Discussion Materials Confidential | January 2017 Matt Adams, Managing Director ALABAMA PUBLIC FINANCE Matt.adams@raymondjames.com 1-800-753-6619 205-802-4275 (direct)
30 YEAR AAA TAX EXEMPT RATES SINCE SEPTEMBER 20, 2016 3.50 3.25 3.00 2.75 2.50 Since Pricing on 2.25 September 20, 2016 30 Year = +0.73% 2.00 1.75 30 Year Tax Exempt Rates 2
LOCAL REVENUES FOR BOE ISSUERS IN ALABAMA • Board’s of Education in Alabama are primarily funded on the local level by either sales taxes or ad valorem taxes. • Ad valorem taxes may be levied on a county wide or district wide basis. • If levied by the County, a county wide election would be needed to levy additional taxes (not to be confused with renewing existing taxes) to support additional debt. • If levied district wide, an election would be needed in the district. • Ad valorem tax increases may require legislative action in Montgomery to provide Constitutional authority for a tax. • Sales taxes may be levied by the City and used for educational purposes. • A sales tax would need to be approved by a vote of the City Council. • Generally, no referendum would be needed for an increase of sales taxes by the City Council. 3
SUMMARY OF LOCAL REVENUES Summary of Local Revenues Tax 2011 2012 2013 2014 2015 25.6 Mill City-Levied Tax (1) $15,178,026 $15,366,054 $14,760,692 $15,251,785 $16,050,047 15.1 Mill District Tax 8,877,207 9,050,362 8,979,548 9,527,092 9,460,339 3.15 Mill City-Levied Tax (1) 1,873,923 1,916,271 2,476,889 2,551,013 1,977,561 8.2 Mill Countywide Tax 4,897,769 4,549,147 4,878,238 5,168,975 5,139,433 1/12 of 30% of $0.03 Sales Tax 275,656 242,894 269,736 310,193 299,706 Total $31,102,581 $31,124,728 $31,365,103 $32,809,058 $32,927,086 (1) The Special Taxes pledged for payment of the principal of and interest on the 2016 Warrants. 4
COVERAGE ANALYSIS WITH AD VALOREM TAX Debt Service Coverage Analysis – Ad Valorem Taxes Total Tax Existing Debt New Debt Debt Short of 1.50x Received in Service Service Coverage coverage Tax 2015 28.75 Mill City-Levied Tax (1) $4,399,425 $4,000,000 $18,027,608 2.14x n/a 15.1 Mill District Tax -0- 4,000,000 9,460,339 2.36x n/a 8.2 Mill Countywide Tax -0- 4,000,000 5,139,433 1.28x 860,567 (1) The Special Taxes pledged for payment of the principal and interest on the 2016 Warrants. Debt Service Coverage Analysis with Operating Cost – Ad Valorem Taxes Existing Total Tax Short of New Debt Operating Debt Debt Received in 1.50x Service Cost Coverage Tax Service 2015 coverage 28.75 Mill City-Levied Tax (1) $4,399,425 $4,000,000 $8,000,000 $18,027,608 1.09x $6,571,529 15.1 Mill District Tax -0- 4,000,000 8,000,000 9,460,339 0.78x 8,539,661 8.2 Mill Countywide Tax -0- 4,000,000 8,000,000 5,139,433 0.43x 12,860,567 (1) The Special Taxes pledged for payment of the principal and interest on the 2016 Warrants. 5
AD VALOREM TAX OVERVIEW • Ad valorem taxes are levied at different assessment ratios of the fair market value depending on the type of property. • Property in Alabama is divided into four classes of property: • Class I – Utilities • Class II – Business and Commercial (and all other property not otherwise classified) • Class III – Agricultural, forest and single-family owner occupied residential property • Class IV – Motor Vehicles (individual use) • Generally, millage levied must be authorized by the Constitution of the State of Alabama. • County wide ad valorem taxes are levied and split on an ADM basis, while district ad valorem taxes stay in the district in which they are levied. 6
HOW MUCH ADDITIONAL MILLAGE OR SALES TAX WOULD BE NEEDED? Ad Valorem Tax Increase Example Approximate Debt Operations Total (not Millage Millage Millage Value of 1 Mill Service including Needed Needed Needed coverage) with no with 1.2x with 1.5x coverage coverage coverage $626,954 $4,000,000 $8,000,000 $12,000,000 19.14 22.97 28.71 • A 20 mill increase on a $300,000 house equals $600 annually. Sales Tax Increase Example Approximate Debt Operations Total (not Increase Increase Increase Value of 1₵ Service including Needed Needed Needed coverage) with no with 1.2x with 1.5x coverage coverage coverage 3.99₵ 4.79₵ 5.99₵ $3,007,752 $4,000,000 $8,000,000 $12,000,000 7
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