Overview of the Municipal Bond Market and Bond Capacity

Transcription

1 Overview f the Municipal Bnd Market and Bnd Capacity

2 THE MUNICIPAL BOND MARKET Bnds are a type f investment security Bnds evidence the issuer s prmise t repay the bndhlder the principal amunt plus interest Bnds are typically issued by plitical subdivisins t prvide financing fr capital imprvements

3 THE MUNICIPAL BOND MARKET Principal is typically repaid in annual installments serial bnds Interest is typically paid semiannually until principal is repaid at maturity interest cupns Bnds are typically sld t an investment bank fr resale t investrs Fllwing the initial ffering, bnds can be sld and purchased in the secndary market

4 REGULATORY CONSIDERATIONS Bnds are exempt frm registratin with the U.S. Securities and Exchange Cmmissin Texas Attrney General must review and apprve issuance f bnds Bnd cunsel prepares transcript f prceedings and submits transcript t Texas Attrney General Texas Attrney General reviews transcript t verify that bnds are issued in accrdance with law

5 REGULATORY CONSIDERATIONS Publicly ffered bnds - issued with assistance f an investment bank - must prvide annual and peridic reprts n the Electrnic Municipal Market Access (EMMA) system Hays CISD staff must administer prcedures and prepare reprts with assistance f the District s financial advisr and bnd cunsel

6 REGULATORY CONSIDERATIONS Interest earned by the wners f bnds issued by a plitical subdivisin is typically exempt frm federal incme tax, resulting in lwer cst f capital Investrs accept lwer interest rate because n incme tax is paid n interest earnings T ensure eligibility fr tax exemptin, Hays CISD staff mnitrs cmpliance with US Treasury rules (e.g., uses f bnd prceeds and timing f expenditures) with assistance f the District s financial advisr and bnd cunsel

7 BOND ISSUANCE Schl building bnds may be issued fr cnstructin, acquisitin and equipment f schl buildings purchase f the necessary sites fr schl buildings purchase f new schl buses Schl building bnds must be apprved by a majrity f District vters

8 BOND ISSUANCE Schl building bnds are paid frm ad valrem prperty taxes Each schl district s tax rate cnsists f tw cmpnents: Maintenance and peratin tax Debt service tax

9 The ttal tax rate is split int tw different cmpnents: Maintenance and Operatins (M&O) Typically used fr the day-t-day peratins f the district, including salaries, utilities, capital utlay, supplies, fd, gas, etc. Interest and Sinking (I&S) - Funds building and capital utlay expenditures and can nly be used t pay principal and interest n cnstructin r refunding bnds. Ttal Tax Rate Maintenance and Operatin (M&O) Tax Rate [Text] Funds [Text] perating expenses such as salaries, utilities, supplies, and transprtatin. Interest and Sinking (I&S) Fund Tax Rate [Text] Funds [Text] payment f principal f and interest n bnds sld fr capital expenses.

10 BOND ISSUANCE Debt service tax capacity cntrls bnding capacity Debt service tax: Can nly be used t pay debt service n schl building bnds and refunding bnds The nly surce f payment fr schl building bnds and refunding bnds

11 BOND CAPACITY A schl district s bnd capacity - capacity t issue schl building bnds - is based n the district s capacity t generate prperty tax cllectins sufficient t pay debt service n bnds

12 BOND CAPACITY District s capacity t generate prperty tax cllectins fr debt service is based n prduct f debt service tax rate times assessed valuatin f taxable prperty in the district

13 BOND CAPACITY - LIMITATIONS Under current law, a schl district s debt service tax rate is effectively capped at $0.50 per $100 f taxable assessed value

14 BOND CAPACITY - LIMITATIONS Tax cde prvides certain state mandated and lcal ptin exemptins frm taxatin Residence hmestead Elderly (ver 65) and disabled Veterans Tax cde als prvides (i) hmestead cap and (ii) tax freeze fr elderly and disabled

15 BOND CAPACITY - VARIABLES Annual changes in any f the fllwing variables impact a schl district s tax cllectins and, therefre, its capacity t issue bnds: Value f taxable prperty in the district Annual debt service n the district s utstanding bnds Cllectin rate (i.e., percentage f taxes actually cllected)

16 Tax Rates TAV ($Billins) Bnd Capacity Histrical & Prjected TAV Tax Year Fiscal Year End Freeze Adjusted TAV TAV Grwth M&O Tax Rate I&S Tax Rate $2,883,487, % ,257,092, % ,411,481, % ,452,686, % ,563,019, % ,708,352, % ,910,777, % ,223,693, % ,765,260, % ,578,026, % ,278,026, % TBD TBD Histrical Tax Rates Freeze Adjusted TAV M&O Tax Rate I&S Tax Rate

17 2017* Debt Service ($000s) Bnd Capacity Estimated Debt Service Capacity at $36.3MM Maximum Annual Debt Service 40,000 Existing Debt Service Estimated Capacity fr Additinal Bnds 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 * 2017 payment includes early principal redemptins f apprximately $9.38MM

18 QUESTIONS?