Debt Retreat. April 13, 2015

Transcription

1 Debt Retreat April 13, 2015

2 Objective Consider the variables, assumptions, and the 10-year outlook as tools to drive what the 2015 refunding will look like as a component of our debt strategy HYPOTHETICAL

3 Agenda Background information Current debt service Future assumptions Debt planning Board goals 2015 refunding options Citizens bond committee

4 Background Information Refinancing/Refunding Definition The replacement of an existing debt obligation with another under different terms A refinancing/refunding may occur for various reasons: To take advantage of a better interest rates; To reduce or alter risk (e.g. switching from a variable-rate to a fixed-rate structure); and To restructure existing debt to maximize savings or free up cash in certain years (e.g. for new money sales).

5 Background Information Advanced Refunding Under Internal Revenue Code, an advanced refunding is a refunding that occurs more than 90 days prior to the date when the outstanding issue is callable for redemption. However, tax exempt bonds may only be advanced called once. The refunding will be feasible only if a significant time remains from the date the outstanding bonds were redeemed to the final maturity on the refunding bonds and the spread between the outstanding bonds and refunding bonds is large enough to produce savings sufficiently high to more than offset the escrow penalty.

6 Background Information Negative Arbitrage Negative arbitrage occurs when the yield on the escrow is below the yield on the refunding issue. This results in more Treasury securities having to be purchased to generate the necessary payments to defease the outstanding debt.

7 Background Information Compliance with 50 Cent Test Sec LIMITATION ON ISSUANCE OF TAX-SUPPORTED BONDS. (a) Before issuing bonds described by Section , a school district must demonstrate to the attorney general under Subsection (b) or (c) that, with respect to the proposed issuance, the district has a projected ability to pay the principal of and interest on the proposed bonds and all previously issued bonds other than bonds authorized to be issued at an election held on or before April 1, 1991, and issued before September 1, 1992, from a tax at a rate not to exceed $0.50 per $100 of valuation.

8 Background Information Compliance with 50 Cent Test (b) A district may demonstrate the ability to comply with Subsection (a) by using the most recent taxable value of property in the district, combined with state assistance to which the district is entitled under Chapter 42 or 46 that may be lawfully used for the payment of bonds.

9 Background Information Compliance with 50 Cent Test (c) A district may demonstrate the ability to comply with Subsection (a) by using a projected future taxable value of property in the district anticipated for the earlier o the tax year five years after the current tax year or the tax year in which the final payment is due for the bonds submitted to the attorney general, combined with sta assistance to which the district is entitled under Chapter 42 or 46 that may be lawfu used for the payment of bonds. The attorney general must base a determination of whether the district has complied with Subsection (a) on a taxable value of propert that is equal to 90 percent of the value certified under this subsection.

10 Background Information Compliance with 50 Cent Test (d) A district that demonstrates to the attorney general that the district's ability to comply with Subsection (a) is contingent on receiving state assistance may not adopt a tax rate for a year for purposes of paying the principal of and interest on the bonds unless the district credits to the account of the interest and sinking fund of the bonds the amount of state assistance equal to the amount needed to demonstrate compliance and received or to be received in that year.

11 Background Information Compliance with 50 Cent Test (e) If a district demonstrates to the attorney general the district's ability to comply wi Subsection (a) using a projected future taxable value of property under Subsection (c and subsequently imposes a tax to pay the principal of and interest on bonds to whic Subsection (a) applies at a rate that exceeds the limit imposed by Subsection (a), the attorney general may not approve a subsequent issuance of bonds unless the attorney general finds that the district has a projected ability to pay the principal of and intere on the proposed bonds and all previously issued bonds to which Subsection (a) appli from a tax at a rate not to exceed $0.45 per $100 of valuation.

12 Background Information Property Wealth Per WADA Eanes ISD $1,291,008 Lake Travis ISD $ 813,174 Austin ISD $ 624,771 Comal ISD $ 496,537 Burnet CISD $ 440,101 Round Rock ISD $ 410,813 Leander ISD $ 355,678

13 Background Information

14 Background Information 2015/16 I&S Tax Rate Analysis Debt Payment $80,000,000 (est) Taxable Value $18,000,000,000 (+9%) I&S Rollback Rate $ /15 I&S Rate $ Actual I&S rollback rates will be calculated in July/August

15 Current Debt Service Principal and Interest on Voter-Authorized Bonds

16 Current Debt Service Principal $ 1,111,120,286 Interest $ 2,367,284,664 Total D/S $ 3,478,404,950 CAB Percentage 76.7% CIB Percentage 23.3% CAB Series Which Can Be Called I/P Ratio 2.13 : $33,239,208 in principal $16,764,681 in principal $70,502,094 in principal 2010 Ref $10,362,267 in principal 2010A $45,194,630 in principal

17 Current Debt Service $140,000, $120,000, $100,000, $80,000, $60,000, $40,000, $20,000, $ Principal Interest

18 Current Debt Service $140,000, $120,000, $100,000, $80,000, $60,000, $40,000, $20,000, $ Principal Interest

19 Future Assumptions 10-year Outlook

20 Future Assumptions HYPOTHETICAL Tax Base Growth 2015/16 8% 2016/17 5% 2017/18 5% 2018/19 4% 2019/20 4% Enrollment Growth 2015/ /17 1, /18 1, /19 1, /20 1,251

21 Future Assumptions Tax Base Growth 2020/21 4% 2021/22 4% 2022/23 3% 2023/24 3% 2024/25 3% Enrollment Growth 2015/16 1, /17 1, /18 1, /19 1, /20 1,734

22 2025/26 3% 2026/27 2% Future Assumptions Tax Base Forecast Beyond 10 Years 2027/28 2% 2028/29 2% 2029/30 2% 2030/31 1.5% 2031/32 1.5% 2032/33 1.5% 2033/34 1.5% 2034/35+ 1%

23 Future Assumptions Construction Costs % % % % %

24 Property Tax Relief? We shall assume that the State will focus on the margins tax and/or the state sales tax. For planning purposes, we shall assume that the homestead exemption is not raised above $15 thousand.

