Financial Planning and ProjectionsMarch 12, 2014 Facility Workshop

Considerations

• Enrollment• Routine Maintenance• Repair vs. Replacement• Lease vs. Buy• Community Support• Financing Options

ENROLLMENT IMPACT

Enrollment Trends

Actual Actual Actual Budget BudgetDistrict 2009-10 2010-11 2011-12 2012-13 2013-14

Athena-Weston SD 539 534 514 567 558 Blue Mountain CC 3,001 2,987 2,858 2,710 NAGrant ESD 988 962 911 901 891 Ione SD 170 193 176 184 204 La Grande SD 2,129 2,205 2,158 2,132 2,176 Lake County SD 7 724 730 696 732 748 Morrow County SD 2,256 2,196 2,190 2,184 2,118

Athena-Weston SD Example

Athena-Weston SD Example

Property Values & Tax Receipts

RMV M5 AV2008-09 866,710 485,680 279,644

2009-10

2010-11 744,110 378,080 208,731

2011-12

2012-13

2013-14 748,970 379,340 219,711

Decisions based upon Enrollment (SSF), Tax Receipts, etc.

Growing• School capacity• School boundary

adjustments• Portables• New facilities

Declining• Sell/mothball surplus• School boundary

adjustments• Staff reductions

FACILITY AND EQUIPMENT MAINTENANCE

Routine Maintenance

• Preventative• Planned• Scheduled

Routine Maintenance

• Preventative• Planned• Scheduled

• Operating Expense

Major Maintenance

• Expenditures beyond normal upkeep• Return a facility to its intended use• Prevent further damage• Make facility compliant with changes in laws• Extends life of asset

Major Maintenance

• Expenditures beyond normal upkeep• Return a facility to its intended use• Prevent further damage• Make facility compliant with changes in laws• Extends life of asset

• Capital Expenditure

How many of you have facility and equipment maintenance plans?

How many of you have facility and equipment maintenance plans?

Do your plans save your district $?

REPAIR VS. REPLACEMENT

Multiple Measures

• 50% Rule: repair if cost ≤ 50% of the replacement or resale value

• Asset life• Energy efficiency• Appreciating value

VIABILITY OF LEASING

[Company Name]Operating Lease vs. Own Analysis[Date]

Model keyBold numbers in white cells are entered by user.Italicized numbers in gray cells are calculations that should not be altered.Black numbers in gray cells are calculations that can be overwritten.

General analysis informationDecision date 1/15/2006

Tax informationAssumed federal tax rate 35.00%Assumed state or local tax rate 5.00%Combined tax rate 38.25%Number of depreciable years (straight-line method) 5

Purchase informationPurchase price $100,000Purchase with cash or financing? CashMonthly payment if financed N/AEstimated annual financing rate 4.50%Monthly borrowing rate 0.38%Number of loan months 60Projected salvage value percentage 10.00%Estimated asset disposition costs $2,000Discount rate (WACC) 11.00%.Leasing informationMonthly lease payment $1,500Annual lease payments $18,000

[Company Name]Operating Lease vs. Own Analysis[Date]

Asset lifetime cost comparison

Purchase price $100,000 Lease payments $90,000Less depreciation tax benefit 38,250 Less depreciation tax benefit 0

Subtotal 61,750 Subtotal 90,000Less salvage value 10,000 Less salvage value 0

Subtotal 51,750 Subtotal 90,000Less interest tax benefit (if financed) 0 Less interest tax benefit N/A

Subtotal 51,750 Subtotal 90,000Add asset disposition cost 2,000 Add asset disposition cost 2,000

Total net costs $53,750 Total net costs $92,000

Discount rate (WACC) 11% Discount rate (WACC) 11%

Present value of payments $100,000.00 Present value of lease payments 66,526.15Present value of salvage less disposal cost ($4,747.61) Present value of disposal costs 1,186.90Present value of depreciation tax savings ($28,273.61) Net present value of lease 67,713.05Present value of interest tax savings $0.00Present value of purchase costs $66,978.78

Lease or buy? Lease

Option #1 -- Purchase (own) Option #2 -- Operating lease expense

http://office.microsoft.com/en-us/ctndirectdownload.aspx?AssetID=TC001184175&Application=XL&Version=11&Result=2#

Leasing Consideration

• ORS 271.390 provides for financing agreements without voter approval.

• Financing agreements are payable from a district’s permanent tax rate.

Pull Pieces Together

Revenue:• SSF (Enrollment)• Tax Receipts (AV)• Interest• 1X (grants, donations)• Other

Expenditures:• Personnel Services• Pension/Health Costs• Materials & Supplies• Contract Services• Debt Service

1-5-10-20 Years Out

• Annual Budget: highest reliability of data• 20-Years: lower reliability the further outConsiderations:• History is good base: review trends• Include schedule for non-routine items (e.g., capital assets)• Cost based analysis vs. revenue based• Catalogue projection assumptions and sources• Scenarios for base, worst and favorable outlooks

Revenue Example

Worst Case Base Case FavorableSSF (X%) No

ChangeX%

Property Taxes (Perm Rate) 2% 3% 4%

Local Option Levy 0 0 Voter approval passes

Operating Grant 0 0 Add if reasonably expected

Interest 0 LGIP rate LGIP rate

Rule of thumb: do not count on 1X revenues

Expense Example

Worst Case Base Case FavorablePersonnel Services X%

Pension Costs

Health Care

Materials & Services

Contract Services

Capital Assets Example

Worst Case Base Case FavorableRevenue:

Grants Less than expected

Expected Expected

Debt Financing Doesn’t cover Covers costs Covers costs

Expenditure:

Capital Construction Exceeds budget and time frame

Within budget & time

Within budget & time

Annual Debt Service Higher interest expense

Projected Known

COMMUNITY SUPPORT FOR NEW CONSTRUCTION

Know your Audience

• Demographics• Informal or formal poll

FINANCING OPTIONS

Election Considerations

Voter Approval• General Obligation

Bondso Separate tax levyo Capital projectso 3-year construction window

• Local Option Levy

No Vote Required• Capital Leases• Agency Loans• Bank Loans• Limited Tax Obligations

(aka “full faith and credit” obligations)

• Grants• Donations• P3