CFAC Presentation to the Board of Education · 2019. 6. 19. · CFAC Presentation to the Board of...
Transcript of CFAC Presentation to the Board of Education · 2019. 6. 19. · CFAC Presentation to the Board of...
CFAC Presentation to the Board of Education
Raymond James Public Finance
PRESENTED BY: Elizabeth Hennessy, Managing Director, Raymond James & AssociatesAlex Kamilewicz, Community Finance Advisory Committee (CFAC)
PREPARED FOR
Glenview School District 34, Cook County, IllinoisJune 17, 2019
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PUBLIC FINANCE
SECTION 1 CFAC Process
SECTION 2 Illinois School Finance and Property Tax Limitation Law
SECTION 3 Capital Funding Options
TABLE OF CONTENTS
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PUBLIC FINANCE
SECTION 1
CFAC Process
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PUBLIC FINANCECFAC PROCESS
• CFAC was charged with recommending financing options to fund the District’s Long Range Capital Facility Plan
• The charge was NOT to discuss necessity or scope of the proposed projects but reasonable funding options
• CFAC met as a committee four times since April 1st, 2019
• CFAC operated under the principle that a wide and significant range of capital outlay is required by the District as outlined in the ten year Capital Facility Plan and Space Study Plan
• CFAC considered all funding sources including but not limited to fund balances, annual operating funds, non-referendum bonds and voter approved bonds
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PUBLIC FINANCE
SECTION 2
Illinois School Finance and Property Tax Extension Limitation Law
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PUBLIC FINANCEILLINOIS SCHOOL FINANCE
• Most Illinois schools are funded mostly by property taxes, District 34 gets over 85% of its revenues from local property taxes
• Property taxes for Cook County non-home rule governments are limited by the Property Tax Extension Limitation Law (PTELL) which limits annual property tax increases to CPI plus a factor for new property.
• CPI in 2019 levy year is 1.90%
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PUBLIC FINANCEFUND BALANCE POLICY COMPARISONS WITH SURROUNDING DISTRICTS
Surrounding Districts (Bond Rating) Fund Balance Policy
Glenview 34 (Aaa) 30%
Arlington Heights 25 (Aaa) 60%
Hawthorn 73 (AA+) 10%-50%
Elk Grove Village 59 (Aaa) 50%-60%
East Maine 63 (Aa2) 15%-20%
North Shore 112 (AAA) 25%
Des Plaines 62 (AA+) 30%
Park Ridge 64 (Aa2) Worth 4 months of operating expenditures for the FY ended
Source: Each District’ Board of Education Policies
Fund balance policy is important because school districts receive property taxes 2 times per year but must pay salaries monthly;
Accumulated Fund balance (savings) are often used for funding capital projects
Feeder Districts (Bond Rating) Fund Balance Policy
Northbrook 27 65%
Northbrook 28 50%-75%
Northbrook-Glenview 30 (Aaa) 45%
West Northfield 31 (Aa2) 35%
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PUBLIC FINANCETAX RATE AND EAV PER PUPIL COMPARISONS WITH SURROUNDING DISTRICTS
Surrounding Districts (Bond Rating)
2017 Tax RatePer $100 EAV
2017 EAV per Pupil
Glenview 34 (Aaa) 2.745 $414,288
Arlington Heights 25 (Aaa) 3.488 $337,060
Hawthorn 73 (AA+) 3.825 $316,403
Elk Grove Village 59 (Aaa) 3.031 $400,728
East Maine 63 (Aa2) 3.556 $323,194
North Shore 112 (AAA) 2.826 $631,201
Des Plaines 62 (AA+) 3.94 $374,477
Park Ridge 64 (Aa2) 4.014 $372,106
Source: Cook and Lake County Clerks’ Websites
*Does not include TIF in EAV
Feeder Districts (Bond Rating)
2017 Tax RatePer $100 EAV
2017 EAV per Pupil
Northbrook 27 3.031 $693,360
Northbrook 28 2.824 $680,906
Northbrook-Glenview 30 (Aaa) 3.193 $661,430
West Northfield 31 (Aa2) 2.700 $693,659
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PUBLIC FINANCEDIRECT DEBT TO FULL VALUE COMPARISONS WITH SURROUNDING DISTRICTS
Surrounding Districts (Bond Rating)
2017 TotalDirect Debt
2017 Full Value of Estimated Property
% to Full Market Value
Glenview 34 (Aaa) 22,293,208 5,865,079,953 0.38%
Arlington Heights 25 (Aaa) 45,120,803 5,612,048,424 0.80%
Hawthorn 73 (AA+) 50,289,164 3,973,385,559 1.27%
Elk Grove Village 59 (Aaa) 12,385,000 8,246,977,617 0.15%
East Maine 63 (Aa2) 51,379,942 3,289,795,677 1.56%
North Shore 112 (AAA) 50,945,000 7,426,710,108 0.69%
Des Plaines 62 (AA+) 73,360,000 5,272,265,064 1.39%
Park Ridge 64 (Aa2) 13,579,092 5,023,427,223 0.27%
Source: Cook and Lake County Clerks’ Websites
* Des Plaines SD 62 Outstanding Alternate Revenue Bonds
Feeder Districts (Bond Rating)
2017 TotalDirect Debt