25 Future Assumptions LISD will remain a property wealthy district and not receive EDA or IFA; LISD will annually collect 99.25% of tax collections (current and delinquent); LISD maintains an underlying rating from S&P of AA-; LISD will be ineligible to use CABs if more than 25% of debt is CABs; LISD cannot use CABs for renovations, technology, or buses; LISD cannot issue CABs unless the bond election was in November; and LISD will lose PSF guarantee after 9/1/2025 if CAB debt is above 25%.

26 Future Assumptions Based on October 2014 Demographer Report

27 Future Assumptions Based on October 2014 Demographer Report

28 Future Assumptions Based on October 2014 Demographer Report

29 Future Assumptions Bond Elections

30 Future Assumptions May 2017 or 2018 Bond Election High School #7 Middle School #9 Elementary Schools #27, 28, 29, & 30 Land and Other Capital Needs $ 412 million May 2021 or 2022 Bond Election High School #8 Middle School #10 Elementary Schools #31, 32, & 33 Land and Other Capital Needs $ 479 million Hypothetical bond election timeline to meet demographer report for next 10 years

31 Debt Planning A Number of Variables to Consider

32 Debt Planning Refunding Variables CAB to CAB or CAB to CIB Level debt service savings Re-structure and target the savings Future New Money Sales All with CIB Target 1:1 principal to interest ratio 50-cent test of 1991 remains in law Negative arbitrage Tax rate implications

33 Debt Planning Flexibility is a Must When Planning: Tax Rate Capacity, Fund Balance, Economy, etc. vs. Debt Service Goals: Reduce CAB Debt Service to 25%, Pay Down Debt Early, etc.

34 Debt Planning Cost per student for flex labs 2015 construction dollars Cost per student for a new high school 2022 construction dollars (#7) 2026 construction dollars (#8)

35 Debt Planning Historical Lookback at Adopted Tax Rates and Potential Tax Rates for 2015/ Tax Year Tax Year Tax Year Tax Year Tax Year M&O Tax Rate $ 1.04 $ 1.04 $ 1.04 $ 1.04 $ 1.04 I&S Tax Rate Total Tax Rate $ $ $ 1.48 $ 1.51 $ 1.54 Analysis of Change in Estimated Taxes Owed on Average Home Tax Year Tax Year Tax Year Tax Year Tax Year Home Value $ 194,072 $ 220,897 $ 242,120 $ 242,120 $ 242,120 State Homestead (15,000) (15,000) (15,000) (15,000) (15,000) Taxable Value $ 179,072 $ 205,897 $ 227,120 $ 227,120 $ 227,120 Total Tax Rate Estimated Taxes Owed $ 2,707 $ 3,113 $ 3,361 $ 3,430 $ 3,498

36 Board Goals Limit the term of the bonds When feasible, retire debt early Limit issuance of CABs Refinance when possible for savings Transparency for the taxpayers Lower the overall cost of borrowing Term of bonds should match asset life When possible, finance technology with M&O?

37 Refunding Options Over-levy for a few years Maximize savings Forgo some savings to reduce CAB% Level out debt service from Strategically place savings to accommodate new money sales

38 2015 Refunding Options Call only the current callable bonds - $42 million Estimated savings of $23 million Call the current callable bonds (2005 series) as well as advance refund bonds callable $305 million Estimated savings of $104 million, net of $22 million in negative arbitrage Call the current callable bonds (2005 series) as well as advance refund bonds callable $481 million Estimated savings of $148 million, net of $32 million in negative arbitrage

39 2015 Refunding Options dministration and PFM recommend that the 2015 refunding include the series 2005, 007, and Option 1 maximize savings now Option 2 structure savings to align with future capital needs (new money sales) an focus on minimizing long-term borrowing costs with planned interest rate increases Other options could include the following: Leverage/forgo some savings opportunity to advance call the most costly CABs (non-callable) Apply rollback rate for

40 2015 Refunding Options Option 1

41 2015 Refunding Options Option 1A

42 2015 Refunding Options Option 2

43 2015 Refunding Options Option 2A

44 Refunding Options Option 1 I/P payback ratios on new money Option 2 I/P payback ratios on new money

45 Updated CAB Percentage Year Option 1 Option % 62.47% % 48.25% % 25.00% % 23.39%

46 Citizens Bond Committee Goals of Committee Considers bond sale/refinancing information provided by LISD administration; Prioritizes and structures of bond transactions to meet the needs of the taxpayers; and Recommends any such bond sale and refunding structure. Administration Responsibility Provide taxable value estimates; Provide long range potential campus needs to address enrollment growth and related cost estimates; and Provide overall tax impact on the community based on bond transaction structure provided by the committee.

47 Questions? Answers