bonds levies voter ptrns 8 12 08

Bonds, Levies and Voter Patterns

August 12, 2008

Jon GoresSenior Vice President(206) [email protected]

Washington State Washington State UniversityUniversity

2

Introduction to D.A. Davidson The largest employee-

owned financial services company headquartered in the Pacific Northwest

Uninterrupted service to school districts throughout the Northwest since 1968

The most experienced school finance professionals

Capital base of over $100 million

Outstanding corporate citizen which gives back to Districts, Foundations and Associations.

Leading underwriter of school bonds in 2008.

In 2007, Davidson completed 219 public finance negotiated transactions totaling $1.545 billion.

Our most recent ranking was 11th in the country among municipal underwriters by number of sales and the top 30th by dollar amount.

In 2007, Davidson senior managed 16 school district transactions.

In addition, we served as a Financial Advisor on 2 bond issues totaling $112 million in 2007.

So far in 2008 Davidson has Senior Managed 13 Washington School District transactions.

Senior Manager2008

Totals

D.A. Davidson & Co. 13

Seattle-Northwest 7

Piper Jaffray 2

Washington Schools2008

3

Davidson’s Education Finance Team

Jack EatonManaging Director35 Yrs Experience

Jon GoresSr. Vice President23 Yrs Experience

Dave TrageserSr. Vice President23 Yrs Experience

Financial and Quantitative Analysis

Chad CowanVice President

9 Yrs Experience

Municipal CreditMaura LentiniVice President

7 Yrs Experience

DisclosureShandra Tietze

Associate25 Yrs Experience

UnderwritingMark Froio

Vice President24 Yrs Experience

MarketingJoe Brady

Sr. Vice President/Sales Manager

25 Yrs Experience

Fixed Income ResearchMary Ann Hurley

Vice President30 Yrs Experience

D.A. Davidson & Co.Northwest Education Finance TeamBANKERS

AnalyticsKelsey Draper

Administrative Assistant

We have the most experienced school finance team in the state.

4

Davidson’s 2007/2008 Washington School District Transactions

$27,800,000West Valley School District No. 208

Unlimited Tax General Obligation Bonds, 2007

$14,750,000Orting School District No. 344


$22,775,000Ellensburg School District No. 401

Unlimited Tax General Obligation Refunding Bonds, 2007

$3,500,000Cape Flattery School District No. 401


$9,720,000Griffin School District No. 324


$9,700,000Arlington School District No. 16


$15,000,000Riverview School District No. 407


$15,000,000Deer Park School District No. 414-200-61


$8,000,000Nine Mile Falls School District No. 325-170


5

Davidson’s 2007/2008 Washington School District Transactions (Continued)

$9,900,000Kelso School District No. 458

Unlimited Tax General ObligationRefunding Bonds, 2007

$4,296,277Prescott School District No. 402-37


$5,835,000Burlington-Edison School District No. 100


$2,205,000Liberty School District No. 362


$45,000,000Federal Way School District No. 210


$67,000,000North Thurston Public Schools


$7,155,000Port Townsend School District No. 50


$15,000,000Riverview School District No. 407


$36,000,000Sumner School District No. 320


6

2007/2008 WashingtonSchool District Transactions (Continued)

$2,115,000Sultan School District No. 311


$7,645,000Nooksack Valley School District No. 506


$5,650,000Selah School District No. 119


$4,350,000Nine Mile Falls School District No. 325

Unlimited Tax GeneralObligation Bonds, 2008

$7,440,000Toppenish School District No. 202

Unlimited Tax GeneralObligation Refunding Bonds, 2008

$16,000,000Oak Harbor School District No. 201


$2,795,000Aberdeen School District No. 5


$5,500,000Lake Chelan School District No. 129


$4,290,000Sequim School District No. 323


7

2007/2008 WashingtonSchool District Transactions (Continued) $7,470,000

Orting School District No. 344


$14,695,000Tahoma School District No. 409


$13,615,000Northshore School District No. 417


$15,000,000Freeman School District No. 358


8

Outline Election Research

Bond Fundamentals—Bonds 101

Bond Issue Planning—Projected Tax Rates

9

Election Research

Election Date Research

Multiple Ballot Measures

Tax Rate vs. Election Success

Economy vs. Election Success

10

Election Timing

When should we run our Bonds?

