Texas Military Preparedness Commission Revolving Loan Fund Program Overview

Texas Military Preparedness Commission's Revolving Loan Fund (RLF) program was established in 2006 by the 78th Legislature (SB 652). The program aims to support defense communities with active military bases by providing loans for projects that enhance military value, create jobs, and improve infrastructure. The RLF program expanded in the 79th Legislature to include economic development and infrastructure projects for communities impacted by BRAC 2005. Potential applicants include political subdivisions near military installations. Approximately 45 communities are eligible to apply for funding. The program is designed to be self-supporting without requiring legislative appropriations.

• Texas Military Preparedness Commission
• Revolving Loan Fund
• Military Value Enhancement
• Defense Communities
• Infrastructure Projects

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1. Texas Military Preparedness Commission Texas Military Preparedness Commission Revolving Loan Fund Revolving Loan Fund 23 February 2006 23 February 2006 Texas Military Preparedness Commission 1 Office of the Governor

2. Agenda Agenda Overview of RLF Program Bob Rasmussen (TMPC) Finance and Legal Structure Kim Edwards (TPFA) Credit Analysis Piper Montemayor (OGEDT) Proposed Timeline Bob Rasmussen (TMPC) Texas Military Preparedness Commission 2 Office of the Governor

3. 78th th Legislature (SB 652) Legislature (SB 652) RLF Program RLF Program 78 Established TMPC and RLF concept Applicable to Defense Communities with active bases Application submitted with Military Value Enhancement Statement that describes project and benefits TMPC evaluates project and administers loans BRAC evaluation criteria Feasibility of project Creditworthiness TPFA issues bonds to fund loans Legislature s intent is for RLF program to be self- supporting no legislative appropriations Texas Military Preparedness Commission 3 Office of the Governor

4. 79th th Legislature Legislature Amendments to RLF Amendments to RLF 79 Loan program expanded to include: Economic development projects for defense communities adversely impacted by BRAC 2005 Minimize negative economic impact Create jobs Infrastructure projects for communities positively impacted by BRAC 2005 Communities required to submit Community Redevelopment Value Statement relating the project to BRAC 2005 actions Texas Military Preparedness Commission 4 Office of the Governor

5. Potential Applicants Potential Applicants 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 Number of Eligible Communities: Approximately 45 Texas Military Preparedness Commission 5 Office of the Governor

6. 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 6 Office of the Governor

7. Key Action Steps Key Action Steps Joint Conference between TMPC and TPFA and Interested Defense Communities Explain program Review rules, application, criteria, and timelines Communities submit Letters of Interest TMPC Commissioners review Letters of Interest and determine if sufficient demand exists to implement the program Applications requested TMPC Commissioners approve applications TPFA sells bonds to fund loans Loans Available to Eligible Applicants Dec 2006 7

8. Agenda Agenda Overview of RLF Program Bob Rasmussen (TMPC) Finance and Legal Structure Kim Edwards (TPFA) Credit Analysis Piper Montemayor (OGEDT) Proposed Timeline Bob Rasmussen (TMPC) Texas Military Preparedness Commission 8 Office of the Governor

9. Program Mechanics Program Mechanics INVESTORS INVESTORS TPFA Bonds $ $ TPFA TPFA Bond Proceeds TMPC TMPC LOANS LOANS Loans A A B B C C D D 9

10. Program Mechanics Program Mechanics INVESTORS INVESTORS Debt Service TPFA TPFA Loan Payments TMPC TMPC Loan Loan Repayment Repayment Loans A A B B C C D D 10

11. 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 11

12. 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 4.373% $31,134,830 - El Paso Aa3/AA 4.443% $31,343,757 $208,927 Corpus Christi A1/A+/AA- 4.532% $31,605,387 $470,557 Texarkana A2/A+ 4.570% $31,710,809 $575,979 Taxable: $20M for 20 years State of Texas AA1/AA+/AA 5.341% $33,953,530 - Brooks Development Authority3 NR 6.842% $38,517,817 $4,564,287 1 Based on market conditions as of February 15, 2006; TIC reflects 20 year level debt service with premium bonds sized to fund a $20 million project, underwriter s discount and cost of issuance. 2 Over 20 year life of bond issue 12

13. 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 13

14. 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 (November 2006) February 15, 2006: 4.373% Tax-exempt; 5.341% Taxable Taxable vs. Tax-exempt: Facilities with a substantial non- governmental or private business use or guarantee may not qualify for tax-exempt interest rates. Tax code does not define federal government as a governmental entity 14

