Ci#zens Bond Commi.ee Bond 101 - A Lesson on School Finance, Taxes - - PowerPoint PPT Presentation

Ci#zens’ Bond Commi.ee

“Bond 101” - A Lesson on School Finance, Taxes & Bonds

• Dr. Brian Woods &

David Rastellini, Deputy Supt for Business & Finance

November 9, 2017

1

Why do school districts have bond issues?

ü To finance the purchase and renova2on

• f capital assets such as school buildings,

large-scale technology and buses.

2

What is a bond issue?

ü Authoriza2on by our taxpayers via popular vote to issue interest-bearing promissory notes.

3

• Raising the

M&O rate above $1.04 requires voter approval

• I&S rate

cannot exceed 50 cents when issuing debt

Total Tax Rate

Per $100 of valuaVon

OperaVons (M&O)

$1.0400

Operating costs such as: teacher salaries, supplies, utilities, transportation, etc.

Debt Service (I&S)

$0.3355

Principal and interest on bonds sold to build and renovate schools and pay for other major capital expenses

4

Historical I&S Tax Rate

$0.2625 $0.3355

$0.10 $0.15 $0.20 $0.25 $0.30 $0.35

0.2625 0.2625 0.2625 0.2975 0.3255 0.3355 0.3355 0.3355 0.3355 0.3355 0.3355 0.3355

5

His Historic

• rical T

al Taxab able V le Valu alua# a#on

• n

$23 B $50 B $0 $10 $20 $30 $40 $50 $60

Billions

Tax Year

6

Lo Local Pr al Property V perty Values alues

• In the last 5 years, property values have increased an

average of 8.68% per year (8.14% last year)

• Growth was due to new property and reappraisals

(50-50)

• Residen2al property growth for the last 5 Years (8.2%)
• Today, residen2al property is 64.7% of the total tax

base versus 67.5% five years ago

• Current Taxable Valua2on is $50.4 billion

7

2017 A 2017 Appr ppraisal R aisal Roll ll

Residential 64.7% Commercial 35.3%

Net Taxable Value = $50.4 Billion

8

Debt Manageme ment Obje jec#ves

• 1. Manage the I&S Tax Rate
• 2. Reduce the overall cost of

borrowing

Key Factors:

• Understand the

tax base.

• Understanding
• f financial

markets, products & economic trends

9

Managing the T Managing the Tax R Rate e

• Since 2009 raised tax rate three 2mes:

– In 2009 by 3.5 cents – In 2010 by 2.8 cents – In 2011 by 1.0 cent

• With Bond 2014, the expected peak

I&S tax rate was 45.53 cents.

• Today’s I&S tax rate is 33.55 cents,

11.74 cents below projec2ons

10

Ava Available Resourc rces

• Increase in the tax base
• Tax rate
• Fund Balance

– Debt Service Fund – General Fund

• Technology deployment commitments
• I&S Tax rate increases assignments
• Reduced debt service requirements

11

Debt Manageme ment Results

• The tax rates that will not be

reached create tax avoidance on today’s average value of $753 over a five year period (2018-19)

– $1,183 on today’s home valued at $300,000

12

Managing the C Managing the Cost o t of B f Borr rrowing wing

• Over the last 3 years, debt management

strategies have produced over $198 million in interest cost savings and avoidance through:

– Refinancing at lower interest rates – Issuing variable rate bonds vs fixed rate – Selling bonds only when needed and not all at

• nce

13

Managing the C Managing the Cost o t of B f Borr rrowing wing

Factors that affect the cost of borrowing: – Bond Ra2ngs

• “AA+” on our own
• “AAA” via Permanent School Fund

– Variable Rate Bonds

• rates range from – 1.45% to 2.125%

– Structure of the Amor2za2on – Federal/state Assistance – Timing

14

Fe Federal/State Assistance

• Federal Programs:

– Build America Bond subsidies – Sequestra2on

• State Assistance:

– Provided through Hold Harmless Provision – Expected to decrease over 2me

15

Fi Final Comme mments

• Bond issues are an integral part of a

capital improvement program.

• An effec2ve debt management program

is vital to maintaining taxpayer trust and confidence.

• We believe we have been able to

manage the tax rate and minimize the cost of borrowing.

16