Palo Alto Unified School District

Transcription

1 Palo Alto Unified School District May 17, 2012 General Obligation Bonds Issuance Plan Tony Hsieh Managing Director (310)

2 Strong School Bond Background The Palo Alto Unified School District successfully passed its, Strong Schools Bond, on June 3, 2008 $378 million authorization By statute, the estimated legal tax rate for this Prop 39 bond authorization cannot exceed $60.00 per $100,000 of assessed value ( AV ) (excluding the prior B4E Bonds ) Estimated tax rate not to exceed $44.50 per $100,000 of AV, including debt service on the B4E Bonds 1

3 Overview of GO Bond Provisions California school districts typically opt for Proposition 39 bond measures now 55% voter approval threshold Rather than 66.67% threshold Citizens Oversight Committee and annual audits required Estimated tax rate not to exceed $60 per $100,000 of AV for unified school districts All bond authorization types are subject to a bonding capacity as set forth by Education Code 2.50% of total AV for unified school districts 1.25% of total AV for non unified school districts 2

4 Bonding Capacity The District s bonding capacity is a statutory limit on the amount of general obligation bonds that can be issued Based on current AV and outstanding general obligation bonds Increases as AV grows and outstanding general obligation bonds are paid Statutory debt limit factor of 2.5% of AV for unified school districts Estimated Bonding Capacity (1) Total Taxable Property $ 24,903,354,765 $ 38,232,401,077 Statutory Debt Limit Factor x 2.50% 2.50% Bonding Capacity $ 622,583,869 $ 955,810,027 Less Outstanding General Obligation Bonds Building for Excellence Bonds $ 79,275,000 $ 12,690,000 Strong Schools Bonds 142,394, ,844,572 (2) Current Available Bonding Capacity $ 400,914,620 $ 614,275,455 Less Remaining Strong Schools Bonds Authorization 233,000,751 Additional Available Bonding Capacity $ 167,913,869 $ 614,275,455 (1) Assumes AV growth rates of 2.0% in , 3.0% in , 4.0% in , 5.0% in , and 6.0% thereafter. (2) Assumes issuance and amortization of remaining Strong Schools Bonds at the above AV growth assumptions, and an aggregate $60 tax rate. 3

5 Snapshot of AV (as of 2008) The District experienced significant growth from 1998 to 2008 Annualized growth rates: 1 year: 7.07% 5 year: 6.57% 10 year: 7.99% 15 year: 6.53% 20 year: 6.89% 25 year: 7.50% Fiscal Year (1) Source: Santa Clara County & California Municipal Statistics, Inc. Data from 1980 to Total Annual Secured (1) Unsecured (1) Total AV (1) % Change 1980 $ 2,489,949, ,504,333, % ,870,931, % ,445,238, % ,700,797, % 1985 $ 3,250,435,024 $ 881,927,454 4,132,362, % ,796,964,416 1,028,156,445 4,825,120, % ,001,240,094 1,177,006,556 5,178,246, % ,428,327,752 1,107,947,124 5,536,274, % ,619,884,850 1,125,956,059 5,745,840, % ,108,464,735 1,290,575,697 6,399,040, % ,657,963,164 1,449,536,486 7,107,499, % ,191,485,608 1,359,360,795 7,550,846, % ,808,475,157 1,320,092,203 8,128,567, % ,078,247,866 1,217,090,625 8,295,338, % ,227,782,205 1,278,605,790 8,506,387, % ,455,762,204 1,344,500,047 8,800,262, % ,816,657,265 1,194,380,435 9,011,037, % ,457,562,392 1,283,695,019 9,741,257, % ,257,118,631 1,304,811,761 10,561,930, % ,140,019,080 1,413,172,198 11,553,191, % ,306,985,081 1,451,979,801 12,758,964, % ,851,441,981 1,648,386,921 14,499,828, % ,619,561,350 1,658,673,614 15,278,234, % ,089,959,092 1,590,064,949 15,680,024, % ,249,291,335 1,414,543,113 16,663,834, % ,655,359,820 1,381,447,873 18,036,807, % ,201,903,761 1,417,066,056 19,618,969, % ,427,459,664 1,578,417,893 21,005,877, %

