Texas Military Preparedness Commission Revolving Loan Fund Details
Information about applying for a TMRVL loan from the Texas Military Preparedness Commission, including eligibility criteria, project requirements, benefits of the loan fund, and examples of debt service savings. The fund aims to support communities near military installations impacted by BRAC 2005 and enhance military value. Projects must show positive economic impact and be related to facilities or infrastructure.
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Texas Military Preparedness Commission Texas Military Preparedness Commission Revolving Loan Fund April 2007 April 2007 Revolving Loan Fund Texas Military Preparedness Commission 1 Office of the Governor
Who can apply for a TMRVL Loan? Who can apply for a TMRVL Loan? Political subdivisions adjacent to, near, or encompassing part of an active military installation or an installation closed as a result of BRAC 2005 Criteria: Increase military value for BRAC scoring Provide positive economic impact, such as job creation, for communities negatively impacted by BRAC 2005 Assist communities with infrastructure projects that support new missions Communities can partner with other Communities Texas Military Preparedness Commission 2 Office of the Governor
Project Criteria Project Criteria Funds must be expended completely within 5 years from when loan was awarded Minimum amount of loan will be $1M with a maximum determined by available funds and creditworthiness Applications must be submitted with either Military Value Enhancement Statement; or Economic Redevelopment Value Statement Projects are generally expected to be related to facilities or infrastructure Texas Military Preparedness Commission 3 Office of the Governor
Benefits of RLF Benefits of RLF State s AA/AA+/AA1 General Obligation Credit rating provides a lower interest rate for entities with a lower credit rating. Economies of Scale: combining several small bond issues into one larger bond issue lowers up front costs of issuance 4
Example of Debt Service Savings Example of Debt Service Savings Interest Rate1 Total Debt Service Savings2 Tax Exempt: $20M for 20 years Rating State of Texas AA1/AA+/AA 4.475% $30,946,167 - Sample A GO Credit A 4.573% $31,217,678 $271,511 Sample BBB GO Credit BBB 4.662% $31,462,484 $516,317 Taxable: $20M for 20 years State of Texas AA1/AA+/AA 5.862% $34,848,319 - Sample A GO Credit A 6.131% $35,623,105 $774,786 Sample BBB GO Credit BBB 6.375% $36,333,964 $1,485,645 1 Based on market conditions as of April 9, 2007; TIC reflects 20 year level debt service with premium bonds sized to fund a $20 million project, $5.00/$1000 underwriter s discount and $200,000 cost of issuance. 2 Over 20 year life of bond issue. 5
Loan Terms and Structure Loan Terms and Structure Loan Terms and Repayment Schedule will be tailored to meet the needs of each borrower Final term of the loan can not exceed useful life of the project or asset Pre-payment provisions (call feature) of the loan will match the call feature of the bonds TPFA issues TPFA Bonds are Self-Supporting all costs and debt service will be paid from loan payments 6
What is the Interest Rate? What is the Interest Rate? Interest rate will be the market rate for State of Texas General Obligation Bonds on the date the bonds are sold Recent Examples: Tax-exempt : 4.333% (Feb. 7, 2007, 20 year; 12.54 year average life) Taxable: 5.921% (Feb. 22, 2007, 30 year; 20.3 year average life) AMT: 4.799% (Feb. 22, 2007, 30 year; 19.81 year average life) 7
The Use of the Facility may affect the The Use of the Facility may affect the Interest Rate Interest Rate Taxable vs. Tax-exempt: Facilities with a substantial non- governmental or private business use or guarantee may not qualify for tax-exempt interest rates. Under the tax code the federal government is NOT a a governmental entity that is eligible for tax-exempt bond use. Certain types of facilities, such as airports, qualify for tax- exempt financing but are subject to the Alternative Minimum Tax (AMT). 8
