxable property within the school district as shown by the preceding general assessment. Bonds NMSA Tax levy for payment of bonds Sale of Bonds All of the bonds shall be offered and sold at public sale pursuant to this secgon or at a negogated sale on terms determined by the municipal corporagon Maturity of bonds Bonds issued hereunder shall never be issued to run for a longer period than twenty years from the date of the bonds Bonds authorized at elecgon; Gme limit on issuance Bonds shall not be issued or sold by a school district, county or municipality afer the expiragon of four years from the date of the elecgon authorizing the issue, except for the purpose of refunding previous bond issues or in payment of judgments. 3

4 Bonds Unissued bonds authorized at elecgon; In all cases where bond issues by the school districts, counges or municipaliges have been authorized by special elecgon and the bonds have not been issued within four years, the Gme allowed in SecGon NMSA 1978 from the date of the special elecgon authorizing the proposed issue, the proposed bond issue is void, except where issued for refunding bonded debt or for payment of judgments against the school district, county or municipality Refunding bonds; Refinancing of higher interest bonds. Bond funding must be approved by PED Debt Service Debt Service (4????) fund is used to account for the principal and interest payments on outstanding bonds. Property tax assessment for the regrement of debt 4

5 Funds 311** - Bond Building PSCOC/PSFA Awards Special Building Local Typically revenue is generated from the sale of local property or donagons Special Capital Outlay State Direct LegislaGve AppropriaGon Special Capital Outlay Federal Capital Improvements HB Capital Improvements SB-9 State match Capital Improvements SB-9 local tax EducaGon Technology Act 311** Bond Building To account for expenditure of money provided from the sale of locally authorized bonds. You can have mulgple funds. This will/could assist in the arbitrage calculagon. What is arbitrage? Be careful to spend the money as approved in the bond quesgon (voter approval). Generally that language is for the purpose of erecgng, remodeling, making addigons to and furnishing school buildings or purchasing or improving school grounds or any combinagon of these purposes (state consgtugon ArGcle 9 sec 11) Failure to do so could result in the bonds losing their tax exempt status. Record keeping for the life of the bonds + 3 years. 5

6 31200 PSCOC Use this fund to account for PSCOC awards Generally, PSFA pays direct to the contractor their porgon. For financial statement purposes, you have to record the amount of their expenditure and revenue to the extent of the expenditure. Be sure that you capitalize the PSFA porgon of the project Special Building Local Money from local sources DonaGons PTO/PTA playgrounds etc Special Capital Outlay State DLA (Direct LegislaGon AppropriaGon) Be Careful. You must acquire project authorizagon before stargng the project. PSFA will take an offset for their porgon Reimbursement basis Must request reimbursement from PED Special Capital Outlay - Federal 6

7 31600 HB-33 NMSA A local school board may adopt a resolugon to submit to the qualified electors of the school district the quesgon of whether a property tax at a rate not to exceed the rate specified in the resolugon should be imposed upon the net taxable value of property allocated to the school district under the Property Tax Code [Chapter 7, ArGcles 35 through 38 NMSA 1978] for the purpose of capital improvements to public schools in the school district. Property tax that may be locally imposed by the voters. Expenditure of the moneys must adhere to the quesgon approved by the voters. Be very broad in your quesgon. 6 year limit (changed from 5 in 2007) Assessment shall not exceed 10 mil ($10 on every $1000 of assessed valuagon). May be used for salaries of maintenance crew. DANGER What if the elecgon is not successful? Capital Outlay 3170# SB9 NMSA State match Local tax 2 mil Yield Control 6 year limit on assessment SB 9 CalculaGon Assessed ValuaGon Rate Mils Local Tax Projected Local Tax 100,000, $ 200,000 40th day program units Rate* Program Guarantee $ , Rate** Minimum Guarantee $ ,

8 Capital Outlay Ed Tech NMSA -6-15A-3 Proceeds from revenue bonds. Records expenditures for acquisigon of technology and/or lease payments. Tech note/bonds are short term (5 years or less) Tech bonds are repaid through fund

Prior Year Warrants Voided

Prior Year Warrants Voided Previous Year 06/30/2017 OPERATIONAL TEACHERAGE TRANSPORTATION INST. MATERIALS FOOD SERVICES ATHLETICS NON-INSTRUCT. Report ending date 12/31/2017 FUND FUND FUND FUND FUND FUND FUND 11000 12000 13000 14000