APPENDIX A D.A. Davidson Presentation Page C-1 Capital Facilities - PDF document

APPENDIX A – D.A. Davidson Presentation Page C-1

Capital Facilities Planning May 31, 2016 J ON G ORES M ANAGING D IRECTOR (206) 389-4043 JGORES @ DADCO . COM

1 Discussion Topics  Election Results  Capital Facilities Financing  Tax Rate Projections

2 Washington State Election Results-School Districts Only 2014 2015 2016* M&O Levies M&O Levies M&O Levies 160 Passed and 3 Failed 46 Passed and 2 Failed 131 Passed and 3 Failed Capital Project Levies Capital Project Levies Capital Project Levies 49 Passed and 3 Failed 16 Passed and 2 Failed 27 Passed and 2 Failed Transportation Levies Transportation Levies Transportation Levies 1 Passed and 1 Failed 2 Passed and 1 Failed 2 Passed and 0 Failed Bond Authorizations Bond Authorizations Bond Authorizations 13 Passed and 27 Failed 23 Passed and 22 Failed 21 Passed and 19 Failed * February 9, 2016 and April 26, 2016 election results only. Source: Washington Secretary of State: Election and Voting website and individual County Auditor websites

3 Voting Patterns-Bond Issues Passed per Year (Years 1993 through April 2016-Schools Only) Source: State of Washington, Office of Superintendent of Public Instruction

4 Voting Patterns-Bond Issues Passed by Month Statewide (Years 1992 through April 2016-Schools Only) Source: State of Washington, Office of Superintendent of Public Instruction

5 2016-2017 Special Election and Resolution Filing Dates The 2016-2017 special election dates and ballot resolution filing deadlines pursuant to the Revised Code of Washington (“RCW”) are listed below for your information. (1) These are the dates permitted under current law, which are subject to change by the Legislature. E LECTION D ATE R ESOLUTION F ILING D EADLINE (2) A PPROXIMATE D ATE B ALLOTS ARE M AILED (3) November 8, 2016 (General) August 2, 2016 October 21, 2016 February 14, 2017 December 16, 2016 January 27, 2017 April 25, 2017 February 24, 2017 April 7, 2017 August 1, 2017 (Primary) May 12, 2017 July 14, 2017 November 7, 2017 (General) August 1, 2017 October 20, 2017 (1) This data is for informational purposes only and does not take the place of local, state or federal laws. Specific RCW information can be found at: http://www.secstate.wa.gov/elections/election_laws.aspx. (2) Some dates may have been adjusted to reflect the business day prior to actual resolution filing date, according to RCW 29A.04.330, if falling on a weekend. (3) Applies to both mail and absentee ballots. Absentee ballots are required to be mailed no later than 18 days prior to the election date. RCW 29A.40.070 Source: Washington Secretary of State’s Office, Elections and Voting website.

6 Capital Financing Options Types of School District Bonds – Voted- Unlimited Tax General Obligation Bonds (UTGO) – Non-voted – Limited General Obligation Bonds (LGO) A. Voter approved bonds (UTGO) – Repaid with property taxes – Approved with a 60% yes vote, 40% validation – 5% Debt Capacity = $98,512,591 - $1,030,225 (Outstanding Debt) = $97,482,366 B. Non-voted bonds (LGO) – Repaid with existing revenue – Can’t be used for “new” construction – 3/8 of 1% Debt Capacity = $7,388,444 - $1,030,225 = $6,358,219

7 Capital Financing Options C. Capital Projects Levy (no debt limit) – Simple majority – Two to six year collection – No interest cost Bonds are the primary method used by Washington school districts to finance the “local share” of capital projects because – cash is generated up front – payments can be spread over time, and – districts have some control over taxpayer impacts

8 Sample Bond Proposition PROPOSITION 1 SCHOOL DISTRICT NO. 123 BONDS FOR CONSTRUCTION OF SCHOOL FACILITIES The Board of Directors of XYZ School District No. 123, adopted Resolution No. 456, concerning a proposition to finance construction of school facilities. This proposition would authorize the District to construct a new elementary school (Grades K-3) to replace XYZ Elementary School on the existing site and construct additional classrooms to replace portable classrooms at XYZ Middle School; issue no more than $19,544,500 of general obligation bonds maturing within 20 years; and levy annual excess property taxes to repay the bonds, all as provided in Resolution No. 456. Should this proposition be: Approved………. ____ Rejected………… ____

9 Tax Rate Planning Assumptions  Interest Rates  Bond Rating  Assessed Value  Bond Structure

10 Tax Rate Planning A. Interest Rates  Lower interest rates result in lower tax rates for bonds.  Interest rates are determined when bonds are actually sold.  Assumption: Future Bond Sales Current rates plus 1.50 % (150 basis points).

