2007-2008 Capital Financing North East ISD Unlimited Tax School Building Bond Series 2007A

2007-2008Capital Financing

North East ISD Unlimited Tax School Building Bond Series 2007A

2

Teach

ing

, Learning, Leading

Capital Financing

Capital Financing in San Antonio

Construction Considerations

Debt Structure Considerations

Debt Structure Challenges

Concerns: Tax Rate

Underwriters

3

Teach

ing

, Learning, Leading Managing NEISD

Capital Financing

Source: NEISD Finance

May 2007 Election:

North East ISD taxpayers authorize $498M in bonds

San Antonio taxpayers authorize over $2B in bonds for construction since May 2006

4

Teaching, Learning, Lead

ing

Issuer Election Date Result AmountHarlandale ISD 05/13/2006 Carried $52,800,000

Somerset ISD 05/13/2006 Defeated $13,200,000

Southwest ISD 05/13/2006 Carried $62,000,000

Judson ISD 11/07/2006 Carried $59,600,000




South San Antonio ISD 11/07/2006 Defeated $37,200,000

Northside ISD 05/12/2007 Carried $692,670,000

North East ISD 05/12/2007 Carried $498,049,000

City of San Antonio 05/12/2007 Carried $550,000,000

South San Antonio ISD 05/12/2007 Carried $37,2000,000

TOTAL BOND ELECTION $2,142,219,000

Bond Authorization San Antonio

5


ing

Sale Date Par Amount Issuer Issue Description Series Bid TypeCoupon

Type

6/26/2006 $ 49,996,000 Schertz-Cibolo-Univ City ISDUnlimited Tax School Building Bonds

Series 2006 N Fixed

8/10/2006 $ 19,295,000 Bexar Co (Southside) ISDUnlimited Tax School BuildingBonds

Series 2006 A N Fixed

8/10/2006 $ 37,935,000 Bexar Co (Southwest) ISD School Building Bonds Series 2006 N Fixed

8/15/2006 $ 15,000,000 Schertz-Texas General Obligation Bonds Series 2006 N Fixed

8/17/2006 $ 52,495,000 Bexar Co (Harlandale) ISDUnlimited Tax School Building Bonds

Series 2006 N Fixed

8/28/2006 $ 6,265,000 Bexar Co (Southside) ISD Unlimited Tax Bonds Series 2006 - B N Fixed

10/19/2006 $ 74,869,000 Schertz-Cibolo-Univ City ISDUnlimited Tax School Building Bonds

Series 2006 A N Fixed

11/9/2006 $243,940,000 San Antonio City-Texas Cert of Oblig & Ref Imp Bonds Series 1& 2 N Fixed

12/12/2006 $ 2,535,000 Lakeside Wtr Ctl & Imp Dt #2-C Unlimited Tax Bonds Series 2007 C Fixed

2/15/2007 $ 3,000,000 Bexar Co (Alamo Heights) ISD School Building Bonds Series 2007 N Fixed

3/8/2007 $ 2,165,000 Lakeside Wtr Ctl & Imp Dt #2-B Unlimited Tax Bonds Series 2007 C Fixed

3/9/2007 $124,205,000 Bexar Co (Northside) ISDSchool Building & Refunding Bonds

Series 2007 N Fixed

4/18/2007 $240,779,000 Bexar Co (Judson) ISDUnlimited School Building& Reg Bonds

Series 2007 N Fixed

5/2/2007 $100,000,000 Bexar Co (Northside) ISDUnlimited Tax SchoolBuilding Bonds

Series 2007 A NVariable-

Short

6/19/2007 $ 24,065,000 Bexar Co (Southwest) ISD School Building Bonds Series 2007 N Fixed

N = negotiated; C = competitive

Bond Issuance Information

Total: $ 996,554,000

6

Teach

ing

, Learning, Leading Concerns:

Increasing Costs


San Antonio Construction Capacity

Rising labor Costs

Rising material Costs

7

Teach

ing

, Learning, Leading

Increase in National Non-residential Buildings

Source: Bureau of Labor Statistics – www.bls.gov

0%

5%

10%

15%

20%

25%

30%

35%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Increase from 1997

Pre

lim

inar

y th

rou

gh

May

8


ingHistorical Material Cost Data (National Averages)