11

Voting PatternsAll Bond Issues Passed by Purpose

45%

22%

38%

43%

14%

100%

17%

47%

39%

68%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Fire189

General142

Hospital 38

Jail 18

Library 40

Park 100

Police 13

School 969*

Street 22

W&S 12

Per

cent

Pas

sed

Years 1992 through May 2006, inclusive.*Through May 2008.

12

Voting PatternsBond Issues Passed by Year

Schools Only

26%

40%

45%44%

38%

45%

37%

46%45%

34%

53%

43%

38%

41%

24%

28%

38%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

199286

199373

199499

199562

199678

199778

199855

199959

200040

200139

200243

200353

200434

200534

200660

200750

200831

Per

cent

Pas

sed

Years 1992 through May2008, inclusive.

13

Voting PatternsBond Issues Passed by Month

Schools Only

27%

0%

38%

43%

53%49%

28%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

February271

March145

April47

May269

August1

September109

November126

Per

cent

Pas

sed

Years 1992 through May 2008, inclusive.

14

Multiple Propositions on Same Ballot

58.62%

Average Approval RateMultiple Issues

52.34%

Average Approval Rate Single Issue

No. of Issues Passed Failed

20 7 13

Example:

PROPOSITION 2

BONDS FOR NEW STADIUM AND MULTIPURPOSE FIELD

The Board of Directors of ABC District No. 1 adopted Resolution No. 11-07/08, concerning a proposition to finance a new stadium and multipurpose field. This proposition would authorize the District, only if Proposition 1 is approved, to construct and equip a new High School Stadium and synthetic turf multipurpose field; issue no more than $4,000,000 of general obligation bonds maturing within 20 years; and levy annual excess property taxes to repay the bonds, all as provided in Resolution No. 11-07-08. Should this proposition be:

Approved………. ____

Rejected………...____

15

Multiple Ballot Measures

Should M&O Levies, Capital Projects Levies and Bonds Be

Separate Elections?

16

M&O/Bonds on the Same Ballot

M&O and Bond Levies on the Same BallotPassage Rates

80.2%83.6%

35.0%38.3%

0%

10%

20%30%

40%

50%

60%

70%80%

90%

100%

Separate Proposition Average Joint Proposition Average

Paas

age

Rat

es (

%)

M&O Bonds

17

M&O and Capital Levies on the Same Ballot

M&O and Capital Levies on the Same BallotAs of June 2008

65.9% 65.0%

61.5%

67.8%

59.2%

71.1% 70.8%

67.9%

80.6%

59.3%

67.0%

62.2%

64.9% 65.5% 65.5%

60.2%

70.7%68.3%

67.0%

83.1%

58.1%

67.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SeparateProp.

2000 2001 2002 2003 2004 2005 2006 2007 2008 Average

% P

assa

ge

M&O Capital Levies

18

M&O and Transportation Levies on the Same Ballot

M&O and Transportation Levies on the Same BallotAs of June 2008

65.7%

61.3%65.2%

68.9%

61.7%

51.1%

68.3%65.8%

61.2%62.9%

0.0%

62.0% 61.4%64.9%

70.3%

62.3%

54.5%

67.9%66.2%

60.8%63.5%

0.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SeparateProp.

2000 2001 2002 2003 2004 2005 2006 2007 2008 Average

% P

assa

ge

M&O Transportation Levies

19

2009 Special Election and Resolution Filing Dates

The 2009 Special election dates and resolution filing deadlines pursuant to RCW 29A.04.321, RCW 29A.04.330, RCW 29A.40.070 and RCW 29A.56.020 are listed below for your information. (1) These are the dates permitted under current law, which may be changed by the Legislature.