6 Original Assumptions Below are the original assumptions which were used to formulate the bond program: Assumed annual AV growth rates: : 11.34% (which was the actual growth for ) Annually thereafter: 8.28% Interest rates: 4.93% 4.97% Aggregate tax rate (Strong Schools + B4E Bonds) of $44.50 per $100,000 of AV The bonds were anticipated to be issued in 3 series over an 8 year period Issue Issue Date Proceeds Series A Sep 2008 $ 120,000,000 Series B Aug ,630,000 Series C Aug ,960,000 5

7 Updated AV History Unlike many California school districts, the District experienced positive AV growth in through However, growth was very low, compared to history seen in AV: $24,903,354,765 Updated annualized growth rates: 1 year: 1.57% 5 year: 4.89% 10 year: 5.56% 15 year: 7.01% 20 year: 6.15% 25 year: 6.48% 30 year: 7.47% B4E Bonds B4E + Strong Schools Bonds Fiscal Year (1) Source: Santa Clara County & California Municipal Statistics, Inc. Data from 1980 to Total Annual Secured (1) Unsecured (1) Total AV (1) % Change Bonds Tax Rate (1) 1980 $ 2,489,949, ,504,333, % ,870,931, % ,445,238, % ,700,797, % 1985 $ 3,250,435,024 $ 881,927,454 4,132,362, % ,796,964,416 1,028,156,445 4,825,120, % ,001,240,094 1,177,006,556 5,178,246, % ,428,327,752 1,107,947,124 5,536,274, % ,619,884,850 1,125,956,059 5,745,840, % ,108,464,735 1,290,575,697 6,399,040, % ,657,963,164 1,449,536,486 7,107,499, % ,191,485,608 1,359,360,795 7,550,846, % ,808,475,157 1,320,092,203 8,128,567, % ,078,247,866 1,217,090,625 8,295,338, % ,227,782,205 1,278,605,790 8,506,387, % ,455,762,204 1,344,500,047 8,800,262, % $ ,816,657,265 1,194,380,435 9,011,037, % ,457,562,392 1,283,695,019 9,741,257, % ,257,118,631 1,304,811,761 10,561,930, % ,140,019,080 1,413,172,198 11,553,191, % ,306,985,081 1,451,979,801 12,758,964, % ,851,441,981 1,648,386,921 14,499,828, % ,619,561,350 1,658,673,614 15,278,234, % ,089,959,092 1,590,064,949 15,680,024, % ,249,291,335 1,414,543,113 16,663,834, % ,655,359,820 1,381,447,873 18,036,807, % ,201,903,761 1,417,066,056 19,618,969, % ,427,459,664 1,578,417,893 21,005,877, % ,609,299,681 1,777,889,184 23,387,188, % ,508,979,100 1,680,777,737 24,189,756, % ,004,667,022 1,514,397,857 24,519,064, % ,352,759,816 1,550,594,949 24,903,354, %

8 Economic Turmoil The dramatic credit crisis that occurred in late 2008 has negatively impacted AV growth and interest rates AV growth since 2008: : 3.43% : 1.36% : 1.57% Interest rates: 6.0% 7

9 Updated Assumptions Below are updated assumptions which utilize more conservative short term AV growth rates while maintaining the District s long term historical AV growth rate: Annual AV growth rates: : 2.0% : 3.0% : 4.0% : 5.0% Annually thereafter: 6.0% Interest rates: 5.25% 7.25% The District plans to use funds from the Strong Schools Bond at a steady pace until Below is the construction cash draw schedule provided by the District: Cumulative Construction Cash Draw Schedule $450 $400 Cash Out (In Millions) $350 $300 $250 $200 $150 $100 $50 $ CF Need 8