Annual % Change

Δ Change Bond

Program

Annual % Change

Δ Change Bond

Program

Annual % Change

4 Yr % Change

Annual % Change

05 - 06 03 - 06 04 - 05 03 - 05 03 - 04 00 -04 02 - 03

2 Asphaltic Concrete 3" SY 7.60$ 8.6% 34.5% 7.00$ 17.6% 23.9% 5.95$ 5.3% 15.5% 5.65$ 0.9% 5.60$ Rebar A615 Grade 60 TON 2,250.00$ 26.3% 71.5% 1,781.00$ 37.6% 35.7% 1,294.00$ 1.4% 38.1% 1,312.00$ 0.3% 1,316.00$ 6 x 6 WWMesh Concrete Reinforcing CSF 64.00$ 24.3% 80.3% 51.50$ 39.2% 45.1% 37.00$ 4.2% 13.8% 35.50$ 4.4% 34.00$ Concrete 3000 PSI CY 95.50$ 7.3% 24.0% 89.00$ 11.3% 15.6% 80.00$ 3.9% 15.9% 77.00$ 1.3% 76.00$ 8" CMU Backup SF 7.30$ 5.8% 18.7% 6.90$ 3.0% 12.2% 6.70$ 8.9% 19.6% 6.15$ 2.5% 6.00$ Brick STD SF 12.75$ 4.9% 17.0% 12.15$ 3.4% 11.5% 11.75$ 7.8% 17.5% 10.90$ 5.3% 10.35$ Steel Bar Joist 30' TON 2,050.00$ 17.1% 57.7% 1,750.00$ 32.1% 34.6% 1,325.00$ 1.9% 0.0% 1,300.00$ 5.5% 1,375.00$ Structural Steel (SA) TON 2,600.00$ 18.2% 53.0% 2,200.00$ 27.2% 29.5% 1,729.00$ 1.8% 10.3% 1,699.00$ 3.3% 1,644.00$ Metal Deck 2" SF 9.00$ 11.1% 74.8% 8.10$ 54.3% 57.3% 5.25$ 1.9% 18.2% 5.15$ 7.1% 4.81$ W18 x 35 LF 47.50$ 6.7% 41.8% 44.50$ 30.9% 32.8% 34.00$ 1.5% 17.2% 33.50$ 3.1% 32.50$ W18 x 50 LF 65.50$ 8.3% 44.0% 60.50$ 31.5% 33.0% 46.00$ 1.1% 17.9% 45.50$ 3.4% 44.00$ 3/4" Plywood / Wall CDX SF 1.63$ 16.8% 5.8% 1.96$ 28.1% 27.3% 1.53$ 0.6% 5.6% 1.54$ 2.7% 1.50$ 2 X 8 Treated Lumber MBF 1,750.00$ 112.1% 122.9% 825.00$ 5.1% 5.1% 785.00$ 0.0% 35.9% 785.00$ 34.6% 1,200.00$ 3 1/2" Unfaced Insulation 15" SF 0.69$ 15.0% 32.7% 0.60$ 9.1% 15.4% 0.55$ 5.8% 14.6% 0.52$ 2.0% 0.51$ 1" Fireproofing Beams SF 1.27$ 0.8% 5.0% 1.28$ 1.6% 5.8% 1.26$ 4.1% 2.4% 1.21$ 6.1% 1.14$ EIFS 2" Insulation SF 9.35$ 0.5% 13.3% 9.30$ 5.7% 12.7% 8.80$ 6.7% 17.3% 8.25$ 3.1% 8.00$ 3' x 7' Insulated Steel Door EA 480.00$ 63.8% 43.3% 293.00$ 5.4% 12.5% 278.00$ 17.0% 14.5% 335.00$ 3.1% 325.00$ 1/4" Glass Tempered Tinted SF 17.20$ 5.2% 14.7% 16.35$ 2.8% 9.0% 15.90$ 6.0% 40.1% 15.00$ 2.7% 14.60$ Acumin Storefront SF 25.50$ 2.0% 8.5% 25.00$ 4.2% 6.4% 24.00$ 2.1% 9.1% 23.50$ 2.2% 23.00$ Class A 2 X 2 Ceiling Suspended SF 1.40$ 2.2% 19.7% 1.37$ 11.4% 17.1% 1.23$ 5.1% 24.2% 1.17$ 0.8% 1.18$ Gym Wood Floor 25/32" Maple # 2 SF 9.40$ 12.6% 21.3% 8.35$ 1.8% 7.7% 8.20$ 5.8% 15.5% 7.75$ 6.2% 7.30$ VCT 12 X 12 1/16" SF 1.75$ 3.6% 14.4% 1.69$ 4.3% 