P Preliminary Bond Capacity Analysis li i B d C it A l i - - PowerPoint PPT Presentation

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P li i B d C it A l i Preliminary Bond Capacity Analysis Wednesday, December 14, 2016 y

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Summary of District’s Existing Bonds

$9,000,000 $10,000,000

 Sherman Independent School District’s (the “District”) existing bond payments are conservatively structured with annual principal and interest payments over 16-years.

$6,000,000 $7,000,000 $8,000,000 Payments

payments over 16 years.

$4,000,000 $5,000,000 $6,000,000 Annual Bond P $1,000,000 $2,000,000 $3,000,000 $0

2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26 2026/27 2027/28 2028/29 2029/30 2030/31 2031/32

Unlimited Tax School Building & Refunding Bonds, Series 1995-A Unlimited Tax Refunding Bonds, Series 1998 g g , g , Unlimited Tax School Building & Refunding Bonds, Series 2006-A Unlimited Tax Refunding Bonds, Series 2007 Unlimited Tax Refunding Bonds, Series 2012 Unlimited Tax Refunding Bonds, Series 2013 Unlimited Tax Refunding Bonds, Series 2014 Unlimited Tax Refunding Bonds, Series 2015

__________ Note: Debt service payments reflect payments from September 1 through August 31 1 Note: Debt service payments reflect payments from September 1 through August 31.

The District has a total principal amount of existing bonds equal to $67,950,000.

Debt Factors – Taxable Assessed Valuation

 The value of the District’s tax base is a primary factor impacting the District’s bond capacity – As this determines the annual revenues generated from the District’s I&S tax rate.  The District’s taxable assessed valuation (net of frozen values) is $2,702,342,882 for fiscal year 2016/17.  Over the last decade, the increases in the District’s taxable values have been volatile.  Maximum tax base increase occurred in Year 2014/15: $268,068,589;  Average tax base increase last 5-years: $101,682,001; and  Average tax base increase last 10-years: $85,765,416. Historical Increases/(Decreases) in Taxable Valuations – Years 2007/08 – 2016/17

$268,068,589 $300,000,000 $138,300,058 $129,811,787 $177,404,423 $150,000,000 $200,000,000 $250,000,000 ncrease $81,475,069 $4,798,460 $17,092,890 $54,419,768 $0 $50,000,000 $100,000,000 Dollar In

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Source: Grayson Central Appraisal District. ($5,141,219) ($8,575,664) ($50,000,000) 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Debt Factors – Interest Rates

The Bond Buyer 20-Bond Index – A Tax-Exempt General Obligation Bond Yield Index – January 1, 2000 To The Present

5.75 6.00 6.25

6.09%

4 75 5.00 5.25 5.50 %)

Average = 4.47% 3.78%

4.00 4.25 4.50 4.75 Yield (% 3 00 3.25 3.50 3.75

2 80%

Municipal interest rates have increased by approximately 0.51% since the November election and are currently 0.69% below the historical average since year 2000. 2.75 3.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2.80%

historical average since year 2000.

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 Based upon a $100.0 million bond sale repaid over a 30-year period, an interest rate difference of 0.25% changes the District’s interest cost by approximately $6,100,000 and bond capacity by $3,650,000.

Preliminary Bond Capacity Analysis

The Preliminary Bond Capacity Analysis is based upon the assumptions summarized herein. To the extent the District’s actual results differ from the assumptions herein the financial impact to the District will the Districts actual results differ from the assumptions herein, the financial impact to the District will correspondingly change.

 Scenario Presented

 Determine the District’s estimated bond capacity over the next 10-years at a maximum I&S tax rate of 50.0 cents:  Average TAV Growth – Last 10-Years: Taxable values increase by $85,765,416 in each of the next 16 years and remain constant thereafter next 16-years and remain constant thereafter.  We note the District’s bond capacity over the next 10-years will vary based upon its actual certified taxable values in future years. However, to help ensure the District may complete all capital y , p y p p improvements included within a bond program, we recommend the District use its historical annual tax value growth to determine its available bond capacity.

