For Discussion Purposes Only P Preliminary Bond Capacity Analysis li i B d C it A l i Wednesday, December 14, 2016 y Securities, insurance and advisory services offered through BOK Financial Securities, Inc., member FINRA/SIPC and a subsidiary of BOK Financial Corporation. Services may be offered under our trade name, BOK Financial Advisors. NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
Summary of District’s Existing Bonds Sherman Independent School District’s (the “District”) existing bond $10,000,000 payments are conservatively structured with annual principal and interest $9,000,000 payments over 16 years. payments over 16-years. $8,000,000 Payments $7,000,000 $6,000,000 $6,000,000 Annual Bond P $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $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 g g , Unlimited Tax Refunding Bonds, Series 1998 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 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. 1
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 $300,000,000 $268,068,589 $250,000,000 $200,000,000 $177,404,423 ncrease $138,300,058 $129,811,787 $150,000,000 Dollar In $81,475,069 $100,000,000 $54,419,768 $50,000,000 $17,092,890 $4,798,460 $0 ($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 2 Source: Grayson Central Appraisal District.
Debt Factors – Interest Rates The Bond Buyer 20-Bond Index – A Tax-Exempt General Obligation Bond Yield Index – January 1, 2000 To The Present 6.25 6.09% 6.00 5.75 5.50 Average = 4.47% 5.25 5.00 3.78% 4.75 4 75 %) Yield (% 4.50 4.25 4.00 3.75 Municipal interest rates have increased by 3.50 approximately 0.51% since the November election and are currently 0.69% below the 3.25 historical average since year 2000. historical average since year 2000. 3 00 3.00 2 80% 2.80% 2.75 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 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. 3
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. 4
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 p The District’s Year 2016/17 I&S tax rate is 27.0 cents. 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. District will not receive any State assistance for the repayment of bonds. 5
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 Estimated d Project Project Cost Package No. 1 $159,225,367 ■ Construction of a New High School 145,136,477 ■ Campus Technology 12 537 890 12,537,890 C T h l ■ 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 g $ 80,860,645 $ , , ■ Replace Fairview Elementary School 26,968,441 ■ Replace Crutchfield Elementary School 26,925,758 ■ Replace Wakefield Elementary School 26,768,383 ■ ■ Pre-K Renovation at 1 Elementary School 198 063 198,063 P K R i 1 El S h l Total $ 305,515,735 6 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 Assuming the District’s historical average annual taxable value growth of $85,765,416, the District will have an i h Di i ’ hi i l l bl l h f $85 765 416 h Di i ill h 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 $160,460,000 $259,695,000 $373,100,000 Current Bond Capacity – Of Projected Description Bond Capacity Year 2027 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 p y --- 99,235,000 , , 212,640,000 , , Maximum Bond Capacity $ 160,460,000 $ 259,695,000 $ 373,100,000 Projected Capital Needs (Inflation Adjusted) $ 305,515,735 --- $ 373,101,863 7
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