George K. Baum & Company New Mexico Public Finance

Transcription

1 George K. Baum & Company New Mexico Public Finance Renewable Energy Finance & Lease Purchase of Facilities 6565 Americas Parkway NE, Suite 860 Albuquerque, NM (505)

2 George K. Baum & Company is a privately held and client focused full-service investment bank with 24 offices nationwide including public finance offices in 22 cities. GKB is made up of approximately 200 professionals across the nation. Public finance is the focus of our company s business, generating more than 90% of the firm s revenues. GKB has a proven record of more than 90 years providing investment banking services to our clients. George K. Baum & Company has operated public finance offices in the Southwest going back to the early 1980 s. In this time, GKB has consistently been ranked among the top five investment banks for New Mexico municipal bond issuers*. Since 2000, George K. Baum & Company has been involved with more than 6,061 municipal bond issues, totaling more than $223.4 billion across the country. In New Mexico, GKB has served as underwriter or financial advisor on more than 560 bond financings, totaling more than $11 billion in par amount. Our public finance professionals provide a wide range of services to our public finance clients. *Source: Thomson Reuters 2 September 2018

3 John D. Archuleta Senior Vice President Neal Skiver Senior Vice President Brad C.F. Angst First Vice President Clint Elkins Assistant Vice President Thomas Tafoya Analyst Since 2000, GKB has served on more than 560 New Mexico bond issuances totaling more than $11 billion in par amount. 3 September 2018

4 Section 1 Lease Purchase Provisions of the Law Section 2 Financing Options Energy Efficiency Projects Section 3 Mill Levy Calculations Section 4 Continuing Disclosure Requirements 4 September 2018

5 Section 1: Lease Purchase Provisions of the Law 5 September 2018

6 Eunice Public School District No. 8 Lease Purchase Arrangement Eunice, New Mexico $5.91 MILLION Series 2016 Lease Purchase Arrangement Challenge & Background: Update athletic facilities while maintaining GO bonding capacity for academic facilities Statutory limitations of 6% bonding capacity & GO bond needs for new middle school in the coming years Strong but volatile tax base due to O&G Cash balance and reserves from SB9 and HB33 Credit rating Rising cost of construction versus interest cost of financing Working with GKB, the Eunice School District issued the first Lease Purchase Arrangement for Athletic Facilities in the state by utilizing the HB33 mill levy 6 September 2018

7 EUNICE PUBLIC SCHOOLS - ASSESSED VALUATIONS Tax Total Total Total Total Annual Year Residential Non-Residential Oil & Gas Valuation % Change 2010 $13,157,635 $75,611,863 $413,074,586 $501,844, $14,098,097 $125,290,893 $470,229,395 $609,618, % 2012 $14,913,248 $105,316,249 $543,984,770 $664,214, % 2013 $16,094,369 $105,373,360 $486,142,892 $607,610, % 2014 $17,938,896 $110,057,707 $546,976,492 $674,973, % 2015 $19,116,900 $130,013,592 $650,520,356 $799,650, % 2016* $20,424,463 $142,873,857 $452,996,834 $616,295, % *Initial Valuations from PED - Subject to Change $900,000,000 25% $800,000,000 $700,000,000 $600,000,000 $500,000,000 20% 15% 10% 5% 0% $400,000,000 $300,000,000 $200,000,000 $100,000,000 Assessed Valuation Annual % Change -5% -10% -15% -20% -25% *Source: NMPED $ * -30% 7 September 2018

8 Retain GO bonding capacity, lock in construction cost, enter into a Lease Purchase Agreement and utilize cash reserves HB33 Question to voters for $4.00/$1,000 mill levy increase Two separate questions (1) continuation of existing levy; and (2) defined use for athletic facilities Lease purchase structure (not considered debt) Can t pledge HB33 or SB9 Revenue to the repayment of debt Annual appropriation of lease payments Essentiality and Investor needs Cash fund a portion of the project with HB33 reserves RFP for Bank Direct Purchase 8 September 2018

9 Lease Purchase Act Requirements: Financing Results: PED and PSFA approval 2.45% Interest Rate and 3 Year Term 5 year maximum Prepayment option at any time after closing Appraisal requirements Covenants and Reporting Right of Entry and License Cash portion versus bank portion and tracking 9 September 2018