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Preliminary Bond Capacity Analysis

 State Debt Limitation

 Pursuant to State law, the District may only issue new bonds to the degree it can demonstrate its I&S tax rate will not exceed 50.0 cents (the Stated mandated “50-Cent Debt Test”).  However, there is not a limit on the amount of bonds that may be authorized in a bond election.

 Other Assumptions

 The District’s Year 2016/17 I&S tax rate is 27.0 cents.

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 The I&S tax rate increase for the new bond program occurs in year 2017/18.  Bonds are sold at interest rates of 4.50% - 5.00% (current market rates of interest are approximately 4.25%). )  Bonds are structured with principal payments over 30-years. However, the District will have the flexibility to prepay the bonds prior to scheduled maturity, without penalty.

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 District will not receive any State assistance for the repayment of bonds.

Summary of Projected Capital Needs

 As summarized within the table below, the District’s projected capital needs totals approximately $305.5 million in today’s dollars. y Summary of Projected Capital Needs – Totaling $305,515,735

Total E i d Project Estimated Project Cost Package No. 1 $159,225,367

■ Construction of a New High School

145,136,477 C T h l 12 537 890

■ Campus Technology

12,537,890

■ District Technology

1,551,000 Package No. 2 $ 41,906,922

■ Convert Sherman High School to a Middle School

14,002,475

■ Construct a New Stadium

27,904,447 Package No. 3 $ 23,522,801

■ Convert Dillingham Intermediate School to a Middle School

23,522,801 Package No. 4 $ 80,860,645 g $ , ,

■ Replace Fairview Elementary School

26,968,441

■ Replace Crutchfield Elementary School

26,925,758

■ Replace Wakefield Elementary School

26,768,383

■

P K R i 1 El S h l 198 063

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■ Pre-K Renovation at 1 Elementary School

198,063 Total $ 305,515,735

Source: VLK Architects – Scenario 1.

Estimate of District’s Bond Capacity Over the Next 10-Years

 At this time, the District’s available bond capacity is $160.46 million, while its identified capital needs are approximately $305.5 million.  A i h Di i ’ hi i l l bl l h f $85 765 416 h Di i ill h  Assuming the District’s historical average annual taxable value growth of $85,765,416, the District will have an additional bond capacity of $99.235 million in 10-years – Equals a total bond capacity of $259.695 million over this period.  Due to projected inflation, the District’s identified capital needs will increase to approximately $373.1 million in p j , p pp y $ the next 10-years.  To generate $373.1 million of bond capacity, the District’s taxable values will need to increase to $5.48 billion. To achieve, the District’s historical annual rate of taxable value growth will need to double to $173.6 million per year.

Summary of Bond Capacity Next 10-Years – District Average TAV Growth of $85,765,416

Description $160,460,000 Current Bond Capacity $259,695,000 Bond Capacity – Year 2027 $373,100,000 Of Projected Capital Needs Current FY 2016/17 Taxable Value $ 2,702,342,882 $ 2,702,342,882 $ 2,702,342,882 Plus: Taxable Value Growth Required To Issue Bonds 514,592,496 1,372,246,656 2,778,814,334 Actual/Projected Taxable Value Required To Issue Bonds $ 3,216,935,378 $ 4,704,589,538 $ 5,481,157,216 Average Annual Taxable Value Growth Required $ 85,765,416 $ 85,765,416 $ 173,675,896 Average Taxable Value Growth – Last 10-Years $ 85,765,416

• Maximum Taxable Value Growth – Last 10-Years

$ 268,068,589

• Current Bond Capacity

$ 160,460,000 $ 160,460,000 $ 160,460,000 Plus: Additional Capacity – Year 2027

• 99,235,000

212,640,000

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p y , , , , Maximum Bond Capacity $ 160,460,000 $ 259,695,000 $ 373,100,000 Projected Capital Needs (Inflation Adjusted) $ 305,515,735

