E-rate Category 2 Training for PA Public Schools

Category 2 E-rate funding provides support for Wi-Fi, wiring, equipment, and infrastructure within school buildings. Schools can apply annually for funding, with budget caps per student or building over a rolling 5-year period. Stipulations ensure funds are spent within the funding year and for necessary equipment or services.

• E-rate
• Category 2
• Training
• Public Schools
• Funding

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1. SCHOOL BOND OVERVIEW How to make your District s Facilities Plan a Reality October 21, 2016

2. PARTICIPANTS Mike Waterman, Mike Waterman, Director of Business Services Bozeman Public Schools Lora Tauck, Lora Tauck, Business Manager Ekalaka Public Schools Bridget Ekstrom, Bridget Ekstrom, Senior Vice President, Public Finance D.A. Davidson & Co. Dan Semmens, Dan Semmens, Bond Counsel Dorsey & Whitney LLP Denise Williams, Denise Williams, Executive Director MASBO 2

3. BUILDING BLOCKS FOR A SUCCESSFUL PROJECT AND FINANCING V. Post-Financing Phase IV. Construction Phase III. Financing Phase II. Election Phase I. Capital Improvement Planning Phase 3

4. KEYS TO SUCCESS AND PITFALLS TO AVOID ~MIKE WATERMAN, BOZEMAN PUBLIC SCHOOLS~ Keys You gotta spend money to make money Let those with strong backs do the heavy lifting Under promise, over deliver Mike Waterman | (406) 522-6097 | mike.waterman@bsd7.org 4

5. KEYS TO SUCCESS AND PITFALLS TO AVOID ~LORA TAUCK, EKALAKA K-12 SCHOOL DISTRICT~ Keys A School Board that is unified on the bond issue If the entire board can t support the issue, it is difficult for a community to support it! Positive downstream conditioning in the Community! Necessary to pass the bond, necessary to stifle the rumors before, during and after construction Identify your supporters and let them help you Prepare for being unprepared You don t know what you don t know Call on those who do! Pitfalls Positive downstream conditioning is positively exhausting Unforeseen events drain your brain & your contingency fund Lora Tauck | (406) 775-8602 | lorat@ekalaka.k12.mt.us 5

6. KEYS TO SUCCESS AND PITFALLS TO AVOID ~DAN SEMMENS, DORSEY & WHITNEY LLP~ Keys Allow a lot of time Focus on what the District needs now or in the short term If you can t say it simply, maybe you shouldn t say it at all Dan Semmens | (406) 721-6025 | semmens.daniel@dorsey.com 6

7. KEYS TO SUCCESS AND PITFALLS TO AVOID ~BRIDGET EKSTROM, D.A. DAVIDSON & CO.~ Keys Strive for a favorable union Marry the District s (i) needs/wants with (ii) taxpayer impact estimates Know the numbers but keep communications simple Understand formulas for taxes and how the bonds impact the District s taxpayers Clean house in advance Work on items now that will help your chance of passing the bond and also obtaining a favorable rating Pitfalls Plan for a potential project budget gap Retain Project/Budget Flexibility. Use conservative estimates Don t procrastinate Start planning at least 6 months before you call an election and possibly longer (see Clean House above) Bridget Ekstrom | (406) 556-6965 | bekstrom@dadco.com 7

8. SAMPLE SCHOOL DEBT LIMITATION Manhattan School Districts General Obligation Bonds GREATER OF CALCULATION 1 OR 2: Elementary High School (1) CALCULATION 1: 100% of Taxable Valuation $7,152,270 $11,135,219 Calculation 2 provides the greater debt capacity and is used for Manhattan Schools (2) CALCULATION 2: 2016/17 Statewide Average Taxable Valuation Per ANB $33,670 $82,390 X School District s ANB for 2016/17 427 227 Total $14,377,090 $18,702,530 X Debt Limit Rate of 100% 1.00 1.00 Maximum Debt Capacity $14,377,090 $18,702,530 DEBT CAPACITY USING CALCULATION 2: Less: Outstanding Loans/Bonds $1,884,529 $604,948 Remaining Debt Capacity $12,492,561 $18,097,582 2016 Bond Election $7,300,000 $12,400,000 Net Debt Capacity Remaining $5,192,561 $5,697,582 8

