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

Page C-1

APPENDIX A – D.A. Davidson Presentation

Capital Facilities Planning May 31, 2016

JON GORES MANAGING DIRECTOR (206) 389-4043

JGORES@DADCO.COM

Discussion Topics

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• Election Results
• Capital Facilities Financing
• Tax Rate Projections

* February 9, 2016 and April 26, 2016 election results only. Source: Washington Secretary of State: Election and Voting website and individual County Auditor websites

2014

M&O Levies 160 Passed and 3 Failed Capital Project Levies 49 Passed and 3 Failed Transportation Levies 1 Passed and 1 Failed Bond Authorizations 13 Passed and 27 Failed

2015

M&O Levies 46 Passed and 2 Failed Capital Project Levies 16 Passed and 2 Failed Transportation Levies 2 Passed and 1 Failed Bond Authorizations 23 Passed and 22 Failed

2016*

M&O Levies 131 Passed and 3 Failed Capital Project Levies 27 Passed and 2 Failed Transportation Levies 2 Passed and 0 Failed Bond Authorizations 21 Passed and 19 Failed

Washington State Election Results-School Districts Only

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Source: State of Washington, Office of Superintendent of Public Instruction

Voting Patterns-Bond Issues Passed per Year

(Years 1993 through April 2016-Schools Only)

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Source: State of Washington, Office of Superintendent of Public Instruction

Voting Patterns-Bond Issues Passed by Month Statewide

(Years 1992 through April 2016-Schools Only)

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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.

(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.

ELECTION DATE RESOLUTION FILING DEADLINE (2) APPROXIMATE DATE BALLOTS ARE MAILED (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

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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

Capital Financing Options

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• 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

Capital Financing Options

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………… ____

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Sample Bond Proposition

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Tax Rate Planning Assumptions

• Interest Rates
• Bond Rating
• Assessed Value
• Bond Structure

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• 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).

Tax Rate Planning

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• B. Bond Rating
• A higher bond rating results in lower interest rates.
• Assumption:

Aa1 (with State Guarantee) A1 District Rating (Pending)

Tax Rate Planning

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)

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The Rating

Governmental Factors Economy Debt Factors Financial Performance

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)

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• C. Assessed Value

Tax Rate Planning

Year Historical Bond AV New Construction % change New

• Const. as

% 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%

• 4.5%

1.9% 10 year Compound Annual Growth Rate (2006-2016): 5 year Compound Annual Growth Rate (2011-2016):

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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

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

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• 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

Increases in Property Values Will Not Increase School District Tax Collections

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• D. Bond Structure
• State law gives Districts great flexibility in determining bond structures
• Options:

̶ Level Debt ̶ Level Tax Rate ̶ Stepped Level Tax Rate

Tax Rate Planning

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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 $40,000,000 $50,000,000 $60,000,000 $40,000,000 $50,000,000 $60,000,000 June 1, 2017 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

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%

Bond Tax Rate Summary

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Centralia School District Total Tax Rate Comparison

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District Bonds ($) M&O ($) Capital ($)

• Trans. ($)

Total ($) Castle Rock School District No. 412 85,630,899

• 0.2563
• 0.2563

Evaline School District No. 36 156,401,694 0.3161 1.2099

• 1.5260

Boistfort School District No. 234 87,792,277

• 2.0993
• 2.0993

Morton School District No. 214 270,745,738

• 2.3724
• 2.3724

Oakville School District No. 400 6,358,540

• 2.3864
• 2.3864

Toledo School District No. 237 405,460,034

• 2.4032
• 2.4032

Onalaska School District No. 300 385,590,033

• 2.5167
• 2.5167

Centralia School District No. 401 1,901,480,685

• 2.8551
• 2.8551

Pe Ell School District No. 301 121,060,133 0.6922 2.3111

• 3.0032

Mossyrock School District No. 206 396,465,673 1.0909 2.0885

• 3.1794

White Pass School District No. 303 500,490,629 1.8784 1.4850

• 3.3633

Napavine School District No. 14 369,013,243 0.9392 2.4943

• 3.4335

Adna School District No. 226 315,263,293 1.7297 2.0816

• 3.8113

Chehalis School District No. 302 1,610,840,207 1.1375 2.9286

• 4.0661

Winlock School District No. 232 310,692,274 1.5369 2.5319

• 4.0688

Eatonville School District No. 404 20,597,302 1.6958 3.8371

• 5.5328

Rochester School District No. 411 19,914,912 1.5876 4.1611

• 5.7488

(1) Assessed Value does not include Timber Assessed Value (2) Lewis County values only Assessed Value ($) (2)

Lewis County School Districts 2016 Assessed Values with 2016 Total Tax Rates (1)

Centralia School District Total Tax Rate Comparison

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District Bonds ($) M&O ($) Capital ($)

• Trans. ($)

Total ($) Centralia School District No. 401 48,759,349

• 2.8551
• 2.8551

Griffin School District No. 324 992,865,998 1.4480 2.2816 0.5492

• 4.2788

Tenino School District No. 402 863,233,701

• 3.2851

1.4120

• 4.6971

Rainier School District No. 307 440,514,724 1.0953 3.7681

• 4.8634

Olympia School District No. 111 7,703,437,389 1.5524 3.0449 0.4281

• 5.0254

North Thurston School District No. 3 9,983,108,189 1.9328 3.3153

• 5.2481

Rochester School District No. 401 977,249,423 1.5876 4.1611

• 5.7488

Yelm School District No. 2 2,165,640,504 1.6789 4.1117

• 5.7907

Tumwater School District No. 33 4,453,404,583 2.6104 3.2955

• 5.9059

(1) Assessed Value does not include Timber Assessed Value (2) Thurston County values only Assessed Value ($) (2)

Thurston County School Districts 2016 Assessed Values with 2016 Total Tax Rates (1)

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