• $ 373,101,863

Preliminary Bond Capacity Analysis

Maximum Projected I&S Tax Rate and I&S Tax Increase For Various Taxable Home Values I&S Tax Increase For Various Taxable Home Values

50.0 Cents

55.0 Cents 60.0 Cents

Taxable Home Value Annual Monthly Bond Program New

23.0 Cents

35.0 Cents 40.0 Cents 45.0 Cents 50.0 Cents x Rate

y $75,000 $172.56 $14.38 87,948 202.32 16.86 100,000 230.04 19.17 125 000 287 52 23 96

27.0 Cents

15.0 Cents 20.0 Cents 25.0 Cents 30.0 Cents I&S Tax

125,000 287.52 23.96 150,000 345.00 28.75 175,000 402.48 33.54 200,000 459.96 38.33

0.0 Cents 5.0 Cents 10.0 Cents

New Bond Program - 50.0 Cent Tax Rate

225,000 517.56 43.13 250,000 575.04 47.92 275,000 632.52 52.71 300,000 690.00 57.50

Note: The State Property Tax Code allows for school property taxes on an individual homestead to be “frozen” at the age of 65. If you are 65 years of age or older and you have filed for the “Over 65 Homestead Exemption”, there is a ceiling on the amount of school taxes to be paid – The only exception is if improvements are

Current I&S Tax Rate Projected I&S Tax Rate Increase

, 325,000 747.48 62.29 350,000 804.96 67.08

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made to a home. As such, a tax increase from a new bond program cannot increase the applicable tax ceiling of a taxpayer that has qualified for the “Over 65 Homestead Exemption.” Note: Taxes are net of the $25,000 Residential Homestead Exemption.

Questions

How can we be of service…?

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• w can we be o se v ce…?

BOK Financial Securities, Inc. – Specialized Texas School District Finance Team p

Joshua M. McLaughlin

Managing Director, Co-Director of Texas Public Finance

William J. Gumbert

Managing Director, Director of Texas Public Finance

C h O G i

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: jmclaughlin@bokf.com Direct: 214.576.0878 │ Mobile: 972.897.0503 │ Fax: 214.576.0890

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: bgumbert@bokf.com Direct: 214.576.0880 │ Mobile: 214.212.3153 │ Fax: 214.576.0890

• Dr. Cathy Bryce

Investment Banker, Texas Public Finance 333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: cbryce@bokf.com Mobile: 214.477.5972 │ Fax: 214.576.0890

Omar Garcia

Investment Banker, Texas Public Finance 333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: ogarcia@bokf.com Direct: 512.243.5917 │ Mobile: 512.565.7005 │ Fax: 214.576.0890

Mike Jolly

Investment Banker, Texas Public Finance

Alison M. Long

Investment Banker, Texas Public Finance 333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: mjolly@bokf.com Direct: 512.868.1980 │ Mobile: 512.751.0479 │ Fax: 214.576.0890

333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: alison.long@bokf.com Direct: 214.576.0881 │ Mobile: 254.744.4555 │ Fax: 214.576.0890

Steven Murray

Analyst, Texas Public Finance 333 West Campbell Road Suite 350 │ Richardson Texas 75080

John H. Robuck

Managing Director, Texas Public Finance 1401 McKinney Street Suite 1000 │ Houston Texas 77010

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333 West Campbell Road, Suite 350 │ Richardson, Texas 75080 E-Mail: steven.murray@bokf.com Direct: 214.576.0875 │ Mobile: 214.507.1355 │ Fax: 214.576.0890

1401 McKinney Street, Suite 1000 │ Houston, Texas 77010 E-Mail: jrobuck@bokf.com Direct: 713.289.5897 │ Mobile: 281.610.8335 │ Fax: 713.354.0258