ELECTION DATE RESOLUTION

FILING DEADLINE (2)

APPROXIMATE DATE ABSENTEE

BALLOTS ARE MAILED (3)

February 3, 2009 December 12, 2008 January 14, 2009 March 10, 2009 January 16, 2009 February 18, 2009 April 28, 2009 March 6, 2009 April 8, 2009 May 19, 2009 March 27, 2009 April 29, 2009

August 18, 2009 (Primary Election) May 26, 2009 July 29, 2009 November 3, 2009 (General Election) August 11, 2009 October 14, 2009

(1) This data is for informational purposes only and does not take the place of local, state or federal laws. RCW notations are offered

as a reference only for additional research. (2) Some dates may have been adjusted to reflect the business day prior to actual resolution filing date according to RCW 29A.04.330

if falling on a Saturday. (3) Absentee ballots are required to be mailed no later than 18 days prior to the election date.

20

Do tax rates or the economyinfluence voters?

Controlling Tax Rates

21

If you knew the passage of the levy won’t increase the tax rate for homeowners?

Tax Rate Changes

68%75% 79% 75% 77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1991 1993 1995 1997 1999 2001 2003

% In Favor

*2003 Eiland Survey

60%

22

The absolute size of the tax rate may be less important than the change in rates.

There is very little correlation between the total tax rate and election success. That is, the amount of the total tax rate does not appear to influence voters as much as the stability of the tax rates.

Tax Rates Research

Correlation between Total Tax Rate and Election Success

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$9.26 $11.17 $11.47 $11.87 $12.58 $13.04 $13.08 $13.32 $13.81 $13.89 $14.17 $14.36 $14.57 $15.35 $16.67

Total Tax Rate

Per

cen

tag

e o

f Y

es V

ote

s, 2

00

0

Ele

ctio

ns

23

Stable tax rates lead to greater success at election time.

Districts with smaller tax rate changes have more success passing levies.

Tax Rate Change

This is reflected in the voter survey data. The correlation of real dollar change in tax rates from 1992-97 with election results

demonstrates that stable tax rates lead to greater election success.

Percentage of Yes Votes by Change in Tax Rates

50%

52%

54%

56%

58%

60%

-$2.47 -$1.07 +$0.03 +$1.51

Change in Tax Rates

Per

cent

age

of Y

es V

otes

, 199

2-19

97

24

Consumer Confidence Index

50

70

90

110

130

150

Jan-

00

Apr

-00

Jul-

00

Oct

-00

Jan-

01

Apr

-01

Jul-

01

Oct

-01

Jan-

02

Apr

-02

Jul-

02

Oct

-02

Jan-

03

Apr

-03

Jul-

03

Oct

-03

Jan-

04

Apr

-04

Jul-

04

Oct

-04

Jan-

05

Apr

-05

Jul-

05

Oct

-05

Jan-

06

Apr

-06

Jul-

06

Oct

-06

Jan-

07

Apr

-07

Jul-

07

Oct

-07

Jan-

08

Apr

-08

Con

sum

er C

onfi

den

ce I

nd

ex

Feb '0350.00%

Feb '0244.44%

Mar '0220.00%

Mar '0161.54%

Feb '0141.67%

Mar '0060.00%

Feb '0025.00%

Mar '0336.36%

Feb '0441.67%

Mar '040.00%

Feb '0575.00%

Mar '0560.00%

Feb '0650.00%

Mar '0662.50%

Feb '0752.94%

Mar '0733.33%

Feb '0840.00%

Mar '0815.38%

25

Standard & Poor’s 500 Index

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

Jan-

00

Apr

-00

Jul-

00

Oct

-00

Jan-

01

Apr

-01

Jul-

01

Oct

-01

Jan-

02

Apr

-02

Jul-

02

Oct

-02

Jan-

03

Apr

-03

Jul-

03

Oct

-03

Jan-

04

Apr

-04

Jul-

04

Oct

-04

Jan-

05

Apr

-05

Jul-

05

Oct

-05

Jan-

06

Apr

-06

Jul-

06

Oct

-06

Jan-

07

Apr

-07

Jul-

07

Oct

-07

Jan-

08

Apr

-08

S&

P 5

00 I

nd

ex

Feb '0350.00%

Feb '0244.44%

Mar '0220.00%

Mar '0161.54%

Feb '0141.67%

Feb '0025.00%

Mar '0336.36%

Feb '0441.67%

Mar '040.00%

Feb '0575.00%

Mar '0560.00%

Feb '0650.00%

Mar '0662.50%

Feb '0752.94%

Mar '0733.33%

Feb '0840.00%

Mar '0815.38%

Mar '0060.00%

26

Effects of the Simple Majority

27

2008 Election Summary

Average Approval Rate (M&O only) %Before 4204 67.04%After 4204 61.45%

Average Approval Rate %Counties - Rejected 4204 62.00%Counties - Approved 4204 58.64%