Legal Pledge Legal Pledge Any lawful revenue source can be pledged to repay the loan Will vary by type of borrower (City, Economic Development Authority, Port Authority) Examples: Property Tax (General Obligation pledge); Enterprise Revenue System (Utility, Municipal Airport); Sales Tax Please consult your legal counsel 9
Other Costs Other Costs TMPC Administrative fee: 1/10 of 1% (10 bp) of par amount of loan ($1,000 per $1 million loan). Due when loan is funded. May be paid from bond proceeds and included in the loan amount. Local Costs of Issuance (Financial advisor, Bond counsel, and credit rating if Borrower does not have an existing rating) Arbitrage Rebate Compliance 10
Allocation of TPFA Costs of Issuance Allocation of TPFA Costs of Issuance % of Total Pro Rata COI Loan Amount Bond Counsel Financial Advisor Rating Agency Fees Official Statement printing and distribution Miscellaneous Borrower A $5,000,000 25% $50,000 Borrower B $10,000,000 50% $100,000 Borrower C $4,000,000 20% $40,000 Borrower D $1,000,000 5% $10,000 Total $20,000,000 100% $200,000 11
Example Sources and Uses Schedule Example Sources and Uses Schedule Borrower A Borrower B Borrower C Borrower D Total Sources: Loan Proceeds $5,130,425 $10,209,150 $4,114,000 $1,066,120 $20,519,695 Uses: Project Fund $5,000,000 $10,000,000 $4,000,000 $1,000,000 $20,000,000 TMPC Fee $5,000 $10,000 $4,000 $1,000 $20,000 TPFA Cost of Issuance $50,000 $100,000 $40,000 $10,000 $200,000 Local Cost of Issuance $50,000 $50,000 $50,000 $50,000 $200,000 Underwriter Discount $25,425 $49,150 $20,000 $5,120 $99,695 Total $5,130,425 $10,209,150 $4,114,000 $1,066,120 $20,519,695 12
Example Debt Service Schedule Example Debt Service Schedule Period Ending Borrower #1 $5MM - 10 Year Borrower #2 $10MM - 20 Year Borrower #3 $4MM - 15 Year Borrower #4 $1MM - 15 Year Total 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2012 6/30/2013 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 6/30/2025 6/30/2026 6/30/2027 $ 57,065 673,800 669,300 674,000 672,800 670,800 672,900 674,000 674,100 673,200 $ 126,306 788,300 784,300 784,800 784,700 788,900 787,400 785,300 787,500 784,000 784,800 787,125 785,750 788,000 783,875 788,250 786,000 787,125 786,500 784,125 $ 48,803 384,650 385,850 386,650 387,050 387,050 386,650 385,850 384,650 383,050 385,950 386,625 385,000 382,625 384,375 $ 12,695 99,150 101,850 99,450 101,950 99,350 101,650 98,850 100,950 97,950 99,850 101,125 101,750 102,125 97,375 $ 244,869 1,945,900 1,941,300 1,944,900 1,946,500 1,946,100 1,948,600 1,944,000 1,947,200 1,938,200 1,270,600 1,274,875 1,272,500 1,272,750 1,265,625 788,250 786,000 787,125 786,500 784,125 $ 6,111,965 15,063,056 $ $ 5,444,828 $ 1,416,070 28,035,919 $ 1 Based on market conditions as of April 9, 2007; Each Loan amount assumed to include 10bp TMPC Administrative Fee, $50,000 Local Cost of Issuance and pro rata share of TPFA Cost of Issuance and Underwriters Discount, 13
Borrowers should consult with their Borrowers should consult with their bond counsel and financial advisor bond counsel and financial advisor prior to submitting an application. prior to submitting an application. 14
Proposed Timeline: Proposed Timeline: Date Action May 1, 2007 Letters of Interest Due May 17, 2007 TMPC Reviews Letters of Interest and determine if there is sufficient interest to implement program (Need at least $20 million in total loans per bond issue). June 15, 2007 Communities Submit Applications August 16, 2007 TMPC Commissioners Approve Applications August 30, 2007 Letters of Commitments from Communities (City Council/Board Resolution) 15
Proposed Timeline (continued): Proposed Timeline (continued): Date Action September 6, 2007 TPFA Board Approves Requests for Financing November 13, 2007 Bond Review Board Planning Session November 29, 2007 Bond Review Board Approval Week of Dec. 3 Governing bodies of Borrowers approve Bond resolution; Bonds sold December 20, 2007 Loans Funded Note: Additional approvals by Borrower s governing body may also be required. 16
Questions? Primary Points of Contact: Applications and Timeline Al Casals (512)936-0517 acasals@governor.state.tx.us Finance Questions Kim Edwards (512)463-5544 kim.edwards@tpfa.state.tx.us Legal Questions Judith Porras (512)463-6735 Judith.porras@tpfa.state.tx.us 17
