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ALBANY UNIFIED SCHOOL DISTRICT BOARD AGENDA BACKUP Regular Meeting of August 9, 2016 ITEM:

FINANCIAL ADVISOR SCENARIOS FOR MEASURES B & E

PREPARED BY:

ALLAN GARDE, CHIEF BUSINESS OFFICIAL

TYPE OF ITEM:

REVIEW AND DISCUSSION

PURPOSE: To review and discuss the possible tax scenarios associated with Measures B & E. BACKGROUND INFORMATION: At the June 28, 2016 Regular Board Meeting, the Board approved Resolution 2015-16-23 and Resolution 2015-16-24, which declared the official voting results of Measures B and E by the Alameda County Registrar of Voters. At the May 24, 2016 Regular Board Meeting, the Board reviewed an update on the facts of Measures B & E, including a summary of the key historical Board Meetings regarding facilities. DETAILS: Two scenarios are presented which are in line with the discussions from the June 28 Board Meeting. They both assume a bond issuance in 2016 for property owners to benefit from the interest rates currently at near historic lows. The two options are:  Scenario 1 – Original financing plan where the tax rates rise and fall depending on the bond issuances and the annual debt payments.  Scenario 2 – Financing plan based on a targeted tax rate for a set number of years to provide certainty and consistency for property owners. KEY QUESTIONS/ANSWERS: 1. When do these scenarios assume the bonds are issued? a. To capitalize on the near historically low interest rates, reduce costs associated with each bond issuance series, and address the serious seismic and overcrowding facilities needs timely; the scenarios assume issuances by 2020 to align with the proposed project timelines discussed at the June 28 Board Meeting. FINANCIAL INFORMATION: There is currently no financial impact for the Board to discuss possible bond issuance scenarios. STRATEGIC GOALS ADDRESSED: This Board Item addresses Objective #3: Communicate and Lead Together. Goal: All stakeholders will collaborate and communicate about decisions that guide the sites and district.

RECOMMENDATION: Review and Discuss the Financial Advisor Scenarios for Measures B & E

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Albany Unified School District

Board Presentation by Isom Advisors, a Division of Urban Futures, Inc. August 9, 2016

1470 Maria Lane, Ste. 315 - Walnut Creek, CA 94596

Measure B and E Bond Programs Successful Bond Elections



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Albany Unified School District

The District had two successful general obligation bond measures on the June 2016 ballot.



Measure B

Measure E

Total

Total Par Amount

$70 million

$25 million

$95 million

Estimate of Highest Tax Rate

$120 per $100,000 in assessed value

$60 per $100,000 in assessed value

$180 per $100,000 in assessed value

Voter Support Required

66.67%

55.00%

N/A

Voter Support

68.96%

73.56%

N/A

The 2015-16 tax rate for bonds issued under the prior authorizations is $144 per $100,000 in assessed value.

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Bond Program Model Adapting the Bond Program



Albany Unified School District

The bond program will be adjusted over time based on new information and changing circumstances. 

The key inputs into the bond model include assessed valuation growth and interest rate environment.



As new information becomes available, we can incorporate them into our model.



We can also adjust the bond program to better meet project needs or to proactively manage tax rate impact.

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Assessed Value History District AV has grown on average by over 5.0% per year since 1989



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Albany Unified School District

Average annual growth in assessed valuation for Albany USD has been 5.74% since 1989.

Billions

Albany USD: History of Assessed Valuation Growth $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Assessed valuation information for 2016-17 will be available at the end of summer. We are currently assuming 4.0% AV growth for the next five years, followed by 3.25% thereafter.

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Series “A” Sizing Net bonding capacity will likely be around $30 million





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Albany Unified School District

The Series “A” bonds will be sized based on the District’s net bonding capacity. 

District’s 2015-16 assessed value (AV) is approximately $2.3 billion.



Gross bonding capacity for unified school districts is 2.5% of its total AV. Based on Albany USD’s current AV, gross bonding capacity is $57.9 million.



The District’s current net bonding capacity is approximately $29.0 million, calculated by subtracting out the District’s current outstanding bonds from gross bonding capacity.