February ElectionApproval Totals (M&O only) No.Total Approvals 35No. of Failures with 4204 1No. of Failures without 4204 14



March ElectionApproval Totals (M&O only) No.Total Approvals 108No. of Failures with 4204 2No. of Failures without 4204 49

28

2008 Election Summary

April Election May Election

Approval Totals (M&O only) No.Total Approvals 2No. of Failures with 4204 0No. of Failures without 4204 0



Approval Totals (M&O only) No.Total Approvals 5No. of Failures with 4204 0No. of Failures without 4204 1



29

Property Tax 101

30

Do you agree or disagree that school districts get more money in taxes as property values go up?

Property Taxes

Agree Disagree

2005 Voters 66% 23%

2007 Voters 68% 20%

Source: Tom Eiland & CFM Consulting

31

Property Taxes 101

Increases in Home Values Will Not Increase School District Tax Collections

Changes in home values don’t change the amount of taxes authorized.

Local school taxes can only be increased by a vote of the people.

Changing property values will change tax rates, but not tax collections.

32

$1,000 Levy

$250 $250 $250 $250

$100,000 $100,000 $100,000 $100,000

Property Taxes 101

33

$1,000 Levy

$250 $250 $250 $250

$200,000 $200,000 $200,000 $200,000

Property Taxes 101

34

$1,000 Levy

$187.50 $250 $250 $312.50

$150,000 $200,000 $200,000 $250,000

Property Taxes 101

35

Property Taxes 101

$1,000 Levy

$200 $200 $200 $200 $200

$100,000 $100,000 $100,000 $100,000

$100,000

36

Increase in Property Values Will Not Increase School District Tax Collections Changes in property values don’t change the amount of taxes authorized

Local school taxes can only be increased by a vote of the people

Changing property values will change tax rates, but not tax collections

Year Home Value Tax Rate Tax Bill

ABC School District Home Value 2006 $100,000 $5.00/$1,000 $500

Assume a 20% increase in Assessed Value for ABC School District

#1: 20% increase 2007 $120,000 $4.17/$1,000 $500

#2: 10% increase 2007 $110,000 $4.17/$1,000 $459

#3: 30% increase 2007 $130,000 $4.17/$1,000 $542

37

Property Taxes 101

Conclusion

If your property value increases at a lower rate than the average increase for the school district, the amount of taxes you pay will decrease.

If your property value increases at a higher rate than the average increase for the school district, the amount of taxes you pay will increase.

38

Capital Projects Financing

39

Capital Financing Options

Most common Bonds

Voted Non-voted

Capital Projects Levy Less Common

Qualified Zone Academy Bonds (QZAB) Conditional Sale Contracts

40

Types of School District Bonds– Voted- Unlimited Tax General Obligation Bonds (UTGO)– Non-voted – Limited General Obligation Bonds (LGO)

A. Voter approved bonds are – repaid with property taxes– approved with a 60% yes vote, 40% validation– 5% Debt Capacity

B. Non-voted bonds are (LGO)– repaid with existing revenue– can’t be used for “new” construction– 3/8 of 1% debt

C. Conditional Sale Contracts– Considered “debt” (non-voted)– Payment from general district revenues– No maximum term (economic life)

Capital Finance Options

41

D. Qualified Zone Academy Bonds (QZAB)– interest free loan– private partnership/free & reduced lunch– can’t be used for new construction– non-voted debt

E. Capital projects levy (no debt limit)– one to six year repayment– no interest cost– significantly reduced interest earnings– life cycle mismatch

Capital Financial Options

Bonds are the primary method used by Washington school districts to finance the “local share” of capital projects because

– cash is generated up front– payments can be spread over time, and– districts have some control over taxpayer impacts

42

Capital Financing Options

State match for construction projects available to all school districts

Study and survey grant

State match ratios from 20% to 90%--not dollar for dollar

Does state match create incentive for deferred maintenance?