2017 Full Value of Estimated Property
% to Full Market Value
Northbrook 27 (NR) - 2,616,740,412 -
Northbrook 28 (NR) - 3,676,892,763 -
Northbrook-Glenview 30 (Aaa) 35,752,332 2,331,540,618 1.53%
West Northfield 31 (Aa2) 12,439,754 1,835,420,976 0.68%
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PUBLIC FINANCE
SECTION 3
Funding Options
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PUBLIC FINANCESTATUTORY DEBT LIMIT PARAMETER
StatutoryDebt Limit
Equalized Assessed Valuation 2017 $1,955,026,651Equalized Assessed Valuation 2017 TIF $407,406,850Total 2017 EAV $2,362,433,501
Statutory Debt Limit 6.90%
Gross Debt Limit $163,007,912
Less: Outstanding Principal (22,293,208)
Net Debt Limit $140,714,704
• Statutory Debt Limit is calculated using TIF EAV
• Given the facility needs identified, and the 2017 EAV, we view $140M as the maximum principal that the District can issue (Referendum and DSEB Bonds)
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PUBLIC FINANCECFAC RECOMMENDED FUNDING PLAN BASED ON $157.2M CAPITAL PLAN FY2020-2027
• Combined with other funding sources, this is the maximum the District should spend in the view of CFAC
Estimated Sources of Funds
Annual Capital Outlay O&M Fund $1,200,000
($150k per year x 8 years)
One-Time Fund Balance Draw 16,000,000
DSEB Bonds 9,380,000
Referendum Bonds 130,620,000
Total Sources $157,200,000
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PUBLIC FINANCEDISTRICT OPERATING FUND BALANCE
• Illinois school districts need to have a fund balance to pay monthly bills given that the main source of revenue, property taxes, is distributed twice annually
• CFAC recommends maintaining a 50% fund balance as a percent of annual operating expenditures; this would allow up to $16M to be used towards capital projects (fund balance = 10% of total project costs)
CFAC view of Operating Fund Bal/Exps
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PUBLIC FINANCENON-REFERENDUM DSEB BONDS
1. The District can issue bonds without a referendum to fund capital projects, if the debt service payments fit within the District’s Debt Service Extension Base (DSEB) ($2,156,238 for levy 2019). DSEB grows with CPI annually. Anticipate $9.4M in 2023.
2. They are paid through the bond and interest tax levy up to the Debt Service Extension Base as described above.
3. CFAC recommends the District continue to utilize the DSEB for non-referendum bonds and its policy of repaying the DSEB bonds within 10 years with flexibility to issue additional DSEB bonds within that period.
4. The District issued DSEB bonds in 2019 to fund the summer capital projects; DSEB is available for another non-referendum bond issue in 2023.
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PUBLIC FINANCESTATE AND FEDERAL TAX LAW PARAMETERS
• State Law dictates that bonds approved by referendum must be issued within 5 years of the referendum
• Federal tax law requires that in order to issue bonds on a tax-exempt basis, the issuer must “expect” to spend the proceeds within 3 years of issuance
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PUBLIC FINANCECFAC RECOMMENDED FUNDING PLAN BASED ON $157.2M CAPITAL PLAN FY2020-2027
Summer 2020 2021 2022 2023 2024 2025 2026 2027 Totals
Estimated Capital Costs including Class Room Updates 9,742,309 8,993,133 10,470,966 2,072,749 12,765,420 6,999,511 6,315,396 2,640,515 60,000,000
Hypothetical Space Study Recommendations 19,440,000 19,440,000 19,440,000 19,440,000 19,440,000 97,200,000
Estimated and Theoretical Capital Costs 9,742,309 28,433,133 29,910,966 21,512,749 32,205,420 26,439,511 6,315,396 2,640,515 157,200,000
Cumulative Capital Costs 9,742,309 38,175,442 68,086,408 89,599,157 121,804,577 148,244,088 154,559,485 157,200,000
Sources of Funds:
Annual Capital Outlay 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 1,200,000
One Time Capital from Fund Balance 16,000,000 16,000,000
DSEB Non-Referendum Bonds 9,380,000 9,380,000
Referendum Bonds 73,000,000 57,620,000 130,620,000
Total Funding Sources 16,150,000 73,150,000 150,000 150,000 67,150,000 150,000 150,000 150,000 157,200,000
Cumulative Funding Sources 16,150,000 89,300,000 89,450,000 89,600,000 156,750,000 156,900,000 157,050,000 157,200,000
Cumulative Annual (Shortfall)/Surplus 6,407,691 51,124,558 21,363,592 843 34,945,423 8,655,912 2,490,515 -
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PUBLIC FINANCECURRENT SITUATION
CFAC Assumes 5% EAV growth every reassessment year and 2% increase in CPI starting in levy 2020 (per District's assumptions as of April 2019).