9. SAMPLE BOND ISSUE MILL LEVY IMPACT Apr-16 D.A. Davidson & Co. Manhattan Schools MILL LEVY IMPACT ANALYSIS $19,700,000 Bond - 20 Year Bond Terms - - - - - - Slightly Conservative Interest Rate Range Estimates (+50 over current rates) - - - - - - Prior HS Bond (coming off tax rolls) NET HS INCREASE COMBINED ELEM/HS $19,700,000 $9,357,897 $1,159,996 $21,014 $1,138,982 - 140.63 ELEM (37% cost allocation) $7,300,000 $3,467,667 $538,384 $21,014 $517,370 $6,470.358 79.96 HS (63% cost allocation) $12,400,000 $5,890,230 $914,512 $20,371 $894,141 $10,245.328 87.27 Estimated Mill Levy Computation: Par Amount: Total Estimated Interest Over Life of Bond (1): Estimated Annual Bond Payment Over 20 Years (1): Est State Aid for Debt Service Available for Bonds (2): EQUALS: Estimated Net Annual Debt Service DIVIDED BY: District's FY 2015/16 Mill Value: EQUALS: Estimated Number of Annual Mills Required: $292,900 $20,371 $272,529 $10,245.328 26.60 $621,612 $0 $621,612 $10,245.328 60.67 Estimated Tax Increase for Individual RESIDENTIAL TAXPAYER: 2015/16 Tax Year 2015/16 Tax Year "MARKET VALUE" of "TAXABLE VALUE" of Residential Property(3) Residential Property(3) $100,000 $1,350 $200,000 $2,700 $183,628 (Town of Manhattan Median Home) $2,479 $242,390 (Gallatin County Median Home) $3,272 $183,628 (Town of Manhattan Median Home) $2,479 Estimated "ANNUAL" Tax (4) $107.95 $215.89 Estimated "ANNUAL" Tax (4) $117.82 $235.64 Estimated "ANNUAL" Tax (4) $35.91 $71.82 Estimated "ANNUAL" Tax (4) $81.91 $163.82 Estimated "ANNUAL" "MONTHLY" Tax (4) $189.85 $379.71 Estimated Tax (4) $15.82 $31.64 $198.22 $216.35 $65.94 $150.41 $348.63 $29.05 $261.63 $285.56 $87.04 $198.52 $460.15 $0.00 $38.35 $0.00 * All property owners (including farming and ranching operations, commercial businesses, home owners etc ) should use the following formula to calculate the estimated tax impact of the Bond issue. "Taxable Value" X Mills/1,000 = Estimated Annual Tax Impact of the Bonds (1) Based on estimated true interest cost rates with a conservative sample rate for 20-year bank qualified bonds (BQ) of 3.19% with original issue premium generated for the Project for costs. (2) The estimated State Aid for Debt Service figure above has been calcuated using current variables for Manhattan School Districts and are subject to change annually. (3) Based upon Class 4 residential property. The "Market Valuation" for tax purposes will be different than the valuation of most residential real property for resale purposes. To better calculate the estimated tax impact of the bond issue, property owners should look up their exact taxable value as shown on their personal tax statement and use the formula shown above in grey. According to the 2014 reappraisal by the State Department of Revenue, the median home in Manhattan was $183,628 and the median home in Gallatin County was $242,390. (4) Tax Impacts are based on property tax legislation adopted at the 2015 Legislative Session, which implemented the 2014 Department of Revenue reappraisal effective for the 2015/16 and 2016/17 tax years. Tax impact information varies every year depending on such factors as District Mill Value, State reimbursement (if any), method of calculating taxable valuation and actual debt service. 9

10. SAMPLE STATE AID FOR DEBT SERVICE This estimate remains preliminary until the bond election is passed and the debt service budget is prepared. The district s share of the bond payment is the ratio of the district mill value per ANB to the Statewide mill value per ANB. District s whose mill value per ANB exceeds the statewide mill value do not qualify for Debt Service GTB state funding. The Pro-rate % is the percentage of state funding provided in the previous year. 10 Source: Montana Office of Public Instruction

11. TRENDS IN STATE AID FOR DEBT SERVICE 11

12. MUNICIPAL BOND MARKET UPDATE AAA Municipal Trends for 20-year Maturity, 10-Year Maturity, 1-Year Maturity 2.16% 1.51% 0.78% 12 Source: Thomson Reuters.

13. SAMPLE MUNICIPAL BOND MARKET RATES BASED ON RATING Municipal Market Data Benchmark Information September 30, 2016 "AAA" 0.78 0.82 0.88 0.94 1.02 1.1 1.19 1.3 1.41 1.51 1.6 1.7 1.79 1.85 1.91 1.97 2.02 2.07 2.12 2.16 INSURED 0.88 0.94 1.05 1.16 1.29 1.41 1.53 1.72 1.85 1.95 2.06 2.17 2.27 2.33 2.39 2.45 2.50 2.55 2.59 2.63 "AA" 0.82 0.89 0.96 1.04 1.13 1.23 1.35 1.50 1.63 1.74 1.84 1.95 2.04 2.10 2.16 2.22 2.27 2.32 2.37 2.41 "A" 0.95 1.03 1.13 1.26 1.38 1.50 1.62 1.81 1.94 2.04 2.15 2.26 2.36 2.42 2.48 2.54 2.59 2.64 2.68 2.72 "BAA" 1.20 1.30 1.43 1.56 1.68 1.78 1.91 2.08 2.21 2.32 2.42 2.51 2.60 2.66 2.72 2.78 2.82 2.87 2.91 2.92 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 Sample Yield Curves Sample Credit Spreads 13