10 10 September 2018

11 Eunice Public School District No. 8 Lease Purchase Arrangement Eunice, New Mexico $5.91 MILLION Series 2016 Lease Purchase Arrangement Summary: Eunice Schools was able to upgrade long overdue improvements to its athletic facilities in an economic downturn while maintaining its bonding capacity for academic purposes. GKB knows the financing options available to New Mexico Districts and brings customized creative and sophisticated options for your situation and project. We balance this with a keen understanding of the law, regulations, and risk associated with each type of product. 11 September 2018

12 Section 2: Financing Options Energy Efficiency Projects 12 September 2018

13 The Energy Efficiency and Renewable Energy Bonding Act (the CERBs Act ) authorizes the New Mexico Finance Authority ( NMFA ) to issue up to $20MM in Clean Energy Revenue Bonds ( CERBs ), the proceeds of which are used to provide funding for various energy efficiency measures installed at public schools and state agencies. To date, 3 school districts (Mountainair, Santa Fe & Socorro) and 1 state agency (Cultural Affairs) have funded energy efficiency projects under the CERBs Act approximately $16MM is currently available. 13 September 2018

14 The following Energy Efficiency Measures ( EEMs ) are allowed under the CERBs Act: Replacement or modification of lighting fixtures On-site photovoltaics HVAC system modification or replacements Energy control systems Cogeneration/combined heat and power systems The CERBs Act requires an energy efficiency assessment (an Energy Audit ) to identify the EEMs that can be installed at a total price that is less than the energy cost savings to be realized with a schedule of funding and installing the EEMs that will realize significant energy cost savings in the shortest amount of time. Insulation Storm windows or doors Caulking, weather stripping, window glazing Solar heating and cooling systems or other renewable energy systems Energy recovery systems 14 September 2018

15 The Energy Audit shall be developed for school buildings by the Energy Minerals and Natural Resources Department ( EMNRD ) in conjunction with the following: Public Education Department ( PED ) Public School Capital Outlay Council ( PSCOC ) Public School Facilities Authority ( PSFA ) Results of the Energy Audit will be used to calculate the estimated energy cost savings in the form of lower utility payments by the school district that will be annually realized as a result of the installation of the EEMs. 90% of these future estimated energy cost savings (after accounting for the EEMs annual operations and maintenance costs) will be deducted from the school district s State Equalization Guarantee ( SEG ) and transferred into a special fund, called the energy efficiency and renewable energy bonding fund. 15 September 2018

16 The school district will enter into a financing arrangement with NMFA, the proceeds of which will be deposited into escrow and used to pay for the installation of the EEMs. Upon maturity of the CERBs obligation, the SEG deduction will cease. Annual reporting to the Legislature and the Governor is required, including the following details: All payments made for the installation of EEMs Expenditures made in administering the Act All buildings on which EEMs have been performed Energy cost savings calculations Cost-effectiveness of the program Annual summary of activities Additional information to assist in evaluation of the program 16 September 2018

17 Taxes & Other Funds Permanent Fund State Equalization Guarantee Energy Efficiency and Renewable Energy Bonding Fund Utility Providers (Electricity/Natural Gas/Water) Utility Services 100% of Utility Savings NM Public School District Financing Agreement Fund Construction Escrow New Mexico Finance Authority, Lender & Issuer of Clean Energy Revenue Bonds Pay Project Costs Energy Contractor 17 September 2018

18 $200 $180 $160 $140 $120 $100 Positive Cashflow $80 $60 $40 Annual Debt Service/ SEG Deduction Net Annual Savings Annual Debt Service $20 $ Notes: 1. Year 1 Net Annual Savings = $ Year 1 Debt Service Payment = $90 (90%) 3. Assumed Inflation = 2% 18 September 2018

19 Santa Fe Public School District Solar PV Project Santa Fe, New Mexico $2.9 MILLION Series 2016 Clean Energy Revenue Bond Summary: Transaction structured under New Mexico s Energy Efficiency and Renewable Energy Bonding Act Installation of approximately 1 MW of solar at Santa Fe High School (ground mounted) and Ramirez Thomas Elementary School (parking shade mounted) NMFA provided 24 year financing at a 3.11%, resulting in positive annual cashflow after debt service GKB s Renewables & Energy Infrastructure team served as financial consultant to the District 19 September 2018