Outstanding Remaining Outstanding TOTALTax Equalized Debt Service CPI DSEB DSEB Referendum Total Debt Service
Year Assessed Value Increase Extension Base Increase Debt Service Capacity Debt Service Debt Service Tax Rate2017 1,955,026,651 2.04% 2,072,508 2.10% 2,013,750 58,758 1,578,180 3,591,930 0.182018 1,955,026,651 0.00% 2,116,030 2.10% 2,112,426 3,604 1,579,000 3,691,426 0.192019 2,052,777,984 5.00% 2,156,235 1.90% 2,152,750 3,485 1,572,850 3,725,600 0.182020 2,052,777,984 0.00% 2,199,360 2.00% 2,188,050 11,310 - 2,188,050 0.112021 2,052,777,984 0.00% 2,243,347 2.00% 2,220,650 22,697 - 2,220,650 0.112022 2,155,416,883 5.00% 2,288,214 2.00% 2,254,450 33,764 - 2,254,450 0.102023 2,155,416,883 0.00% 2,333,978 2.00% 1,884,250 449,728 - 1,884,250 0.092024 2,155,416,883 0.00% 2,380,658 2.00% 1,921,300 459,358 - 1,921,300 0.092025 2,263,187,727 5.00% 2,428,271 2.00% 1,954,100 474,171 - 1,954,100 0.092026 2,263,187,727 0.00% 2,476,836 2.00% 1,591,750 885,086 - 1,591,750 0.072027 2,263,187,727 0.00% 2,526,373 2.00% 1,625,950 900,423 - 1,625,950 0.072028 2,376,347,113 5.00% 2,576,900 2.00% 1,664,200 912,700 - 1,664,200 0.072029 2,376,347,113 0.00% 2,628,438 2.00% 1,492,400 1,136,038 - 1,492,400 0.062030 2,376,347,113 0.00% 2,681,007 2.00% - 2,681,007 - - 0.002031 2,495,164,469 5.00% 2,734,627 2.00% - 2,734,627 - - 0.002032 2,495,164,469 0.00% 2,789,320 2.00% - 2,789,320 - - 0.002033 2,495,164,469 0.00% 2,845,106 2.00% - 2,845,106 - - 0.002034 2,619,922,692 5.00% 2,902,008 2.00% - 2,902,008 - - 0.002035 2,619,922,692 0.00% 2,960,048 2.00% - 2,960,048 - - 0.002036 2,619,922,692 0.00% 3,019,249 2.00% - 3,019,249 - - 0.002037 2,750,918,827 5.00% 3,079,634 2.00% - 3,079,634 - - 0.002038 2,750,918,827 0.00% 3,141,227 2.00% - 3,141,227 - - 0.002039 2,750,918,827 0.00% 3,204,052 2.00% - 3,204,052 -
Total $23,062,276 $3,151,850 $26,214,126
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PUBLIC FINANCECURRENT SITUATION
CFAC assumes 5% EAV growth every reassessment year and 2% increase in CPI starting in levy 2020 (per District's assumptions as of April 2019).