14. SCHOOL FUNDING INTERIM COMMISSION Summary of Notable School Summary of Notable School Facility Developments Facility Developments Denise Williams | (406) 461-3659 | dwilliams@masbo.com 14

15. SCHOOL FUNDING INTERIM COMMISSION School Facilities School Facilities Findings Identified 3 tiers of facility needs: Tier 1: Operations and regular maintenance (O&M) Tier 2: Major maintenance Tier 3: New construction State support of Quality Schools Facility Grant Program (QSFGP) has been inconsistent Revenue stream for Debt Service GTB has decreased, leading to reduced reimbursement levels Local effort in facilities (a.k.a. skin in the game ) helps ensure prudent planning and ongoing maintenance Capital improvements planning is more effective when: districts are provided greater budgetary flexibility state support for school facilities is consistent state programs are flexible districts have a long-term facilities plan based on an updated facility condition inventory Findings State should help fund these tiers 15

16. SCHOOL FUNDING INTERIM COMMISSION School Facilities School Facilities - - Recommendations Recommendations State policy needs to encourage local effort and long-range planning in managing and maintaining school district facilities 1. 1. LC ICAP LC ICAP minor changes to the INTERCAP loan program 2. 2. LC EFBT LC EFBT allow transfers from GF to Building Reserve 3. 3. LC GRT1 LC GRT1 replacing QSFGP with formula facility grant program requiring updated facility inventory and plan and local match 4. 4. LC GRT2 LC GRT2 revising QSFGP to require updated facility inventory and plan and local match 16

17. SCHOOL FUNDING INTERIM COMMISSION 1. 1. LC ICAP LC ICAP minor changes to the INTERCAP loan minor changes to the INTERCAP loan program program Can use to finance: Construction of buildings used primarily for the storage and maintenance of vehicles and equipment Cost of nonpermanent modular classrooms necessary for student instruction Allows an approved building reserve levy to be used to repay a loan up to 15 years only for projects authorized by voters Allows repayment from an applicable budgeted fund of the district 17

18. SCHOOL FUNDING INTERIM COMMISSION 2. 2. LC EFBT LC EFBT allow transfers from General Fund to allow transfers from General Fund to Building Reserve Fund Building Reserve Fund Similar to transfers to Compensated Absences Fund For major maintenance projects Roofing systems Heating, a/c and ventilation systems Energy-efficient window and door systems and insulation Plumbing systems Electrical and lighting systems Information technology infrastructure, including internet 18

19. SCHOOL FUNDING INTERIM COMMISSION 3. 3. LC GRT1 LC GRT1 replacing QSFGP with formula facility replacing QSFGP with formula facility grant program grant program Eliminate School Facility and Technology Account Deposit riverbed and timber revenues in Guarantee Account (about $5 million) Guarantee Account pays $1 million technology payment to schools Guarantee Account sends the greater of $10 million of 20% of interest and income to new Facility Grant Program account Facility Grant Program account All districts get credit that flows with local planning and effort Credit sits in a separate (new) account until claimed by district Debt Service GTB is paid from the State General Fund 19

20. SCHOOL FUNDING INTERIM COMMISSION 4. 4. LC GRT2 LC GRT2 revising QSFGP to require updated revising QSFGP to require updated facility inventory and plan and local match facility inventory and plan and local match Eliminates Facility and Technology Account Deposit riverbed and timber revenues in Guarantee Account (about $5 million) Guarantee Account pays $1 million technology payment to schools Creates School Debt Service Assistance Account Funded with lottery net revenue (about $12 million) Pays Debt Service GTB (about $10 million) Creates Major Maintenance Grant Program Account Intended funding is $10 million total from: - Overflow from SDSAA (about $2 million) - 95 mills revenue captured from TIFDs (About $2 million) - Workers comp dividends (amount unknown) - Transfer from Guarantee Account to bring to $10 million 20

21. SCHOOL FUNDING INTERIM COMMISSION 4. 4. LC GRT2 LC GRT2 (continued) ESTIMATED IMPACT ON STATE GENERAL FUND ESTIMATED IMPACT ON STATE GENERAL FUND Gains/Savings (Losses) Loss of lottery net revenue Eliminates NRD payment $ 12 million $ 5 million Repeals STEM scholarship program $ 0.4 million Captured 95 mills from TIFDs $ 2 - $3 million Additional needed to replace lost revenue to Guarantee Account $ 2 million 21