20 Santa Fe Public School District Solar PV Project Santa Fe, New Mexico $975 THOUSAND Series 2018 Clean Energy Revenue Bond Summary: Transaction structured under New Mexico s Energy Efficiency and Renewable Energy Bonding Act Installation of approximately 407 kw of solar at Capital High School (ground mounted) and El Camino Real Academy (parking shade mounted) NMFA will be providing 25 year financing at a 3.80%, resulting in positive annual cashflow after debt service GKB s Renewables & Energy Infrastructure team served as financial consultant to the District 20 September 2018

21 The New Mexico Public Facility Energy Efficiency and Water Conservation Act (the EPC Act ) allows a Governmental Unit (school district, city, county, state agency, etc.) to enter into a Guaranteed Utility Savings Contract with a Qualified Provider (an energy services company, or ESCO ) The Qualified Provider will install various energy and water conservation measures, such as lighting, HVAC, energy management systems, controls, insulation, replacement windows/doors, solar (electric and thermal), cogeneration, etc. The Qualified Provider must provide a written guarantee that the energy savings will meet or exceed the costs. The term of the Guaranteed Utility Savings Contract cannot exceed 25 years or the expected useful life of the most durable energy or water conservation measure 21 September 2018

22 A Governmental Unit may enter into an installment payment contract or leasepurchase agreement for the purchase and installation of energy or water conservation measures The payment obligation is only payable from utility cost savings, conservationrelated cost savings and other revenues pledged for that purpose under the EPC Act (not a general obligation) The only source of payment is the Public School Utility Conservation Fund, which is annually approved for funding by the New Mexico Legislature 22 September 2018

23 Permanent Fund State Legislature Public School Utility Conservation Fund Utility Providers (Electricity/Natural Gas/Water) Utility Services 100% of Utility Savings NM Public School District Financing Agreement Fund Construction Escrow Lender/ Investor Pay Project Costs Qualified Provider (ESCO) 23 September 2018

24 San Juan College District Guaranteed Energy Savings Project Farmington, New Mexico $7.5 MILLION Series 2016 Lease Purchase Agreement Summary: Transaction structured under New Mexico s Public Facility Energy Efficiency and Water Conservation Act Energy Conservation Measures: lighting upgrades, central plant improvements, air handling unit replacements, energy management system and waste management solutions The lease-purchase was sold with an 18 year term at an interest rate of 3.11%, resulting in positive annual cashflow after debt service GKB s New Mexico Renewables & Energy Infrastructure office served as lease arranger agent for the District 24 September 2018

25 Clovis Community College District Guaranteed Energy Savings Project Clovis, New Mexico $2.74 MILLION Series 2018 Lease Purchase Agreement Summary: Transaction structured under New Mexico s Public Facility Energy Efficiency and Water Conservation Act Energy Conservation Measures: lighting, water conservation, building envelope, controls, solar PV, central plant improvements and air handling unit replacements The lease-purchase was sold with an 16 year term at an interest rate of 3.69%, resulting in positive annual cashflow after debt service GKB s New Mexico Renewables & Energy Infrastructure office served as lease arranger agent for the District 25 September 2018

