How will this affect my taxes?

Transcription

1 How will this affect my taxes? Disclaimers- models and estimates are based on assumptions and projections of future interest rates which are unknowable, but care is taken to use reason and reliable forecasts at the time the model is created. We wanted to look at maturity (bond terms) of various lengths Tax rate is a function of Tax Base- We assumed NO GROWTH in the tax base for this exercise- to be very conservative. Normal growth is % per year in Yarmouth (formerly masked by power plant) Things WILL change. This model assumes all three bond referendums will pass. They may not.

2 Short Summary if all projects are funded: At recommended 30 year maturity- estimated net impact on property taxes will be about 8.2% in the peak year, and average 7.9% in the first 10 years---declining thereafter. Shorter maturities to be reviewed. An alternative 25 year schedule will save interest costs over the life of the issue- but the peak year impact will be about 11.5%, and 10.1% average in the first 10 years, declining thereafter. An alternative 20 year schedule will save interest cost over the life of the issue- but the peak year impact will be about 12.8%, and 11.7% average in the first 10 years, declining thereafter.

3 Debt Service Costs in Perspective of Entire Budget Demands Current Debt Service = 6.3% of Budget (FY 19) Projected Debt Service = 14% of Budget (in peak year)

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5 Schools Part 2- ($12.2M) Represents $0.47 of the $1.47 net margin. 8.2% -2.6% = 5.6% Adds $165 to $350 ($515 Total for Parts 1 and 2)

6 General Descriptors of Tax Impacts If nothing gets funded- debt service will decline from $1.40/$1000 to $0.63/$1000 in a couple years, then drop to $0.44/$1000 for a few years.then retire completely in If only the Public Safety Building ($8.5M) gets funded- debt service will still decline from $1.40/$1000 to about $1.05/$1000 thru 2034 then dropping off entirely in (2% net decrease) If the PS Building ($8.5M) and Schools Part 1 ($39.8M) gets fundeddebt service will increase by about $.98/1000. (5.5% increase-30 yr School bonds) (7.7% on a 20 year School Bond) If all projects get funded- debt service will increase by about $1.47/$1000 ($8.2% on 30 year school financing) (11.5% on 25 yrs, 12.8% on 20 yrs)

7 Term Sensitivity Analysis -Schools $52,000,000 Financed Alternatively at: 30 years 25 years 20 years

8 Debt Alternative Structures If the School projects are financed for 25 years rather than 30 years, annual debt service costs will increase to $2.05/$1000 additional- An increase of 11.5% (instead of 8.2%). Total interest cost will be less and the term will be shorter by 5 years. If the School projects are financed for 20 years rather that 30 years, annual debt service costs will increase to $2.28/$1000 additional- An increase of 12.8% (instead of 8.2% or 11.5%) Total Interest cost will be less and the term will be shorter by 10 (5) years. An alternative staggered issue can be considered (subsequent slide)

9 Analysis of Various Maturities for School Debt of $52,000, YEARS 25 YEARS 30 YEARS FY 19 Existing Debt Schedule $2,340,194 $2,340,194 $2,340,194 Tax rate for Debt service FY 19 (1.40) $1.40 $1.40 $1.40 SCHOOL- New Principal Interest /20 Interest/25 Interest/30 $38.8M 9 $39,800,000 $12,304,000 $15,190,400 $19,600,800 $12.2M $12,200,000 $4,179,200 $5,031,680 $6,203,200 TOTAL $52,000,000 $16,483,200 $20,222,080 $25,804,000 Annual Debt Service Cost (peak year) FY 21 Taxes For New Debt- Schools $3,864,000 $3,484,000 $2,514,000 FY 21 Taxes for New Debt- Public Safety $276,250 $276,250 $276,250 FY 21 Existing Debt Schedule $2,000,527 $2,000,527 $2,000,527 Total Debt Service $6,140,777 $5,760,777 $4,790,777 FY 21 Tax Rate For Debt Service $3.68 $3.45 $2.87 Less: FY 19 Baseline -$1.40 -$1.40 -$1.40 $2.28 $2.05 $1.47 Overall rate increase from FY 19 (17.83) 12.8% 11.5% 8.2% First 10 year average FY 21-FY yr ave for new School debt $4,134,400 $3,658,416 $3,018, yr ave for new Public Safety Debt $621,150 $621,150 $621, year Ave Existing Schedule $1,059,640 $1,059,640 $1,059,640 total Annual Average Debt Service $5,815,190 $5,339,206 $4,698,950 Average (FY 21-FY 30) Rate for Debt Service $3.48 $3.20 $2.81 Less FY 19 Baseline -$1.40 -$1.40 -$1.40 $2.08 $1.80 $1.41 Overall rate increase from FY 19 (17.83) 11.7% 10.1% 7.9%

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11 25 Years FY 19 Debt Service Costs Total: $2,340,154 $1.40 Peak year Debt costs (2021): $5,760,777 $3.45 Difference $2.05 Increase over FY 19 Total tax rate of %

12 20 years FY 19 Debt Service Costs Total: $2,340,154 $1.40 Peak year Debt costs (2021): $6,140,777 $3.68 Difference $2.27 Increase over FY 19 Total tax rate of %

13 $4,500,000 Existing Plus $39.8M Part 1 Schools Only (No PS, No Part 2) $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $ All Existing $39.8M If only the Part 1 School Project is approved (No Part 2 and No Public Safety) FY 21 and FY 22 are spike years with a debt service net increase of $1,700,868 ~ $1.02/$1000 ~ 5.7% "Average" (1st 10) years net increase is $974,485 ~ $0.58/$1000 ~ 3.3%

14 Interest Rate Sensitivity 3.20% on 30 years $52,000,000 Vs 3.70% on 30 years $52,000,000

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16 What about a staggered issue? Approve $39.8M now for a 20 year issue, and Come back in a few years for a second 20 year issue ($15,000,000)?

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18 Questions?.

19 Term Sensitivity Analysis - PS Building $8,500,000 Financed alternatively at: 15 years 20 years 25 years

20 Public Safety Building Financed at Year Alternatives- Stand Alone Comparison

21 Debt Cost Summary If all projects get funded (PS at $8.5M + Schools Part 1 and Part 2 at $52M), then debt service tax burden will increase from $1.40/$1000 to about $2.87/$1000 (up $1.47/$1000), then declining annually thru (8.2% increase) $1.47/$1000 rate increase x $350,000 valuation = $ Current Tax Bill on $350,000 = $6, New tax Bill on $350,000 $19.30/$1000 = $6,755 Increase = $ = 8.2%

22 $6,000,000 $52,000, years at 3.70% AIC (0.5% Higher AIC) $5,000, % interest margin adds about $23,000/yr in first 10 years < $5/yr On $350,000 home $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 FY Existing 30 yrs 3.2 With Interest Rate at 3.70% the Total Interest Cost on $52M (30 years) is $29,835,875 Average Annual Debt Service Cost (gross) FY is $3,303,403

23 $6,000,000 $52,000, years at 3.20% AIC $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 FY Existing 30 yrs 3.2 With Interest Rate at 3.2% the Total Interest Cost on $52M (30 years) is $25,804,000 Average Annual Debt Service Cost (gross) FY is $3,075,240