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PUBLIC FINANCECFAC RECOMMENDED FUNDING PLAN BASED ON $157.2M CAPITAL PLAN FY2020-2027
Outstanding Proposed 2023 Proposed Total Remaining Outstanding Proposed 2021 Proposed 2024 Proposed Total PROPOSED Total Tax Equalized Debt Service CPI DSEB DSEB DSEB DSEB Referendum Referendum Referendum Referendum TOTAL Tax Rate
Year Assessed Value Increase Extension Base Increase Debt Service Debt Service Debt Service Capacity Debt Service Debt Service Debt Service Debt Service DEBT SERVICE Debt Service2017 1,955,026,651 2.04% 2,072,508 2.10% 2,013,750 2,013,750 58,757.69 1,578,180 1,578,180 3,591,930 0.182018 1,955,026,651 0.00% 2,116,030 2.10% 2,112,426 2,112,426 3,604 1,579,000 1,579,000 3,691,426 0.192019 2,052,777,984 5.00% 2,156,235 1.90% 2,152,750 2,152,750 3,485 1,572,850 1,572,850 3,725,600 0.182020 2,052,777,984 0.00% 2,199,360 2.00% 2,188,050 2,188,050 11,310 8,087,000 8,087,000 10,275,050 0.502021 2,052,777,984 0.00% 2,243,347 2.00% 2,220,650 2,220,650 22,697 8,012,400 8,012,400 10,233,050 0.502022 2,155,416,883 5.00% 2,288,214 2.00% 2,254,450 2,254,450 33,764 8,007,400 8,007,400 10,261,850 0.482023 2,155,416,883 0.00% 2,333,978 2.00% 1,884,250 449,250 2,333,500 478 4,468,800 3,541,167 8,009,967 10,343,467 0.482024 2,155,416,883 0.00% 2,380,658 2.00% 1,921,300 454,400 2,375,700 4,958 5,767,600 2,240,600 8,008,200 10,383,900 0.482025 2,263,187,727 5.00% 2,428,271 2.00% 1,954,100 470,600 2,424,700 3,571 5,770,600 2,240,600 8,011,200 10,435,900 0.462026 2,263,187,727 0.00% 2,476,836 2.00% 1,591,750 881,000 2,472,750 4,086 5,767,400 2,240,600 8,008,000 10,480,750 0.462027 2,263,187,727 0.00% 2,526,373 2.00% 1,625,950 899,800 2,525,750 623 5,768,000 2,240,600 8,008,600 10,534,350 0.472028 2,376,347,113 5.00% 2,576,900 2.00% 1,664,200 912,000 2,576,200 700 5,772,000 2,240,600 8,012,600 10,588,800 0.452029 2,376,347,113 0.00% 2,628,438 2.00% 1,492,400 1,132,800 2,625,200 3,238 5,769,000 2,240,600 8,009,600 10,634,800 0.452030 2,376,347,113 0.00% 2,681,007 2.00% 2,128,800 2,128,800 552,207 5,769,000 2,240,600 8,009,600 10,138,400 0.432031 2,495,164,469 5.00% 2,734,627 2.00% 2,183,600 2,183,600 551,027 5,771,600 2,240,600 8,012,200 10,195,800 0.412032 2,495,164,469 0.00% 2,789,320 2.00% 2,238,200 2,238,200 551,120 5,771,400 2,240,600 8,012,000 10,250,200 0.412033 2,495,164,469 0.00% 2,845,106 2.00% 192,400 192,400 2,652,706 5,768,200 2,240,600 8,008,800 8,201,200 0.332034 2,619,922,692 5.00% 2,902,008 2.00% - 2,902,008 3,686,800 4,325,600 8,012,400 8,012,400 0.312035 2,619,922,692 0.00% 2,960,048 2.00% - 2,960,048 8,012,200 8,012,200 8,012,200 0.312036 2,619,922,692 0.00% 3,019,249 2.00% - 3,019,249 8,008,000 8,008,000 8,008,000 0.312037 2,750,918,827 5.00% 3,079,634 2.00% - 3,079,634 8,009,600 8,009,600 8,009,600 0.292038 2,750,918,827 0.00% 3,141,227 2.00% - 3,141,227 8,011,400 8,011,400 8,011,400 0.292039 2,750,918,827 0.00% 3,204,052 2.00% - 3,204,052 8,013,000 8,013,000 8,013,000 0.292040 2,888,464,768 5.00% 3,268,133 2.00% - 3,268,133 8,009,000 8,009,000 8,009,000 0.282041 2,888,464,768 0.00% 3,333,495 2.00% - 3,333,495 8,009,200 8,009,200 8,009,200 0.282042 2,888,464,768 0.00% 3,400,165 2.00% - 3,400,165 8,008,000 8,008,000 8,008,000 0.282043 3,032,888,007 5.00% 3,468,168 2.00% - 3,468,168 - - 0.00
Total $23,062,276 $11,942,850 $35,005,126 $3,151,850 $89,957,200 $94,353,167 $187,462,217 $222,467,343
Proceeds $9,380,000 Proceeds $73,000,000 $57,620,000 2019 DSEB Proceeds*All-In True Interest Cost 3.37% All-In True Interest Cost 3.04% 4.00%
Series 2023 Series 2021 Series 2024 2021 & 2024 Referendum Proceeds 130,620,000$ 2023 DSEB Proceeds 9,380,000$
Cash Contribution and Annual Capital Outlay 17,200,000$ TOTAL PROCEEDS 157,200,000$
(1) Assumes 5% EAV growth every reassessment year and 2% increase in CPI starting in levy 2020 (per District's assumptions as of April 2019). Combined All-In True Interest Cost 3.58%(2) Trulia estimates an average home value in Glenview is $425,000. Tax Impact reflects Cook Co. equalization factor of 2.9627 and $10,000 homeowner's exemption.(3) Rates are based on AAA MMD Index as of May 21, 2019 with current market spreads plus 0.50% cushion on Series 2020 and 1.00% on Series 2023 and 2024.*2019 DSEB Proceeds based on actual Series 2019 issue.