Unhoused vs. modernization

43

Ideal Time Frame for Major Decisions

Preparing for the Election

44

The Participants

1. Bond Counsel prepares documents and provides a legal opinion

2. The Underwriter provides financial planning and ultimately buys the bonds for resale to investors

3. The Financial Advisor represents the District during negotiations with the Underwriter

4. The County Treasurer is the District’s treasurer and takes receipt of the bond proceeds

5. The Architect provides cost projections based on the project scope

Planning a Bond Financing

45

The Ballot Proposition—Voted Bonds

1. Maximum amount to be borrowed

2. Maximum term of the bonds

3. Use of bond proceeds

4. Use of State matching money (Front Funded)

5. Unlimited Authority to levy property taxes to pay debt service

Planning a Financing

46

PROPOSITION 1

SCHOOL DISTRICT NO. ___

BONDS FOR CONSTRUCTION OF SCHOOL FACILITIES

The Board of Directors of _____ School District No. ___, adopted Resolution No._____, concerning a proposition to finance construction of school facilities. This proposition would authorize the District to construct a new elementary school (Grades K-3) to replace _______ Elementary School on the existing site and construct additional classrooms to replace portable classrooms at _______ Middle School; issue no more than $19,544,500 of general obligation bonds maturing within 20 years; and levy annual excess property taxes to repay the bonds, all as provided in Resolution No.______. Should this proposition be:

Approved………. ____

Rejected………...____

Bond Proposition

47

1. Maximum amount to be levied

2. Maximum term of the levy

3. Use of levy proceeds

4. Estimated levy amount per year

5. Estimated tax rate per year

The Ballot Proposition—Capital Projects Levy

48

PROPOSITION __________

SCHOOL DISTRICT NO. ___

CAPITAL LEVY FOR TECHNOLOGY IMPROVEMENTS

The Board of Directors of ________School District No. ___adopted Resolution No. _____, concerning a proposition to finance technology improvements. This proposition would authorize the District to acquire and install technology and communication equipment and make other technology improvements and upgrades throughout existing school facilities to improve student learning, and levy the following excess taxes, on all taxable property within the District:

Capital Projects Proposition

Approximate LevyRate/$1,000

Collection Year Assessed Value Levy Amount2009 $_________ $________2010 $_________ $________2011 $_________ $________2012 $_________ $________

All as provided in Resolution No. ___. Should this proposition be approved? LEVY . . . YES ___ LEVY . . . NO ___

49

A. Projected Budget1. Estimated costs

2. Estimated revenues Bonds State match Local share vs. Front Funded Investment earnings Impact fees

B. Projected Cash Flow1. Tax law considerations

Arbitrage Rebate Expenditure Rule

C. Projected Impact on taxpayers1. Levy rates are the standard means of communicating the tax impact

Tax rate per $1,000 Tax deduction

The Financing Plan

50

Assumptions for Tax Rate Planning

Interest Rates

Bond Rating

Assessed Value

Bond Structure

Financial Planning

51

Assumptions for Levy Rate PlanningA. Interest Rates

- Lower interest rates result in lower tax rates for bonds.- Interest rates are determined when bonds are actually sold.- Assumption: Current rates plus 1.5%

Financial Planning

Bond Buyer Index20-Year General Obligation Bond

(1 year history)

3.75

3.90

4.05

4.20

4.35

4.50

4.65

4.80

4.95

5.10

5.25

Au

g-07

Au

g-07

Au

g-07

Sep

-07

Sep

-07

Oct

-07

Oct

-07

Nov

-07

Nov

-07

Dec

-07

Dec

-07

Jan

-08

Jan

-08

Jan

-08

Feb

-08

Feb

-08

Mar

-08

Mar

-08

Ap

r-08

Ap

r-08

May

-08

May

-08

Jun

-08

Jun

-08

Jul-

08

Jul-

08

Jul-

08

Rat

es (

%)

Bond Buyer Index20-Year General Obligation Bond

(25 year history)