10.5% 1.62$ 5.9% 14.9% 1.53$ 2.7% 1.49$ Sound Panels 1 1/2" Dacron Alum. Frame SF 9.85$ 2.6% 4.8% 9.60$ 0.5% 2.1% 9.55$ 1.6% 4.9% 9.40$ 0.5% 9.35$ VWC Medium WGT 10-24 oz SF 1.60$ 0.0% 7.4% 1.60$ 1.9% 7.4% 1.57$ 5.4% 17.2% 1.49$ 4.2% 1.43$ Paint Drywall 2 Coats Spray SF 0.33$ 0.0% 10.0% 0.33$ 3.1% 10.0% 0.32$ 6.7% 18.5% 0.30$ 3.4% 0.29$ Liquid ChalkBoard 4' X 12' EA 575.00$ 0.0% 10.6% 575.00$ 4.2% 10.6% 600.00$ 15.4% 11.1% 520.00$ 14.0% 605.00$ Toilet Partition Phenolic Floor/Clg EA 1,250.00$ 4.2% 13.6% 1,200.00$ 6.7% 9.1% 1,125.00$ 2.3% 12.5% 1,100.00$ 4.8% 1,050.00$ 30' Aluminum Flagpole EA 1,625.00$ 7.1% 12.1% 1,750.00$ 9.4% 20.7% 1,600.00$ 10.3% 3.0% 1,450.00$ 3.6% 1,400.00$ Fire Extinguisher 10# Dry Chemical EA 88.00$ 0.0% 19.7% 88.00$ 19.7% 19.7% 73.50$ 0.0% 0.0% 73.50$ 0.0% 73.50$ Walkway Cover 12' SF 29.00$ 7.4% 20.8% 27.00$ 10.2% 12.5% 24.50$ 2.1% 16.7% 24.00$ 2.1% 23.50$ Ductwork Insulation Frk Vapor Barrier 2" SF 3.43$ 3.3% 13.6% 3.32$ 3.4% 9.9% 3.21$ 6.3% 18.0% 3.02$ 4.1% 2.90$ Ductwork Insulation Board Frk VB 2" SF 10.45$ 5.0% 13.6% 9.95$ 2.6% 8.2% 9.70$ 5.4% 18.3% 9.20$ 4.5% 8.80$ Duckwork Galvanized Steel LB 5.85$ 4.5% 19.6% 5.60$ 7.7% 14.5% 5.20$ 6.3% 20.9% 4.89$ 6.5% 4.59$ Duckwork Stainless Steel LB 8.55$ 11.0% 30.3% 7.70$ 10.0% 17.4% 7.00$ 6.7% 18.6% 6.56$ 5.8% 6.20$ PVC Schedule 40 10' 3 Hangers LF 17.90$ 3.5% 4.4% 17.30$ 1.4% 0.9% 17.55$ 2.3% 14.0% 17.15$ 3.0% 16.65$ PVC Schdule 80 LF 18.65$ 0.0% 18.65$ 0.5% 18.75$ -$ -$ 3" Cleanout Floor EA 233.00$ 22.0% 30.9% 191.00$ 2.7% 7.3% 186.00$ 4.5% 5.7% 178.00$ 1.7% 175.00$ Urinal EA 655.00$ 3.1% 12.0% 635.00$ 3.3% 8.5% 615.00$ 5.1% 12.8% 585.00$ 1.7% 575.00$ Wire 600 Volt THW Solid # 12 CLF 52.50$ 1.9% 14.1% 51.50$ 6.2% 12.0% 48.50$ 5.4% 15.5% 46.00$ 3.4% 44.50$ 3/4" EMT - 15' H Conduit w ith fittings LF 5.13$ 2.6% 25.1% 5.00$ 13.9% 22.0% 4.39$ 7.1% 20.6% 4.10$ 5.7% 3.88$ 3/4" Rigid Galv. Steel Conduit w /fittings LF 9.76$ 2.7% 25.9% 9.50$ 15.2% 22.6% 8.25$ 6.5% 19.6% 7.75$ 4.0% 7.45$ 3/4" PVC Schedule 40 in Concrete Slab LF 2.92$ 3.5% 16.3% 2.82$ 5.2% 12.4% 2.68$ 6.8% 22.4% 2.51$ 4.6% 2.40$ Pull Box NEMA 1 - 8" x 8" x 4" EA 79.00$ 2.6% 13.7% 77.00$ 2.7% 10.8% 75.00$ 7.9% 21.0% 69.50$ 5.3% 66.00$ 600 AMP Copper Bus Duct Plug-In Indoor LF 201.00$ 3.6% 8.6% 194.00$ 2.1% 4.9% 190.00$ 2.7% 5.0% 185.00$ 1.1% 183.00$