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PUBLIC FINANCECFAC RECOMMENDED FUNDING PLAN BASED ON $157.2M CAPITAL PLAN FY2020-2027
Note: The line represents the Debt Service Extension Base which grows annually by CPI. The District will have additional DSEB bonding authority in 2030 after the issuance of the 2023 DSEB Bonds.
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PUBLIC FINANCEESTIMATED IMPACT OF REFERENDUM BONDS
2021 and 2024 Referendum Bonds $130,620,000 $41,420,000
2023 DSEB $9,380,000 $9,380,000
Cash Contribution $17,200,000 $20,500,000
TOTAL PROCEEDS $157,200,000 $81,104,000
Estimated All-In True Interest Cost* 3.58% 3.56%
Total Debt Service 184,310,367 58,439,100 on 2021 and 2024 Referendum Bonds
Average Annual Debt Serviceon Referendum Bonds $8,013,494 $2,540,830
0.39 0.12
$308 $143
$539
$1,118
* Rates are based on AAA MMD Index as of May 21, 2019 with current market spreads plus 0.50% cushion on Series 2020 and 1.00% on Series 2023 and 2024.
Tax Rate for Average Annual Debt Service
Tax Impact of Average Annual Debt Service on $300,000 Home
Tax Impact of Average Annual Debt Service on $500,000 Home
Tax Impact of Average Annual Debt Service on $1,000,000 Home
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PUBLIC FINANCERECOMMENDATIONS ON FUNDING
• District has currently and will continue to use its available resources within certain limits to fund its capital needs prior to requesting additional funds from the voters
• Use of Operating Fund Balances for capital projects should be one-time, and maintain the operating fund balance/operating expenses ratio of 50%
• Use Debt Service Extension Base (DSEB) for issue of non-referendum bonds with 10 year payback and flexibility to issue additional bonds prior to maturity
• Maintain level payments of principal and interest for referendum bonds
• Seek transparency in communications with the public
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PUBLIC FINANCEDISCLAIMER
The information contained herein is solely intended to facilitate discussion of potentially applicable financing applications and is not intended to be a specific buy/sellrecommendation, nor is it an official confirmation of terms. Any terms discussed herein are preliminary until confirmed in a definitive written agreement. While we believe that theoutlined financial structure or marketing strategy is the best approach under the current market conditions, the market conditions at the time any proposed transaction isstructured or sold may be different, which may require a different approach.
The analysis or information presented herein is based upon hypothetical projections and/or past performance that have certain limitations. No representation is made that it isaccurate or complete or that any results indicated will be achieved. In no way is past performance indicative of future results. Changes to any prices, levels, or assumptionscontained herein may have a material impact on results. Any estimates or assumptions contained herein represent our best judgment as of the date indicated and are subject tochange without notice. Examples are merely representative and are not meant to be all-inclusive.
Raymond James shall have no liability, contingent or otherwise, to the recipient hereof or to any third party, or any responsibility whatsoever, for the accuracy, correctness,timeliness, reliability or completeness of the data or formulae provided herein or for the performance of or any other aspect of the materials, structures and strategies presentedherein.
Raymond James does not provide accounting, tax or legal advice; however, you should be aware that any proposed transaction could have accounting, tax, legal or otherimplications that should be discussed with your accounting, tax and other advisors and/or legal counsel.
Raymond James and affiliates, and officers, directors and employees thereof, including individuals who may be involved in the preparation or presentation of this material, mayfrom time to time have positions in, and buy or sell, the securities, derivatives (including options) or other financial products of entities mentioned herein. In addition, RaymondJames or affiliates thereof may have served as an underwriter or placement agent with respect to a public or private offering of securities by one or more of the entitiesreferenced herein.