26 Section 3: Mill Levy Calculations 26 September 2018

27 SCHOOL DISTRICT 2017 Residential 2017 Non- Residential Actual 2017 Copper, 2016 Oil/Gas 2017 Total Valuation R/NR Collctn. Rate Res./Non-res. Production COUNTY BERNALILLO COUNTY Albuquerque #12 12,134,868,835 3,742,472,116 99% 15,718,567,541 + #2A Sandoval 285,979,880 37,228,894 99% 319,976,686 + #2AC Sandoval 42,759,783 3,566,195 99% 45,862,718 Oil/Gas/ Cop. Collectn. Rate Oil/Gas/Copp er Production Total Production Cash Balance June 30, Amount Due 7/1/17 to 12/31/ Surplus/ (Deficit) % of Surplus Amount Due 1/1/17 jto 12/31/ Tax Levy Req. +R1-A Bernalillo 0 6,009,699 16,252,885,402 99% 5,949,602 16,090,356,548 76,095,898 61,193,105 14,902,793 11,177,094 68,257,516 57,080, CATRON COUNTY Reserve #1 24,302,433 22,833,303 47,135,736 92% 43,364,877 43,364, , ,828 21,211 15, , , Quemado #2 49,614,529 24,721,186 94% 69,875,572 + #2A Catron 4,768,561 2,789,150 94% 7,104,248 + Q-M-02 Cibola 2,703,512 6,811,767 91,408,705 90% 8,563,751 85,543, , ,000 10,540 7, , , CHAVES COUNTY Roswell #1 607,908, ,973,979 9,662,908 1,035,545,709 96% 984,847,489 90% 8,696, ,544,106 6,047,183 5,295, , ,114 6,234,563 5,670, Hagerman #6 12,450,797 23,607, ,857 37,009,555 96% 34,616, % 950,857 35,567, , ,508 32,591 24, , , Dexter 26,642,382 50,333,441 5,231,598 82,207,421 96% 73,896,790 50% 2,615,799 76,512, , , , , , , Lake Arthur #20 3,639,943 21,655,097 17,337,564 42,632,604 98% 24,789,139 60% 10,402,539 35,191, , , , , , , CIBOLA COUNTY Grants-Cibola #3 125,222, ,803, ,025,484 87% 261,892, ,892,171 2,814,280 2,395, , ,802 2,673,389 2,359, GOB 2017 Tax Levy COLFAX COUNTY Cimarron #3 285,191, ,531,269 22,897, ,619,546 90% 365,150,287 85% 19,462, ,612, , ,388 35,154 26, , , Raton #11 86,268,336 66,229,170 2,663, ,160,590 94% 143,347,656 90% 2,396, ,744,431 24,400 20,694 3,706 2, , , Springer #24 15,933,170 22,948,811 90% 34,993,783 + #49 Union 403,209 1,020,254 40,305,444 90% 1,281,117 36,274,900 24,130 9,594 14,536 10, , , Maxwell #26 4,535,037 15,668,997 20,204,034 90% 18,183,631 18,183, CURRY COUNTY Clovis #1 527,174, ,929, ,103,642 94% 754,917, ,917,423 3,834,771 3,279, , ,165 3,672,443 3,256, Texico #2 16,019,253 41,882,780 94% 54,427,911 + #3 Roosevelt 2,267,746 25,334,757 85,504,536 97% 26,774,428 81,202, , , ,351 79, , , Melrose #12 8,769,231 18,174,932 94% 25,327,513 + #9/53 Roosevelt 333,588 1,034,183 97% 1,326,738 + #53 Quay 909,670 2,778,189 31,999,793 94% 3,466,587 30,120, , ,981 8,955 6, , , Grady #61 2,655,919 5,928,222 91% 7,811,568 + #23/47 Quay 353, ,339 9,469,239 90% 796,588 8,608,157 47,463 38,766 8,698 6,523 58,190 51, September 2018

28 $200,000,000 $180,000,000 $160,000,000 Total Valuation Annual % Change 7.0% 6.0% General Obligation Bonding Capacity 2017 Final Limitation (6% of $183,790,500) $11,027,430 Less: Outstanding G.O. Debt (As of 09/04/2018) $5,000,000 Additional G.O. Bonding Capacity $6,027,430 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $ ABC Public School District Tax Year Total Residential Total Non-Residential Total Valuation Annual % Change 2013 $99,576,176 $63,505,333 $163,081, % 2014 $102,175,848 $63,615,983 $165,791, % 2015 $104,590,330 $66,796,473 $171,386, % 2016 $105,124,593 $68,578,844 $173,703, % 2017 $108,451,717 $75,338,783 $183,790, % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% District's Authorized but Unissued Bonds $0 Year Ending Additional Capacity Current $6,027, $6,287, $6,557, $6,837, $7,122, $7,417, $7,722, $8,042, $8,372, $8,712, $9,067, $9,432, $9,812, $10,202, $10,607, $11,027, September 2018