10.5% 26.7% 11.4% 16.4% 5.0% 15.7% 4.4%

4

2006 20032005 2004

Median Construction Cost (R.S. Means)

5

Div. Trade / Building Material U/M

2002

3

15

16

6

7

8

9

10

26.7%

03-06

2000 to 2004 …3.9% / Yr

1996 to 2000 … 3.2% / Yr

2003 to 2006 …8.9% / Yr

10.5%

05-06

15.7%

00-04

11.4%

04-05

9


ing

Campus Bid Cost (sq. ft.)

Campus Bid Cost(sq. ft.)

Stone Oak ES … Bid – 9/26/1995 $78.90 Blattman ES … Bid – 3/14/2002 $119.58

May ES … Bid – 2/15/1996 $82.48 Beard ES … Bid – 3/28/2002 $113.37

Longs Creek ES … Bid – 4/30/1996 $80.91 Ward ES … Bid – 4/11/2002 $98.50

Myers ES … Bid – 5/15/1996 $76.40 Judson ES … Bid – 7/10/2002 $108.12

Huebner ES … Bid – 5/28/1996 $79.20 Ott ES … Bid – 3/4/2003 $112.40

Steubing ES … Bid – 7/15/1996 $79.38 Hatchett ES … Bid – 4/2/2003 $112.52

Carson ES … Bid – 5/20/1997 $77.95 Canyon Parkway ES ... Bid – 1/29/2004 $150.07

Michael ES … Bid – 1/29/1998 $84.79 Wilderness Oak ES … Bid – 1/29/2004 $153.82

Castle Hills ES …Bid – 3/10/1999 $102.29 Bulverde Creek ES … Bid – 2/3/2004 $123.08

Raba ES … Bid – 3/30/1999 $97.35 Steubing Ranch ES … Bid – 2/3/2004 $107.87

Burke ES … Bid – 4/27/1999 $94.83 Krueger ES … Bid – 3/9/2004 $121.93

Hardy Oak ES … Bid – 5/5/1999 $101.09 Mead ES … Bid – 8/15/2004 $150.78

Wetmore ES … Bid – 12/7/1999 $94.85 Fisher ES … Bid – 1/11/2005 $134.95

Lewis ES … Bid – 6/15/2000 $105.06 Wanke ES … Bid – 2/15/2005 $139.89

Roan Forest ES … Bid – 9/5/2000 $101.70 Murnin ES … Bid – 3/15/2005 $138.19

Royal Ridge ES … Bid – 11/1/2000 $92.33 Driggers ES … Bid – 1/12/2006 169.48

Rhodes ES … Bid – 12/5/2000 $116.30 Aue ES … Bid – 2/2/2006 $141.90

Nichols ES … Bid – 1/23/2001 $103.89 Potranco ES … Bid – 10/12/2006 $166.14

Fairlawn ES … Bid – 4/26/2001 $110.85 Babcock South ES … Bid – 11/09/2006 $146.94

