20072008 Capital Financing

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2007-2008Capital Financing
North East ISD Unlimited Tax School Building
Bond Series 2007A
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Capital Financing

• Capital Financing in San Antonio
• Construction Considerations
• Debt Structure Considerations
• Debt Structure Challenges
• Concerns Tax Rate
• Underwriters

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Managing NEISD Capital Financing

• May 2007 Election
• North East ISD taxpayers authorize 498M in bonds
• San Antonio taxpayers authorize over 2B in bonds
  for construction since May 2006

Source NEISD Finance
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Bond Authorization San Antonio
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Bond Issuance Information
N negotiated C competitive
Total 996,554,000
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ConcernsIncreasing Costs

• San Antonio Construction Capacity
• Rising labor Costs
• Rising material Costs

Source NEISD Finance
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Increase in National Non-residential Buildings
Preliminary through May
Source Bureau of Labor Statistics www.bls.gov
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Historical Material Cost Data (National
Averages)
1996 to 2000 3.2 / Yr
2000 to 2004 3.9 / Yr
2003 to 2006 8.9 / Yr
10.5 05-06
15.7 00-04
11.4 04-05
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Elementary School Construction Cost Analysis
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Debt StructureConsiderations

• Inflation of construction costs needs to be
  addressed
• Secure lowest cost of borrowing and achieve
  District goals
• Take advantage of historically low interest rates
  and flat yield curve environment

Source NEISD Finance
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TRSY versus true interest cost (TIC) Yield
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Debt StructureConsiderations

• Maintain tax rates to achieve the desired tax
  savings on the average valued home
• Minimize costs associated with bond issuance
• Consider possible need for additional bonds for
  growth in 2010 and 2013

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Debt StructureChallenges

• Keeping debt in the 30 year time range
• Keeping IS tax rate below .50

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Debt StructureChallenges

• Match the maturity of technology and equipment
  bonds to their useful life
• 54 million for technology
• 11.2 million for buses

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• One Sale or Two Sales?

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Proposed Bond Issuance

• One sale of 498,049,000
• Minimize interest rate risk
• Every .1 change in interest rates will cost
  approximately 4.5 million
• A 1 change in rates will cost an additional 45
  million

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Market Volatility
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Proposed Bond Issuance

• One sale of 498,049,000
• Will allow additional interest earnings on bonds
  of 17.5 - 20 million for construction
• Maintain tax rates
• To achieve the desired estimated tax savings on
  the average valued home will cost taxpayers
  capitalized interest

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Proposed Bond Issuance

• Capitalized Interest
• When Initial tax rate does not cover initial debt
  payments.
• Create additional funds to cover initial debt
  payments in order to maintain desired tax rate.

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Proposed Bond Issuance

• Example
• Borrow 110,000
• Purchase 100,000 asset
• Make initial loan payments with additional
  10,000
• Additional 10,000 will be paid over the life of
  the loan

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NEISD Proposed Bond Sale Summary

• One Sale Two Sales
• 40M Interest Earnings 20M Interest Earnings
• 23.5M Capitalized Interest 4.5M
  Capitalized Interest
• .2M Issuance Cost
• 16.5M in Net Earnings 15.3M in Net
  Earnings 15.3M Change in Interest
  Rate of .34
• 0

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Concerns Tax Rate

• Assumptions Prior to Bond Election

Source NEISD Finance
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Estimated Effect on Taxpayer Prior to Election
MO Tax rate of 1.03 was used in estimate with
an IS Tax Rate of .3729 MO Tax rate of 1.03
was used in estimate with an IS Tax Rate of
.3712
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Effect on NEISD Taxpayers

• Changes in assumption after election
• Average taxable home value increased not by 7
  but by 11
• MO tax rate increased by .01

Source NEISD Finance
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Effect on Taxpayers After Election
Current value MO Tax rate of 1.04 used in
estimate with an IS Tax Rate of .3495 MO Tax
rate of 1.04 used in estimate with an IS Tax
Rate of .3074
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North East ISD Average Value of New Single Family
Residential Properties Tax Year 2007

• Number of Parcels 3,320
• Average Market Value 221,213
• Average Taxable Value 206, 213
• Houses built after January 1, 2006
• Value net of 15,000 homestead exemption

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North East ISD Average Value of Existing Single
Family Residential Properties

• Tax Year Tax Year Value
• 2006 2007 Increase
• Number of Parcels 104,595 104,905
• Average Market Value 148,963 163,821 9.97
• Average Value Net of
• 10 Value Cap Loss 147,429 160,910 9.14
• Average Taxable Value 132, 429 145,910
  10.18
• Houses built before January 1 2006
• Value net of 10 value cap loss and 15,000
  homestead exemption

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Average Value of Existing Single Family
Residential Properties
MO Tax rate of 1.04 used in estimate with an
IS Tax Rate of .3629
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Concerns Tax Rate

• What tax rate?

Source NEISD Finance
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NEISD Proposed Bond Sale Summary

• One Sale One Sale
• Tax Rate 2008 .3495 Tax Rate 2008 .3629
• 40M Interest Earnings 40M Interest Earnings
• 23.5M Capitalized Interest 6.1M
  Capitalized Interest
• 16.5M in Net Earnings 33.9M in Net
  Earnings

IS increase of .0405
IS increase of .0539
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Recommendation Negotiated Bond Sale

• In order to structure debt to maintain tax rate
  for dollar savings to North East taxpayers

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RecommendedUnderwriters

• RBC Dain Rauscher
• Banc of America
• Bear Stearns
• First Southwest Company
• The Frost National Bank
• Morgan Keegan Co., Inc.
• SAMCO Capital Markets

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Preliminary 2007-2008 Tax Rates
Tax Rate Tax Rate 06-07 General (MO)
1.3600 1.3600 07-08 General (MO) 1.0400
1.0400 Change in Tax Rate (0.3200)
(0.3200) 06-07 Debt Service (IS) 0.3090
0.3090 07-08 Debt Service (IS) 0.3495
0.3629 Change in Tax Rate 0.0405
0.0539 06-07 Total Tax Rate 1.6690
1.6690 07-08 Total Tax Rate 1.3895
1.4029 Change in Tax Rate (0.2795)
(0.2661)
Estimated
Source NEISD Finance
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Concerns Tax Rate

• What tax rate?

Source NEISD Finance
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Questions?