With a 4% growth in assessed valuation, we estimate that the net bonding capacity will increase to approximately $31.0 million.

Future bond issuances will likely require a bonding capacity waiver from the California Board of Education.

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Interest Rate Environment

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Interest rates are near historic lows

Albany Unified School District



The municipal market continues to be very strong from an issuer perspective.



Lower interest rates when bonds are issued can significantly reduces costs to tax payers. Municipal Market Data (MMD) Rates since 2005

7.00% 6.00% 5.00%

10-Year

30-Year

High

4.86% (10/15/2008)

5.94% (10/15/2008)

Low

1.29% (7/6/2016)

1.93% (7/6/2016)

Average

2.85%

3.91%

Current

1.41%

2.05%

4.00% 3.00% 2.00% 1.00% 0.00% 2005

2006

2007

2008

2009

2010 10-Year MMD

2011

2012

2013

2014

2015

2016

30-Year MMD

Source: Thomson Reuters – The Municipal Market Monitor (tm3)

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Measure B and E Bond Programs Original Financing Plan



Albany Unified School District

The original financing plan provided a conservative tax rate estimate to allow the District to implement a prudent bond program. Albany USD: Projected Tax Rate (ORIGINAL)

$350

Amount Tax Rate per $100K in AV

$300 $250 $200

Series “A” (2016)

$25.0 million

Series “B” (2017)

$37.5 million

Series “C” (2019)

$32.5 million

$150 $100 $50 $0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 Prior Authorizations

Measure B

Measure E



No combined tax rate target in earlier years (estimated to be as high as $300 per $100K in AV).



Conservative interest rate assumptions.



Flexibility to issue entire authorization in first two years. 7

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Measure B and E Bond Programs Updated Financing Plan



Albany Unified School District

As the District begins the process of issuing bonds under the new authorizations, it is a good time to revisit the assumptions underlying the bond programs. Albany USD: Projected Tax Rate (UPDATED)

$350

Amount

Tax Rate per $100K in AV

$300 $250 $200

Series “A” (2016)

$30.0 million

Series “B” (2017)

$32.0 million

Series “C” (2019)

$33.0 million

$150 $100 $50 $0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 Prior Authorizations

Measure B

Measure E



Setting a combined tax rate target in earlier years of approximately $250 per $100,000 in assessed value.



Realistic interest rate assumptions.



Flexibility to adjust schedule to meet project needs and other scheduling issues. 8

Tax Rate Management Tax rate management allowed for in the CA Ed Code



Albany Unified School District

The California Education Code is clear that the governing board of a school district can request the County to set tax rates on bonds that are planned to be sold before the next tax levy. 

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15252. The board of supervisors of the county, the superintendent of schools which has jurisdiction over any school district, shall annually at the time of making the levy of taxes for county purposes estimate the amount of money required to meet the payment of the principal and interest on bonds of the district authorized by the electors of the district and not sold, and which the governing board of the district informs the board in their belief will be sold before the next tax levy, and the board of supervisors shall levy a tax sufficient to pay the principal and interest so estimated. (Emphasis added)

A tax rate in the first year will allow the District to repay principal earlier and reduce overall borrowing costs.

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Timeline – Series “A” Proposed Issuance Schedule

Task

Albany Unified School District

Responsible Party

Date

Board /Financial Advisor

August 9th

Finance Team

Early August

Board

August 23rd

District/Financial Advisor

Early September

Board

September 13th

District/Financial Advisor

September 19th

Post POS

Finance Team

September 20th

Price Series “A” Bonds

Finance Team

September 28th

Print and Mail Final Official Statement (FOS)

Finance Team

October 7th

Closing of Series “A” Bonds

Finance Team

October 12th

Presentation to Board on bond structure and tax rate management Distribute drafts of Preliminary Official Statement (POS), bond resolution and legal documents Board approves resolution requesting County to set a tax rate in connection with the first series of bonds under the new authorization Meeting with Bond Rating Agency Board approves resolution authorizing refunding and supporting legal documents for the Series “A” Bonds Receive Rating

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