Elementary School Construction Cost Analysis

10

Teach

ing

, Learning, Leading Debt Structure

Considerations


Inflation of construction costs needs to be addressed

Secure lowest cost of borrowing and achieve District goals

Take advantage of historically low interest rates and flat yield curve environment

11

Teach

ing

, Learning, Leading

Historical 10 Year Treasury Curve vs Outstanding NEISD Bond Issuance

1.00%

3.00%

5.00%

7.00%

9.00%

11.00%

13.00%

15.00%

Jan-

62

Jun-

63

Nov-

64

Apr-6

6

Sep-

67

Feb-

69

Jul-7

0

Dec-

71

May

-73

Oct-7

4

Mar

-76

Aug-

77

Jan-

79

Jun-

80

Nov-

81

Apr-8

3

Sep-

84

Feb-

86

Jul-8

7

Dec-

88

May

-90

Oct-9

1

Mar

-93

Aug-

94

Jan-

96

Jun-

97

Nov-

98

Apr-0

0

Sep-

01

Feb-

03

Jul-0

4

Dec-

05

May

-07

Yiel

d (%

)

Current Yield at 7/6/07 - 5.19%Highest - 15.65% at 9/28/1981Lowest - 3.10% at 6/13/2003

Average - 6.61%

Series 2005TIC Yield = 4.51%Series 2005 REF

TIC Yield = 4.52%

Series 2007TIC Yield = 4.12%


Series 1985-D,ETIC Yield = 8.82%

Series 1997 TIC Yield = 5.15%

Series 2004TIC Yield = 4.52%Series 2004 REF

TIC Yield = 3.72%


TRSY versus true interest cost (TIC) Yield

12

Teach

ing


Considerations

Maintain tax rates to achieve the desired tax savings on the average valued home

Minimize costs associated with bond issuance

Consider possible need for additional bonds for growth in 2010 and 2013

13

Teach

ing


Challenges

Keeping debt in the 30 year time range

Keeping I&S tax rate below $.50

14

Teach

ing


Challenges

Match the maturity of technology and equipment bonds to their useful life $54 million for technology $11.2 million for buses

15


ing

One Sale or Two Sales?

16

Teach

ing

, Learning, Leading

One sale of $498,049,000

Minimize interest rate risk

Every .1% change in interest rates will cost approximately $4.5 million

A 1% change in rates will cost an additional $45 million

Proposed Bond Issuance

17


ingMarket Volatility

18

Teach

ing

, Learning, Leading

One sale of $498,049,000 Will allow additional interest earnings on bonds

of $17.5 - $20 million for construction

Maintain tax ratesTo achieve the desired estimated tax savings on

the average valued home will cost taxpayers capitalized interest

Proposed Bond Issuance

19

Teach

ing

, Learning, Leading Proposed Bond

IssuanceCapitalized Interest:

When Initial tax rate does not cover initial debt payments.

Create additional funds to cover initial debt

payments in order to maintain desired tax rate.

20

Teach

ing

, Learning, Leading Proposed Bond

IssuanceExample:

Borrow $110,000Purchase $100,000 assetMake initial loan payments with additional

$10,000Additional $10,000 will be paid over the life of

the loan

21

Teach

ing

, Learning, Leading NEISD Proposed Bond

Sale Summary One Sale Two Sales

$40M Interest Earnings $20M Interest Earnings[$23.5M] Capitalized Interest [$4.5M] Capitalized Interest

[$.2M] Issuance Cost

$16.5M in Net Earnings $15.3M in Net Earnings[$15.3M] Change in Interest Rate of .34%

$0

22

Teach

ing

, Learning, Leading

Concerns: Tax Rate


Assumptions Prior to Bond Election

23


ing

2006-2007

Estimated2007-2008

Estimated2008-2009

Increase in Value 7% 7%Average Taxable Valueof Residences $138,351 $148,036 $158,398

Tax Rate per $100 of valuation $1.6690 $1.4029* $1.4012**

Taxes Due on Average Residence $2,309 $2,077 $2,219

Increase (Decrease) in Taxes ($232) ($90)

