SavannahChatham County Public Schools - PowerPoint PPT Presentation
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SavannahChatham County Public Schools
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Provide debt planning & management services to tax-exempt borrowers from California to Florida ... through the issuance of one or more short-term notes ... – PowerPoint PPT presentation
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Title: SavannahChatham County Public Schools
1
Savannah-Chatham County Public Schools
- Board Workshop
- November 07, 2007
2
Outline
- Introduction of Ford Associates, Inc.
- ESPLOST Background
- Tax and Market Considerations
- Key Principles
- Financing Alternatives
3
Ford Associates, Inc.
- Independent Financial Advisory Firm located in
Tampa, Florida - Provide debt planning management services to
tax-exempt borrowers from California to Florida - Specialize in K-12 Education, completing
approximately 1 billion in K-12 financings per
year - Served as financial advisor to the Board since
1987
4
ESPLOST Background
- On July 05, 2006, the Board passed a resolution
calling for voter referendum for the imposition
of a 1 sales and use tax - On September 19, 2006, voters approved the tax
- On March 12, 2007, the Court validated the use of
bonds to be repaid from the tax
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ESPLOST Background, Contd.
- Specifically, the tax was imposed beginning
January 01, 2007 and will continue until December
31, 2011 - The total amount of the tax is limited to 360
million - 67.5 million can be used to repay PI on
outstanding general obligation bonds
6
ESPLOST Background, Contd.
- The Board may issue up to 200 million in bonds
maturing as follows - Year 1 30 million
- Year 2 35 million
- Year 3 40 million
- Year 4 45 million
- Year 5 50 million
- The final maturity must be repaid no later than
calendar year 2012 - Although the bonds will be repaid from ESPLOST
revenues, they are general obligations of the
school district - Collections are lagging projections
7
Tax and Market Considerations
- Federal tax law limits the amount of a tax-exempt
borrowing to no more than the borrower reasonably
expects to expend in 36 months. - Monies expended over a period of more than 24
months are subject to arbitrage rebate
8
Tax and Market Considerations, Contd.
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Key Principles
- Dont borrow if you dont have to
- Dont borrow more that you need to
- Dont borrow before you need to
- Dont borrow for longer than you need to
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Financing Alternatives
- The Board has 2 basic borrowing options
- Issue all, or a portion, of the amount in the
form of traditional bonds - Borrowing only those amounts necessary through
the issuance of one or more short-term notes - Both options have advantages and disadvantages,
and each of the two options has variations the
Board may wish to consider
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Financing Alternatives, Contd.
- Option 1 Bonds
- Minimizes cost of issuance
- Locks in rates
- Provides availability of funding at time
construction contracts are awarded - May necessitate arbitrage rebate
- May result in borrowing more than is absolutely
needed
12
Financing Alternatives, Contd.
- Option 2 Short Term Notes
- Minimizes the amount of borrowing
- Lowers the overall cost of borrowing
- Creates arbitrage opportunities
- Can be accomplished on a publically offered
basis, or as a private placement - Requires multiple issues and may increase costs
of issuance - Subject to interest rate volatility
13
Financing Alternatives, Contd.
- Recommendations
- Cash flow timing and arbitrage considerations are
the key factors in determining the method of
finance - Short term notes will result in lower borrowing
costs and will provide arbitrage opportunities - Bonds should only be used if they are structured
to avoid arbitrage rebate
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