SavannahChatham County Public Schools

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Savannah-Chatham County Public Schools

• Board Workshop
• November 07, 2007

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Outline

• Introduction of Ford Associates, Inc.
• ESPLOST Background
• Tax and Market Considerations
• Key Principles
• Financing Alternatives

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Ford Associates, Inc.

• Independent Financial Advisory Firm located in
  Tampa, Florida
• Provide debt planning management services to
  tax-exempt borrowers from California to Florida
• Specialize in K-12 Education, completing
  approximately 1 billion in K-12 financings per
  year
• Served as financial advisor to the Board since
  1987

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ESPLOST Background

• On July 05, 2006, the Board passed a resolution
  calling for voter referendum for the imposition
  of a 1 sales and use tax
• On September 19, 2006, voters approved the tax
• On March 12, 2007, the Court validated the use of
  bonds to be repaid from the tax

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ESPLOST Background, Contd.

• Specifically, the tax was imposed beginning
  January 01, 2007 and will continue until December
  31, 2011
• The total amount of the tax is limited to 360
  million
• 67.5 million can be used to repay PI on
  outstanding general obligation bonds

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ESPLOST Background, Contd.

• The Board may issue up to 200 million in bonds
  maturing as follows
• Year 1 30 million
• Year 2 35 million
• Year 3 40 million
• Year 4 45 million
• Year 5 50 million
• The final maturity must be repaid no later than
  calendar year 2012
• Although the bonds will be repaid from ESPLOST
  revenues, they are general obligations of the
  school district
• Collections are lagging projections

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Tax and Market Considerations

• Federal tax law limits the amount of a tax-exempt
  borrowing to no more than the borrower reasonably
  expects to expend in 36 months.
• Monies expended over a period of more than 24
  months are subject to arbitrage rebate

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Tax and Market Considerations, Contd.
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Key Principles

• Dont borrow if you dont have to
• Dont borrow more that you need to
• Dont borrow before you need to
• Dont borrow for longer than you need to

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Financing Alternatives

• The Board has 2 basic borrowing options
• Issue all, or a portion, of the amount in the
  form of traditional bonds
• Borrowing only those amounts necessary through
  the issuance of one or more short-term notes
• Both options have advantages and disadvantages,
  and each of the two options has variations the
  Board may wish to consider

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Financing Alternatives, Contd.

• Option 1 Bonds
• Minimizes cost of issuance
• Locks in rates
• Provides availability of funding at time
  construction contracts are awarded
• May necessitate arbitrage rebate
• May result in borrowing more than is absolutely
  needed

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Financing Alternatives, Contd.

• Option 2 Short Term Notes
• Minimizes the amount of borrowing
• Lowers the overall cost of borrowing
• Creates arbitrage opportunities
• Can be accomplished on a publically offered
  basis, or as a private placement
• Requires multiple issues and may increase costs
  of issuance
• Subject to interest rate volatility

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Financing Alternatives, Contd.

• Recommendations
• Cash flow timing and arbitrage considerations are
  the key factors in determining the method of
  finance
• Short term notes will result in lower borrowing
  costs and will provide arbitrage opportunities
• Bonds should only be used if they are structured
  to avoid arbitrage rebate