*M&O Tax rate of $1.03 was used in estimate with an I&S Tax Rate of $.3729**M&O Tax rate of $1.03 was used in estimate with an I&S Tax Rate of $.3712

Estimated Effect on Taxpayer Prior to Election

24

Teach

ing

, Learning, Leading Effect on NEISD

Taxpayers


Changes in assumption after election

Average taxable home value increased not by 7% but by 11%

M&O tax rate increased by $.01

25


ing

Current 2006-2007

Estimated2007-2008

Estimated2008-2009

Increase in Value 11% 10%Average Taxable Valueof Residence

$138,642” $153,715 $169,087

Tax Rate per $100 of valuation $1.6690 $1.3895* $1.3474**

Taxes Due on Average Residence $2,314 $2,136 $2,278

Decrease in Taxes from 06-07 ($178) ($36)

“Current value*M&O Tax rate of $1.04 used in estimate with an I&S Tax Rate of $.3495**M&O Tax rate of $1.04 used in estimate with an I&S Tax Rate of $.3074

Effect on Taxpayers After Election

26


ingNorth East ISD Average Value of New

Single Family Residential Properties Tax Year 2007*

Number of Parcels 3,320

Average Market Value $221,213

Average Taxable Value** $206, 213

*Houses built after January 1, 2006**Value net of $15,000 homestead exemption

27


ingNorth East ISD Average Value of Existing Single Family Residential

Properties*Tax Year Tax Year Value 2006 2007 Increase

Number of Parcels 104,595 104,905

Average Market Value $148,963 $163,821 9.97%

Average Value Net of10% Value Cap Loss $147,429 $160,910 9.14%

Average Taxable Value** $132, 429 $145,910 10.18%

*Houses built before January 1 2006**Value net of 10% value cap loss and $15,000 homestead exemption

28


ing

2007-2008Estimated2008-2009

Increase in Value 10% 10%Average Taxable Value of Existing Residence $145,910 $160,501

Tax Rate per $100 of valuation $1.4029* $1.4029*Taxes Due on Average Existing Residence $2,047 $2,252

Decrease in Taxes from 06-07 ($262) ($57)

*M&O Tax rate of $1.04 used in estimate with an I&S Tax Rate of $.3629

Average Value of Existing Single Family Residential Properties

29

Teach

ing

, Learning, Leading

Concerns: Tax Rate


What tax rate?

30

Teach

ing

, Learning, Leading NEISD Proposed Bond

Sale Summary One Sale One Sale

Tax Rate 2008 $.3495 Tax Rate 2008 $.3629

$40M Interest Earnings $40M Interest Earnings[$23.5M] Capitalized Interest [$6.1M] Capitalized Interest

$16.5M in Net Earnings $33.9M in Net Earnings

I&S increase of $.0405 I&S increase of $.0539

31

Teach

ing

, Learning, Leading

Recommendation Negotiated Bond Sale

In order to structure debt to maintain tax rate for dollar savings to North East taxpayers

32

Teach

ing

, Learning, Leading Recommended

Underwriters

RBC Dain RauscherBanc of AmericaBear StearnsFirst Southwest CompanyThe Frost National BankMorgan Keegan & Co., Inc.SAMCO Capital Markets

33

Teach

ing

, Learning, Leading

Tax Rate Tax Rate06-07 General (M&O) $1.3600 $1.360007-08 General (M&O) $1.0400* $1.0400*

Change in Tax Rate ($0.3200) ($0.3200)

06-07 Debt Service (I&S) $0.3090 $0.309007-08 Debt Service (I&S) $0.3495* $0.3629*

Change in Tax Rate $0.0405 $0.0539

06-07 Total Tax Rate $1.6690 $1.669007-08 Total Tax Rate $1.3895* $1.4029*

Change in Tax Rate ($0.2795) ($0.2661)

Preliminary 2007-2008 Tax Rates


*Estimated

34

Teach

ing

, Learning, Leading

Concerns: Tax Rate


What tax rate?

35

Teach

ing

, Learning, Leading

Questions?

Documents

2007-2008 Capital Financing North East ISD Unlimited Tax School Building Bond Series 2007A