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

11.00

12.00

13.00

14.00

Jul-

83

Jul-

84

Jul-

85

Jul-

86

Jul-

87

Jul-

88

Jul-

89

Jul-

90

Jul-

91

Jul-

92

Jul-

93

Jul-

94

Jul-

95

Jul-

96

Jul-

97

Jul-

98

Jul-

99

Jul-

00

Jul-

01

Jul-

02

Jul-

03

Jul-

04

Jul-

05

Jul-

06

Jul-

07

Jul-

08

Rat

es (

%)

52

Assumptions for Levy Rate Planning (continued)B. Bond Rating

- A higher bond rating results in lower interest rates.- Assumption: Aaa (with bond insurance)

Aa1 (with State Guaranty)

A Guide to Bond Ratings

Moody’s Investors Service – Founded 1918

Highest Quality Aaa

Aa1, Aa2, Aa3

A1, A2, A3

Baa1, Baa2, Baa3

Lowest Quality NR (Nonrated)

Financial Planning

53

Bond raters consider local economy, district finances and other factors.

The Rating

DebtFactors

Economy

Governmental Factors

FinancialPerformance

Example:Tacoma Aa3 Lake Chelan A3 Edmonds Aa3

Puyallup Aa3 Selah A3 Richland A1

Issaquah Aa1 Sumner A1 Yakima A2

Financial Planning

54

Financial PlanningC. Assessed Value

– Higher Assessed values will lower the District’s tax rates (but not overall payment).– An individual’s taxes will be based on the assessed value for their own property.

– Growth from new construction.

– Assessment cycle (Annual market based adjustment vs. periodic reassessment by County Assessor)

Change from Previous Years

School District Assessed Value Growth Historical and Projected

10.38%

6.00%

3.00%

7.00%

3.79%

10.53%

0%

2%

4%

6%

8%

10%

12%

2002 2003 2004 2005 2006 2007 andthereafter*

55

D. Bond Structure– State law gives districts great flexibility in determining bond structures.

– Options frequently include: Level payments

Level rate for bonds only

Level rate for all levies

Option #1

DescriptionLevel Debt Base Case

Total Authorization $70,000,000

Bond Sales:June 2007 $70,000,000

December 2008December 2009December 2013December 2014December 2015

Tax Rates:2007 $2.82

Projected 2008 $3.352008 increase over 2007 $0.53

Financial Planning

56

Option #1: Level Debt Service

$70MM

Proposed Bond Tax Rates

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Lev

y/ $

1000

Ass

esse

d V

alu

e

2007 Bonds

Existing Bonds

57




Level rate for all levies

Option #1 Option #2


Combined Level Tax Rate

Total Authorization $70,000,000 $70,000,000

Bond Sales:June 2007 $70,000,000 $70,000,000

December 2008December 2009December 2013December 2014December 2015

Tax Rates:2007 $2.82 $2.82

Projected 2008 $3.35 $2.932008 increase over 2007 $0.53 $0.11

58

Option #2: Level Tax Rate

$70MM


$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Lev

y/ $

1000

Ass

esse

d V

alu

e

2007 Bonds

Existing Bonds

59




Level rate for all leviesOption #1 Option #2 Option #3



Delayed Sale Combined Stepped

Level Tax RateTotal Authorization $70,000,000 $70,000,000 $70,000,000

Bond Sales:June 2007 70,000,000 70,000,000 24,000,000

December 2008 23,000,000December 2009 23,000,000December 2013December 2014December 2015

Tax Rates:2007 $2.82 $2.82 $2.82

Projected 2008 $3.35 $2.93 $2.962008 increase over 2007 $0.53 $0.11 $0.14

60

Option #3: Stepped Level Tax Rate

$70MM


$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50$5.00

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

Lev

y/ $

1000

Ass

esse

d V

alue

2009 Bonds2008 Bonds2007 BondsExisting Bonds

61




Level rate for all leviesOption #1 Option #2 Option #3 Option #4




Level Tax Rate

Combined Level Tax Rate (All

School Tax Rates)Total Authorization $70,000,000 $70,000,000 $70,000,000 $70,000,000

Bond Sales:June 2007 70,000,000 70,000,000 24,000,000 70,000,000

December 2008 23,000,000December 2009 23,000,000December 2013December 2014December 2015

Tax Rates:2007 $2.82 $2.82 $2.82 $5.82

Projected 2008 $3.35 $2.93 $2.96 $5.932008 increase over 2007 $0.53 $0.11 $0.14 $0.11