29 Issuer: ABC Public School District Type: General Obligation School Bonds Series: Series 2018 Dated Date 8/1/2018 Original Par: $5,000,000 Current Par: $5,000,000 Enhancement: NM School District Enhancement Program Call Provisions: 8/1/2028 Due: 8/1 Calendar Year Principal Interest Annual DS Annual DS 2019 $260,000 $175,000 $435,000 $435, $270,000 $165,900 $435,900 $435, $280,000 $156,450 $436,450 $436, $285,000 $146,650 $431,650 $431, $295,000 $136,675 $431,675 $431, $305,000 $126,350 $431,350 $431, $320,000 $115,675 $435,675 $435, $330,000 $104,475 $434,475 $434, $340,000 $92,925 $432,925 $432, $355,000 $81,025 $436,025 $436, $365,000 $68,600 $433,600 $433, $380,000 $55,825 $435,825 $435, $390,000 $42,525 $432,525 $432, $405,000 $28,875 $433,875 $433, $420,000 $14,700 $434,700 $434,700 Total: $5,000,000 $1,511,650 $6,511,650 $6,511, September 2018

30 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 GO Bond - Mill Levy Rate Calculation Example Total Assessed Valuation $183,790,500 Collection Rate 90% Production (AV x Collection Rate) $165,411,450 Annual Debt Service $435,000 GOB Mill Levy Rate (Annual Debt Service Production x 1,000) $2.630 Est. Mill Levy Revenue for Debt Service (Annual Debt Service Production x 1,000) $435,000 $50,000 $0 30 September 2018

31 Section 4: Continuing Disclosure Undertaking 31 September 2018

32 When an issuer sells bonds in the public markets for $1 million and over, the issuer is required to make certain disclosure requirements annually to update bonds holders and the public, which is outlined in the Continuing Disclosure Undertaking that the issuer executes prior to closing. Effective July 1, 2009, the Municipal Securities Rulemaking Board ( MSRB ) received approval from the Securities and Exchange Commission ( SEC ) to establish a continuing disclosure service which is called MSRB s Electronic Municipal Market Access System or ( EMMA ). EMMA receives electronic submission of continuing disclosure documents and related information from issuers and/or obligated persons pursuant to Rule 15c2-12 and makes this information publicly available on the EMMA website at emma.msrb.org. 32 September 2018

33 Continuing disclosure provisions of Rule 15c2-12: An underwriter for a primary offering of municipal securities subject to the rule is prohibited from underwriting the offering unless the underwriter has determined that the issuer has undertaken to provide certain items of information to the marketplace. These items include: 1) Annual financial information concerning the issuer; 2) Audited financial statements; 3) Notice of certain events, if material; and 4) Notices of failures to provide annual financial information on or before the date specified in the written undertaking. 5) New offering documents must include descriptions of any continuing disclosure violations in the past five years. Continuing disclosure documents are made available to the public for the life of the securities. 33 September 2018

34 Generally, New Mexico school districts have the same fiscal information that needs to be filed annually. Due dates for filing are usually December 31st or March 31st of each year as longs as bonds are outstanding. The following is a typical list of information required to be filed: Debt & Other Financial Obligations Net debt Outstanding debt Debt service requirements Direct & overlapping debt District Information Student enrollment State Equalization Guarantee ( SEG ) payments Fiscal year audit (or unaudited financials if the audit isn t available) Tax Base Assessed valuation History of assessed valuation Major taxpayers Tax rates School tax rates Tax collections 34 September 2018

35 George K. Baum & Company New Mexico Public Finance Albuquerque Santa Fe (505) Americas Parkway NE, Suite 860 Albuquerque, New Mexico All rates are indicative, subject to credit approval and market conditions. Please call George K. Baum & Company for current indications. While this material is based on information we consider reliable, we do not represent that is accurate or complete, and it should not be relied upon as such. This rate report does not constitute an offer to sell or a solicitation of an offer to buy any security, instrument or contract. George K. Baum & Company, or any person associated with it, may at any time have positions in securities, instruments or contracts similar to those mentioned above. Each counterparty must determine the appropriateness of each transaction to its specific application. This report was prepared from data believed to be reliable but not guaranteed by us without further verification or investigation, and does not purport to be complete. It is not to be considered as an offer to sell or a solicitation of an offer to buy the securities of the entities covered by this report. Opinions expressed are subject to change without notice. George K. Baum & Company may act as a principal for its own account or as agent for another person, in connection with the sale or purchase of any security which is subject in this report. 35 September 2018