10 Scenario 1 ($44.50 Tax) The following scenario would maintain the $44.50 estimated tax rate for future bond issuances The District s facility needs are projected NOT to be met on time Projected shortfall of $11 million beginning in 2015 and rising to $27.1 million in 2017 Prospective Issuance Schedule (1) Issue Issue Date Proceeds Series A Sep 2008 $ 119,999,249 (2) Series B Jul ,000,000 (2) Series C Oct ,000,000 Series D Jul ,000,000 Series E Jul ,000,000 Series F Jul ,745,000 Series G Jul ,555,000 Series H Jul ,010,000 Total $ 349,309,249 Total debt service: $1.89 billion Tax Rate (Per $100,000 of AV) $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $ B4E Bonds 2023 Series D Series G 2026 Estimated Tax Rates Issued Fiscal Year Series E Series H Series C Series F Estimated Tax ($44.50) 2056 (1) Based upon draw schedule provided by District. Timing and amounts may change based upon AV, interest rates and District needs. (2) Previously issued financing. 9

11 Scenario 2 ($60 Tax Large Financings) The following scenario would increase the aggregate tax rate to $60 starting in the fiscal year The District s facility needs are projected to be met on time Prospective Issuance Schedule (1) Issue Issue Date Proceeds Series A Sep 2008 $ 119,999,249 (2) Series B Jul ,000,000 (2) Series C Oct ,000,000 Series D Jul ,000,751 Total $ 378,000,000 $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $ Tax Rate (Per $100,000 of AV) Estimated Tax Rates Total debt service: $1.13 billion B4E Bonds Series D Series G Issued Fiscal Year Series E Series H Series C Series F Estimated Tax ($44.50) (1) Based upon draw schedule provided by District. Timing and amounts may change based upon AV, interest rates and District needs. (2) Previously issued financing. 10

12 Scenario 3 ($60 Tax Small Financings) Recommended in Nov The following scenario would increase the aggregate tax rate to $60 starting in the fiscal year The District s facility needs are projected to be met on time Prospective Issuance Schedule (1) Issue Issue Date Proceeds Series A Sep 2008 $ 119,999,249 (2) Series B Jul ,000,000 (2) Series C Oct ,000,000 Series D Jul ,000,000 Series E Jul ,000,000 Series F Jul ,000,000 Series G Jul ,000,000 Series H Jul ,000,751 Total $ 378,000,000 Total debt service: $1.1 billion Tax Rate (Per $100,000 of AV) $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $ B4E Bonds 2023 Series D Series G 2026 Estimated Tax Rates Issued Fiscal Year Series E Series H Series C Series F Estimated Tax ($44.50) 2056 (1) Based upon draw schedule provided by District. Timing and amounts may change based upon AV, interest rates and District needs. (2) Previously issued financing. 11

13 Advantages and Disadvantages of Scenario 3 In the current interest rate and municipal bond market environment, the District can benefit from issuing smaller financings on a more frequent basis Advantages Significant savings on interest cost Example Scenario 2 issues $110 million in 2012 to cover construction draws over a 2 year period while Scenario 3 issues $50 million in 2012 and $60 million in 2013 to cover the same 2 year period Based upon a 6.25% interest rate, Scenario 3 would save the District $3.75 million in interest cost on the $60 million not needed until 2013 Interest cost savings allow the District to meet the current construction draw schedule Low earnings in the County Pool; little interest income benefit from issuing larger financing Issuing once a year allows the District to modify its AV growth assumptions more frequently Disadvantages Added financing costs from issuing more frequently Approximately $200,000 in fixed transaction costs per issuance (excludes underwriting fee) Added cost is more than offset by the savings on interest cost (In the example above: $3.75 million less $200,000 = $3.55 million of estimated net benefit) Added administrative burden of issuing more frequently 12