62

Option #4: Level Tax Rate (All)

$70MM


$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027

Lev

y/ $

1000

Ass

esse

d V

alue

2007 Bonds

Existing Bonds

M&O

63




Level rate for all leviesOption #1 Option #2 Option #3 Option #4 Option #5




Level Tax Rate

Combined Level Tax Rate (All

School Tax Rates)

Combined Level Tax Rate (All School Tax

Rates)Total Authorization $70,000,000 $70,000,000 $70,000,000 $70,000,000 $70,000,000

$135,000,000Bond Sales:

June 2007 70,000,000 70,000,000 24,000,000 70,000,000 70,000,000December 2008 23,000,000December 2009 23,000,000December 2013 67,500,000December 2014December 2015 67,500,000

Tax Rates:2007 $2.82 $2.82 $2.82 $5.82 $5.82

Projected 2008 $3.35 $2.93 $2.96 $5.93 $6.302008 increase over 2007 $0.53 $0.11 $0.14 $0.11 $0.48

64

Option #5: Level Tax Rate (All)

$70MM


$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Lev

y/ $

1000

Ass

esse

d V

alue

2015 Bonds2013 Bonds2007 BondsExisting BondsM&O

65

Tax Impact AnalysisIssue Structure: Level Debt Service

Estimated 2008 Tax Rate Increase

Over 2007 Tax Rate (Bonds Only)

(per $1,000 assessed value): $0.53

Assessed

Value of

Property

Gross Property

Tax Increase

For Bonds

Monthly

Gross

Increase 25% 28% 33% 35%

-- Federal Income Tax Bracket--

$100,000 $53.00 $4.42 $39.75 38.16 $35.51 $34.45

150,000 79.50 6.63 59.63 57.24 53.27 51.68

200,000 106.00 8.83 79.50 76.32 71.02 68.90

250,000 132.50 11.04 99.38 95.40 88.78 86.13

300,000 159.00 13.23 119.25 114.48 106.53 103.55

Net Tax Increase from

Bonds After Allowing for

Income Tax Deduction

NOTE: Qualified homeowners may apply for a senior exemption. Please contact the County Assessor for details.

66

1. Construction Cash Flows Effect on tax rates Effect on project costs Effect on investment earnings

2. Other Levies M&O levy Other levies

3. Assessed Value Growth What is your county’s assessment practice? Source of new assessed value

4. Impact on Taxpayers Federal Income Tax deductibility Senior exemption

5. Financing Goals Tax rates? Interest rates?

Things to Consider

67

Financing Alternatives for School Construction Engrossed House Bill 1832—Expanded use of non-voted debt.

Engrossed House Bill 1833—Authorizes schools to enter into long-term leases and allows bond proceeds to pay lease payment.

Qualified Zone Academy Bonds (QZABs)—Federal government interest free loans.

Capital Projects Levy—Maximum six years. Used for construction and technology.

I-728 money can be used to provide improvements or additions to school facilities which are directly related to class size reduction and extended learning opportunities.

68

Refunding Overview

What is a refunding?

A refunding is a procedure whereby an issuer refinances an outstanding bond issue by issuing new bonds. Issuers refund bonds to reduce interest costs, and/or restructure the payment of the debt.

69

Refunding BondsThere are two primary types of refundings: current refundings and advance refundings.

Current refundings — Under federal tax law, a current refunding is one in which the new refunding bond transaction is closed within 90 days of the refunded issue’s next available call date of the debt to be refunded.

Advanced refundings – Under federal tax law, an advanced refunding is one in which the new refunding bond transaction is closed more than 90 days before the first available call date of the debt being refunded.

70

Call Feature on Bonds

“Calling” a bond means to prepay it before its scheduled maturity date

Not all bonds can be called

Call feature is set prior to the sale of bonds– Which bonds can be called– Why they can be called– What price is paid to call the bonds

Example of typical call language: “Bonds maturing on and after December 1, 2008 are subject to redemption on or after June 1, 2008 at the price of par.”