11 Tax Rate Planning B. Bond Rating  A higher bond rating results in lower interest rates.  Assumption: Aa1 (with State Guarantee) A1 District Rating (Pending) A Guide to Bond Ratings Moody’s Investors Service – Founded 1860 Highest Quality Aaa Aa1, Aa2, Aa3 A1, A2, A3 Baa1, Baa2, Baa3 Lowest Quality NR (Nonrated)

12 Tax Rate Planning B. Bond Rating (continued)  Bond raters consider the local economy, District finances, and other factors.  Assumption: Aa1 (with State Guarantee) A1 District Rating (Pending) Governmental Factors Financial Performance Economy The Rating Debt Factors

13 Tax Rate Planning C. Assessed Value New Const. as Year Historical Bond AV New Construction % change % of AV 2000 1,237,574,637 -1.0% N/A 2001 1,263,725,628 2.1% N/A 2002 1,548,628,167 22.5% N/A 2003 1,644,919,906 6.2% N/A 2004 1,691,020,805 2.8% N/A 2005 1,673,225,427 17,604,945 -1.1% 1.0% 2006 1,642,310,193 23,016,106 -1.8% 1.4% 2007 2,171,774,387 63,114,032 32.2% 3.8% 2008 2,077,655,725 65,759,086 -4.3% 3.0% 2009 2,365,392,134 40,954,693 13.8% 2.0% 2010 2,410,950,864 32,059,449 1.9% 1.4% 2011 2,503,639,290 23,296,370 3.8% 1.0% 2012 2,290,530,792 32,271,730 -8.5% 1.3% 2013 2,097,664,633 5,591,377 -8.4% 0.2% 2014 1,884,389,389 6,435,500 -10.2% 0.3% 2015 1,904,617,145 12,273,880 1.1% 0.7% 2016 1,990,136,514 11,905,238 4.5% 0.6% 5 year Compound Annual Growth Rate (2011-2016): -4.5% 10 year Compound Annual Growth Rate (2006-2016): 1.9%

̶ ̶ ̶ ̶ 14 Tax Rate Planning C. Assessed Value (continued)  Projected Assessed Value Growth Final 2015: -0.5% growth Final 2016: 4.5% growth Projected 2017-2045: 1.5% annual growth TransAlta portion remains at 2016 value  An individual’s taxes will be based on the assessed value for their property  Higher assessed values will lower the District’s tax rates (but not the overall payment )  New construction vs. increase in value of existing property

15 Increases in Property Values Will Not Increase School District Tax Collections  Changes in property values don’t change the amount of taxes authorized  Local school taxes can only be increased by a vote of the people  Changing property values will change tax rates, but not tax collections Year Home Value Tax Rate Tax Bill XYZ School District Home Value 2015 $100,000 $5.00/$1,000 $500 Assume a 20% increase in Assessed Value for XYZ School District #1: 20% increase 2016 $120,000 $4.17/$1,000 $500 #2: 10% increase 2016 $110,000 $4.17/$1,000 $459 #3: 30% increase 2016 $130,000 $4.17/$1,000 $542

̶ ̶ ̶ 16 Tax Rate Planning D. Bond Structure  State law gives Districts great flexibility in determining bond structures  Options: Level Debt Level Tax Rate Stepped Level Tax Rate

17 Bond Tax Rate Summary Interest Rates: Future bond sales current plus 150 basis points Bond Rating: Aa1 State Guarantee District Rating: A1 (pending) Assessed Value Growth: Final 2015: -0.5% growth; Final 2016: 4.5% growth; Projected 2017-2045: 1.5% Scenario #1 #2 #3 #4 #5 #6 Authorization Amount $40,000,000 $50,000,000 $60,000,000 $40,000,000 $50,000,000 $60,000,000 Bond Sale Dates and Amounts June 1, 2017 $40,000,000 $50,000,000 $60,000,000 $40,000,000 $50,000,000 $60,000,000 Bond Tax Rates Projected 2018 $1.44 $1.80 $2.16 $1.27 $1.59 $1.90 2019 1.44 1.80 2.16 1.27 1.59 1.90 2020 1.44 1.80 2.16 1.27 1.59 1.90 2025 1.44 1.80 2.16 1.27 1.59 1.90 2030 1.44 1.80 2.16 1.27 1.59 1.90 2035 1.44 1.80 2.16 1.27 1.59 1.90 Total Interest Cost $22,911,000 $28,643,000 $34,369,000 $32,480,000 $40,607,000 $48,735,000 Final Maturity 2036 2036 2036 2041 2041 2041 Term 20 years 20 years 20 years 25 years 25 years 25 years

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