Hays Consolidated Independent School District Discussion Regarding - PowerPoint PPT Presentation

Hays Consolidated Independent School District Discussion Regarding Soft Put Bonds June 2018 R. Dustin Traylor Managing Director RBC Capital Markets, LLC 303 Pearl Parkw ay Suite 220 Tel: (210) 805-1117 San Antonio, TX 78215 Fax: (210) 805-1119 robert.d.traylor@rbccm.com

Hays CISD Portfolio Comparison  A number of Texas school districts utilize a type of variable rate bonds in their bond portfolio to allow them to take advantage of the short end of the yield curve. These are commonly referred to as soft put bonds. These bonds carry a fixed rate of interest for a predetermined term (generally 1-5 years) at the end of that term the District has the ability to remarket the bonds into any interest rate mode (long term fixed rate, variable rate, or term modes). Below is a list of a number of Districts in the area that are utilize these types of bonds as a portion of their portfolio.  The general guidance from the rating agencies is that not more than 25% of a district’s bonds should be in a variable rate mo de. Peer Institutions: Portfolio Composition Northside ISD 1,654 552 25.0% Variable % North East ISD 1,115 265 19.2% Round Rock ISD 641 75 10.5% Hays CISD 428 - 0.0% Pflugerville ISD 392 27 6.5% Lake Travis ISD 304 35 10.3% Georgetown ISD 275 48 14.8% Fixed Rate Variable Hutto ISD 202 25 11.0% 0 500 1,000 1,500 2,000 2,500 Debt Outstanding ($ millions) Source: Municipal Advisory Council of Texas 1 RBC Capital Markets

Fixed-Rate Soft Put Overview Variable Rate Pricing Indications End of Short- Sell Fixed Rate Soft Put Bonds Term Rate Put Bond Period Structure & Timing Soft Put: If the District is not able to Term of Debt 1-5 Years remarket the Bonds, the District will pay a max rate of up to 7% Timing of Execution 4-6 Weeks until they are Today Mandatory Final refinanced or repaid. Tender Date Maturity Cost of Funds through Tender Date Fixed Rate Short Fixed Rate or Term Short Term Rate Bonds Security Provisions Fixed Credit Enhancement PSF Callable (6 months ▲ Effective tax rate management tool Prepayment Provisions before maturity) ▲ Locks in low fixed interest rates through the put date Risks ▲ Captures low rates on short-end of the yield curve Benefits At end of initial rate ▲ No new issuance Interest Rate Risk period ▲ No bank support needed Liquidity Renewal Risk No Yes, mitigated with a Market Access Risk soft put ▼ Subject to remarketing risk at put date Risks & Third Party Credit Risk No ▼ Market access could be limited Considerations ▼ Ongoing responsibility to remarket the bonds at the put date Tax Event Risk No 2 RBC Capital Markets

Municipal Market Data (“MMD”) MMD as of 6/5/2018 3.00 "AAA" Year Maturity MMD 1 2019 1.600 2.50 2 2020 1.730 3 2021 1.830 4 2022 1.900 2.00 5 2023 1.990 6 2024 2.120 MMD % 7 2025 2.240 1.50 8 2026 2.330 9 2027 2.390 10 2028 2.440 1.00 11 2029 2.490 12 2030 2.530 13 2031 2.570 14 2032 2.610 0.50 15 2033 2.660 16 2034 2.710 17 2035 2.750 0.00 1 3 5 7 9 11 13 15 17 19 21 23 18 2036 2.780 19 2037 2.800 20 2038 2.820 Initial Rate Period Amortization 21 2039 2.840 Years 1 – 5 Years 19 – 24 22 2040 2.860 23 2041 2.870 24 2042 2.880   Soft Put Bond Amortization Pricing  Pay short-term interest rates on long-dated bonds 3 RBC Capital Markets

Debt Service Savings $30MM Project Fund | Fixed-Rate Soft Put vs. Fixed-Rate Debt Service  For a $30MM project fund, the Soft Put Bond structure is estimated to save the amounts below during the initial term:  2-Year Put: $1.80 million  3-Year Put: $2.55 million Cost Savings During Initial  4-Year Put: $3.26 million Term  5-Year Put: $3.87 million  The Soft Put Bonds could be structured with long-dated bullet maturity to maximize savings – no need for amortization of principal during the initial period.  With positive slope on the yield curve, the District can benefit from yield curve roll as each year would result in a lower yield. Potential Future Savings  At the Tender Date, the District could redeem bonds, permanently finance with long-term bonds, or roll the Soft Put Bonds for another term. 2-Year Soft Put @ 2.09% 3-Year Soft Put @ 2.23% 4-Year Soft Put @ 2.34% 5-Year Soft Put @ 2.47% FYE Soft Put Debt Savings vs. Soft Put Debt Savings vs. Soft Put Debt Savings vs. Soft Put Debt Savings vs. (8/31) Service Fixed Rate Service Fixed Rate Service Fixed Rate Service Fixed Rate 2019 $658,657 $917,078 $702,778 $872,957 $737,444 $838,291 $778,413 $797,322 2020 634,002 882,749 676,471 840,280 709,839 806,911 749,275 767,476 Reset Rate 2021 676,471 840,280 709,839 806,911 749,275 767,476 2022 Reset Rate 709,839 806,911 749,275 767,476 2023 Reset Rate 749,275 767,476 Reset Rate 2024 Total $1,292,659 $1,799,826 $2,055,719 $2,553,516 $2,866,961 $3,259,024 $3,775,511 $3,867,224 Preliminary; subject to change 4 RBC Capital Markets

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