71

Refunding Overview

ISSUER

Debt Service onOutstanding Bonds

New RefundingBonds

Special U.S. GovernmentObligation (SLGS) andT-Bills

Debt Service onRefunding Bonds

OldBonds

NewBonds

Debt Service onOutstanding Bonds

OldBonds

NewBonds

TO BUY

TO PAY

OWES

ISSUES

OWES

72

Points to Consider By law, advanced refundings are only allowed once before the call date.

– Must provide debt service savings annually

– Savings benefit only taxpayers

– Cannot extend term of the bonds

Impact on non-voted debt capacity—the “over issuance” of new bonds to pay cost of issuance and fund escrow is counted against non-voted debt capacity

Bond rating—is this the best time to have the District’s bond rating reviewed?

Future debt issuance and the impact of Federal Tax Law related to:

– Arbitrage rebate

– Bank Qualification

73

Selling the Bonds

Two Methods Competitive Negotiated

Competitive Sale Financial Advisor Bonds sold to highest bidder

Negotiated Underwriter Bonds sold to produce desired result

74

Competitive vs. Negotiated

Our school district clients care most about outcomes

Schools are different than the State, the largest cities or some counties

They have to care about managing tax rates in both the near and long term, because they (uniquely) have to go to the voters for approval of funds for a significant portion of their operating revenues

It is no coincidence that the extensive use of negotiated bond sale coincides with 20 years of voter generosity.

75

SAFECOMontana Board of InvestmentsSanta Barbara TrustCharles SchwabWashington FirstFirst Security Investment Wells Fargo BankDiscover BrokeragePEMCOAmerican Marine BankPeoples Bank1st Independent BankWM AdvisorsBank of AmericaUSAA Investment Management Co.Franklin Federal Tax Free FundICM Asset ManagementBaker Boyer National BankNorthern State BankThornburg Investment Management

WEST

Fidelity Investments PNC Bank Bear Stearns MD Sass Investors Services Inc. Chase Manhattan Bank Colonial Funds Pioneering Management Corp. AAL Capital Management Lord Abbett Delaware Management Co. Alliance Capital Management Co. Salomon Brothers Asset Management Sanford C. Bernstein DB Scudder of Boston, MA Dreyfus U. S. Trust of New York Boston Company Eaton Vance Municipals

.

EAST

CENTRAL

Nuveen Advisory Corp Strong Capital Management Allstate Insurance Co. Stein Roe & FarnhamState Farm Fire & Casualty IDS Tax ExemptVoyageur Asset Management JanusInvestors Fiduciary Trust Co. Continental Illinois Nat’l. BankAllstate Insurance Co. Northern Trust Co.Montana Tax-Free Fund Wells Fargo Bank State Farm Fire & Casualty Harris BankHeartland Advisors Inc. First Security InvestmentU.S. Bank Bank OneUnited Savings & Loan Society Asset Management

* Selected representative institutional clients

* Selected representative institutional clients

Selling the Bonds

76

Selling the BondsBond Distribution--Who Buys Your Bonds

2008

Insurance, 22%

Money Manager, 25%

Agent, 1%

Retail, 4%

Broker-Dealer, 5%

Arbitrage, 10%

Bank Trust, 15%

Bond Fund, 10%Bank Portfolio, 7%

Corporation, 1%

77

Levy Library

http://www.levylibrary.org/

78

Levy Library

79

Levy Library

80

D.A. Davidson Contact List

Northwest Education Finance Team

Jack Eaton

Senior Vice President

(206) 903-8698 phone

(206) 389-4040 fax

[email protected]

Jon Gores

Senior Vice President

(206) 389-4043 phone

(206) 389-4040 fax

[email protected]

Chad Cowan

Vice President

(206) 903-8697 phone

(206) 389-4040 fax

[email protected]

Maura Lentini

Vice President

(206) 903-8687 phone

(206) 389-4040 fax

[email protected]

Shandra Tietze

Associate

(206) 903-8695 phone

(206) 389-4040 fax

[email protected]

Maria Elvrum

Executive Assistant

(206) 389-4044 phone

(206) 389-4040 fax

[email protected]

Kelsey Draper

Administrative Assistant

(206) 903-8694 phone

(206) 389-4040 fax

[email protected]

bonds levies voter ptrns 8 12 08

Education

options frequently

determining

districts

total tax

refunding

change tax

level tax

federal tax