15. 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 15

16. Other Costs Other Costs TMPC Application fee: $500 - due when application is submitted; refunded when loan is funded 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. Costs of Issuance Arbitrage Rebate Compliance 16

17. Example Costs of Issuance Allocation Example Costs of Issuance Allocation % 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 17

18. Example Sources and Uses Schedule Example Sources and Uses Schedule Borrower A Borrower B Borrower C Borrower D Total Sources: Loan Proceeds $5,055,000 $10,110,000 $4,044,000 $1,011,000 $20,220,000 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 Total $5,055,000 $10,110,000 $4,044,000 $1,011,000 $20,220,000 18

19. Example Debt Service Schedule Example Debt Service Schedule Borrower #1 $5 MM - 10 Year 264,552 $ 664,538 665,338 665,338 664,538 662,938 665,438 666,563 665,906 663,813 Borrower #2 $10 MM - 20 Year 586,612 $ 780,506 781,806 782,506 777,706 777,406 781,406 779,441 781,219 781,881 779,875 780,000 778,875 781,375 777,500 782,125 780,125 781,500 781,125 779,000 Borrower #3 $4 MM - 15 Year 225,838 $ 379,894 376,394 377,594 378,394 378,794 378,794 378,228 376,919 379,913 376,250 380,750 379,375 377,250 379,250 Borrower #4 $1 MM - 15 Year 56,664 $ 92,681 95,581 93,381 96,081 93,681 96,181 93,541 95,713 92,738 94,375 95,500 96,375 97,000 97,375 Period Ending 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 Total 1,133,667 $ 1,917,619 1,919,119 1,918,819 1,916,719 1,912,819 1,921,819 1,917,772 1,919,756 1,918,344 1,250,500 1,256,250 1,254,625 1,255,625 1,254,125 782,125 780,125 781,500 781,125 779,000 - - - - - - - - - - - - - - - - - - - - 6,248,959 $ 15,411,990 $ 5,523,635 $ 1,386,867 $ 28,571,451 $ 19

20. Example Debt Service Schedule Example Debt Service Schedule TPFA - Texas Military Preparedness Commission Series 2006 Fixed Rate Bonds - Debt Service Breakdown $2,500,000 $2,000,000 $1,500,000 Debt Service $1,000,000 $500,000 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year Borrower #2 Debt Service Borrower #1 Debt Service Borrower #3 Debt Service Bond Debt Service Borrower #4 Debt Service 20

21. Consult your bond counsel and Consult your bond counsel and financial advisor. financial advisor. 21

22. Agenda Agenda Overview of RLF Program Bob Rasmussen (TMPC) Finance and Legal Structure Kim Edwards (TPFA) Credit Analysis Piper Montemayor (OGEDT) Proposed Timeline Bob Rasmussen (TMPC) Texas Military Preparedness Commission 22 Office of the Governor

23. Credit Analysis Credit Analysis Credit Review Review Repayment Ability Security Review (if applicable) Documents required at the time of application Comprehensive Annual Financial Reports Full Credit Rating Report 23

24. Agenda Agenda Overview of RLF Program Bob Rasmussen (TMPC) Finance and Legal Structure Kim Edwards (TPFA) Credit Analysis Piper Montemayor (OGEDT) Proposed Timeline Bob Rasmussen (TMPC) Texas Military Preparedness Commission 24 Office of the Governor

25. Proposed Timeline: Proposed Timeline: Date Action April 3, 2006 Letters of Interest Due April 20, 2006 TMPC Commissioners Review Letters of Interest and Determine if Program can be implemented June 1, 2006 Communities Submit Applications June 15, 2006 TMPC Commissioners Approve Applications for Creditworthiness Review July 31, 2006 Creditworthiness Review Completed August 17, 2006 TMPC Commissioners Approve Applications 25

26. Proposed Timeline (continued): Proposed Timeline (continued): Date Action August 30, 2006 Letters of Commitments from Communities (City Council/Board Resolution) September 7, 2006 TPFA Board Approves Requests for Financing November 7, 2006 Bond Review Board Planning Session November 16, 2006 Bond Review Board Approval November 20, 2006 Loan Agreements Signed TMPC and Communities December 14, 2006 Loans Funded 26

27. 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 Credit Questions Piper Montemayor (512)463-6735 pmontemayor@governor.state.tx.us 27