14 Scenario 4 ($60 Prop 39 Tax Rate Plus Current B4E Tax Rate) The following scenario would increase the tax rate to $60 (Proposition 39 maximum) starting in the fiscal year The District s facility needs are projected to be met on time Total debt service is significantly less than scenarios 1 through 3 Prospective Issuance Schedule (1) Issue Issue Date Proceeds Series A Sep 2008 $ 119,999,249 (2) Series B Jul ,000,000 (2) Series C Oct ,000,000 Series D Jul ,000,000 Series E Jul ,000,000 Series F Jul ,000,000 Series G Jul ,000,000 Series H Jul ,000,751 Total $ 378,000,000 Total debt service: $542 million Tax Rate (Per $100,000 of AV) $110 $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $ B4E Bonds 2023 Series D Series G 2026 Estimated Tax Rates Issued Fiscal Year Series E Series H Series C Series F Estimated Tax ($44.50) 2056 (1) Based upon draw schedule provided by District. Timing and amounts may change based upon AV, interest rates and District needs. (2) Previously issued financing. 13

15 What Are Other Districts Doing? In the current environment of weaker AV growth, numerous California school districts have elected to allow tax rates to increase San Mateo Union High School District Estimated $16 Projected to increase to $17.50 in Millbrae School District Estimated $19 Increased to $25.40 in Sequoia Union High School District Estimated $9.73 Increased to $12.90 in Mt. Diablo Unified School District Estimated $60 extension Increased to $61.20 in Projected to increase to $89 in and $95 in Los Angeles Community College District Estimated $25 extension Increased to $40.30 in Manhattan Beach Unified School District Estimated $37 extension Increased to $42.93 in

16 Sample Taxpayer Bill Scenario 3 If the District s bond tax rate is increased to an aggregate $60, a single family residence ( SFR ) with the District wide average AV of $850,000 would experience an annual tax rate increase for next year of approximately $ Sample District wide Tax Rates (1) Tax Rate Item # Purpose (per $100,000 AV) 1 1% Maximum Tax Levy $ 1, CO Retirement Levy VMC Palo Alto Unified Palo Alto City Foothill De Anza College Total $ 1, Appoximated Average AV of SFR within the District: $ 850, Tax Bill Estimate for a SFR: $ 9, Potential Increase in Palo Alto Unified Tax Rate: $ Appoximate Average AV of SFR within the District: $ 850, New Tax Bill Estimate for a SFR: $ 9, Estimated Tax Bill Increase ($): $ Estimated Tax Bill Increase (%): 1.27% (1) Source: Santa Clara County Controller Treasurer Department. 15

17 Sample Taxpayer Bill Scenario 4 If the District s bond tax rate is increased to the maximum $60 Proposition 39 tax rate plus the debt service on the former B4E bonds, a SFR with the Districtwide average AV of $850,000 would experience an annual tax rate increase for next year of approximately $ Sample District wide Tax Rates (1) Tax Rate Item # Purpose (per $100,000 AV) 1 1% Maximum Tax Levy $ 1, CO Retirement Levy VMC Palo Alto Unified Palo Alto City Foothill De Anza College Total $ 1, Appoximated Average AV of SFR within the District: $ 850, Tax Bill Estimate for a SFR: $ 9, Potential Increase in Palo Alto Unified Tax Rate: $ Appoximate Average AV of SFR within the District: $ 850, New Tax Bill Estimate for a SFR: $ 10, Estimated Tax Bill Increase ($): $ Estimated Tax Bill Increase (%): 4.38% (1) Source: Santa Clara County Controller Treasurer Department. 16

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19 Timeline for October 2012 Bond Issuance Continually update Series C bond structure: May 2012 & Ongoing Board directs County to levy bond tax for year: June 2012 Begin financing documentation: August 2012 Receive new AV: August 2012 Adopt issuance resolution/financing plan: September 2012 Sell bonds: September 2012 Settlement of bond financing (receive proceeds): October