1 Unique Funding Opportunities for Capital Improvement Projects n - PDF document

Unique Funding Opportunities for Capital Improvement Projects 2014 MASBO WINTER CONFERENCE Friday, February 7, 2014 12:30 pm to 1:20 pm Northland Securities, Inc. Prepared by: Public Education Finance (612) 851-5900 Michael Hoheisel Education Team Members Matt Rantapaa Michael Hoheisel Matt Rantapaa Ellaura Ukofia Bill Fahey Catherine Winkelhake Lee Brundell Chris Boris 1 Unique Funding Opportunities for Capital Improvement Projects Presentation is intended to show how attendees might go about taking their own identified School District needs and turn them into project reality using various financing tools available to all MN School Districts. The information contained in this presentation is intended solely for general information purposes. Northland Securities is not providing advice or any recommendation on the timing, terms, structure or similar matters related to a specific bond issue. The financial planning services provided by Northland do not create a relationship, direct or implied, related to the issuance of municipal securities that may result from this planning. 2 Unique Funding Opportunities for Capital Improvement Projects n Session will include: q Quick Review of Potential Financing Sources n Fund Summary n Levy n Minnesota Financing Statutes n Federal Programs q Share Case Study Examples n Share District Objectives n Identify and Prioritize Potential Expenditure Needs n Categorize Expenditures Accordingly into Various Financing Sources 3 1

Unique Funding Opportunities for Capital Improvement Projects n Fund Summary q 1) General q 9) Agency q 2) Food Service q 20) Internal Service q 3) Transportation (may q 25) OPEB Revocable or may not be recorded q 45) OPEB Irrevocable separately) q 47) OPEB Debt Service q 4) Community Services q 98) Fixed Asset Account q 5) Capital Group q 6) Building Construction q 99) General Long Term q 7) Debt Service Debt Group q 8) Trust 4 Unique Funding Opportunities for Capital Improvement Projects n Levy q Portion of the District’s budget collected from local taxpayers n May be spread over Referendum Market Value q Operating Referendum (Revenue Referendum) q Location Equity q Equity q Transition n May be spread over Net Tax Capacity q All other levies 5 Unique Funding Opportunities for Capital Improvement Projects n Property tax base terms q Market Value - County Assessor’s appraisal worth of the property q Net Tax Capacity - the result of a conversion from taxable market value multiplied by a property’s class rates q Sales Ratio - Used to accomplish equalization of property values with goal of determining probable selling price of property q Adjusted Net Tax Capacity - net tax capacity adjusted by sale ratio and used to adjust State Aid formulas on a district by district basis q Referendum Market Value - market value of property not including agricultural land beyond one acre plus the dwelling and non-commercial residential seasonal recreational property 6 2

Unique Funding Opportunities for Capital Improvement Projects n MN Education Statute Reference q Web-site address for MN reference purposes https://www.revisor.leg.state.mn.us/pubs/ n Chapter 126C – Education Funding q School Operations n MS 126C.50 thru 126C.56 - Cash flow borrowing n MS 123B.12 - Warrant borrowing n MS 126C.17 – Referendum (Operating) Revenue n MS 475.52 subd 6. - OPEB 7 Unique Funding Opportunities for Capital Improvement Projects n MN Education Statute Reference q Non-voter approved Project Financing n MS 475 & 123B.59 – Alternative Facilities q MS 123B.57 – Health and Safety n MS 475 & 123B.61 – Equipment Certificates n MS 475 & 123B.62 – Capital Facility Bonds n MS 123B.65 – Performance Contract n MS 126C.40 – Lease Levy n MS 465.71 – Installment, Lease Purchase n MS 123B.60 – Building Bonds for Calamities 8 Unique Funding Opportunities for Capital Improvement Projects n Health and Safety Levy (MS 123B.57) q May be used to provide funds for hazardous substance removal, fire and life safety code repairs, labor and industry regulated facility and equipment violations, and health, safety, and environmental management, including indoor air quality management q Includes only single site projects less than $500,000 (if greater than $500,000, see next alternative facilities slide) q Receive money as taxes are collected and as state provides aid q Application must include a health and safety program adopted by the school district board and program must include the estimated cost, per building, of the program by fiscal year q Requires MDE approval 9 3

Unique Funding Opportunities for Capital Improvement Projects n Alternative Facilities Bond and Levy (MS 123B.59) May be used to provide funds for health and safety revenue, without restriction as q to project size; disabled access levy; and deferred capital expenditures and maintenance projects Qualifies if district has more than 66 students per grade; over 1,850,000 sq. ft. of q space and the average age of building space is 15 years or older or over 1,500,000 sq. ft. and the average age of building space is 35 years or older; insufficient funds from projected health and safety revenue and capital facilities revenue; a ten-year facility plan approved by the commissioner A non-eligible school district qualifies if a single site H&S project exceeds q $500,000 and a five-year plan is approved by the Commissioner District has choice of receiving money as taxes are collected and as state q provides aid or issuing general obligation debt Utilizes district’s general obligation which provides access to low tax-exempt q interest rates Publish required notice at least 20 days before soliciting bids, issuing bonds, or q final levy certification 10 Unique Funding Opportunities for Capital Improvement Projects n Equipment Certificates (MS 123B.61) q May be used to borrow money to purchase vehicles, computers, telephone systems, computer software and hardware, etc … , and prepay special assessments q No new dollars / utilizes operating capital revenue to pay debt q Utilizes district’s general obligation which provides access to low tax-exempt interest rates q Maximum borrowing term of ten years unless used to pay special assessments then twenty years q No voter approval necessary 11 Unique Funding Opportunities for Capital Improvement Projects n Capital Facilities Bonds (MS 123B.62) May be used to borrow money for certain capital projects such as q improvement and repair of school sites and buildings, improving handicap accessibility, energy modifications, etc … No new dollars / utilizes operating capital revenue to pay debt q Utilizes district’s general obligation which provides access to low tax- q exempt interest rates Subject to reverse petition period for 30 days q Maximum borrowing term of fifteen years q No voter approval necessary q Must receive approval of Commissioner q Prior to issuing the debt, district is required to publish notice of intended q projects, amount of the bond issue and the total amount of district indebtedness 12 4