Project funding options
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Project Funding Options. Pay-as-you-go (cash) or Pay-as you-use (debt)? Which approach is feasible given project costs, fund balances, debt burden, tax rates? How will decision affect ability to meet existing obligations and complete future projects?

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Project Funding Options

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Project funding options

Project Funding Options

  • Pay-as-you-go (cash) orPay-as you-use (debt)?

    • Which approach is feasible given project costs, fund balances, debt burden, tax rates?

    • How will decision affect ability to meet existing obligations and complete future projects?

    • How does bond interest expense compare to project cost inflation if decision is to pay-go?

    • Which approach is fairer to current and future taxpayers, given project’s useful life?


Parameters internal

Parameters: Internal

  • Project costs and timing

    • Plus: Other future financing needs?

  • Available funds and future revenues

  • Estimated bond interest rates

    • Also: Investment rates on fund balances

  • Council / community positions


Parameters external

Parameters: External

  • Authorization in State Law

    • Types of municipal debt

    • Process for approval and issuance

  • Federal Regulations

    • IRS: Tax-Exempt Uses; Arbitrage Rebate

    • MSRB / SEC: Post-Issuance Compliance

  • Market Forces

    • Rating Agencies: Credit Quality

    • Investors: Rates, Terms and Conditions


Project funding plans

Project Funding Plans

  • Given parameters, what are options?

    • Which will deliver funding when needed?

    • Which is affordable: now and in future?

    • Which is good policy and precedent?

    • Which is politically viable?

  • Result = Project Funding Plan


Fix the fork funding plan 1

Fix the Fork Funding Plan 1

  • Estimated Cost: $7.5 Million

    • POST Cash: $2.0 million

    • General Fund Cash: $650,000

    • G.O. Bond Proceeds: $4.85 million

      • Two Bond Issues: Tax-Exempt and Taxable

  • $2.0M POST Cash Uses

    • River restoration / flood mitigation

    • Relocation necessary for River project

    • Park improvements

    • Other POST-eligible uses TBD


Fix the fork funding plan 2

Fix the Fork Funding Plan 2

  • $650,000 General Fund Cash Uses

    • 100% of relocation necessary for Pan & Fork Site (RFCDC-owned parcel) redevelopment

    • Other private or public uses TBD

  • $4.85M G.O. Bond Proceed Uses

    • Tax-Exempt: River restoration and other public costs not paid with POST / GF cash

    • Taxable: Pan & Fork site and RMI site improvements, all other private development costs not paid with GF cash


Fix the fork funding plan 3

Fix the Fork Funding Plan 3

  • G.O. Bond Ballot Question

    • Authority to issue bonds, pledge full faith and credit and unlimited property tax ability

    • But Town intends to “cancel” all of authorized debt levy debt with other revenues, not raise property taxes above existing level

    • Tax-Exempt / Taxable Bond split is TBD

      • Not part of ballot question, other than estimated cost

      • Town will err toward taxable to fund “gray area” costs as higher interest cost < cost of IRS audit / penalty


Fix the fork funding plan 4

Fix the Fork Funding Plan 4

  • Repayment of Tax-Exempt Bonds

    • Pay mostly from future POST revenues

    • General taxes for bond portion funding non-POST costs (i.e. streets / utilities)

      • Plan: offset / reimburse general taxes with Basalt Sanitation District, future special assessments

    • Repayment of Taxable Bonds

      • Pay near-term from existing general taxes

      • Use future assessments and development charges / agreements to reimburse Town and pay off bonds early (if possible)


Go bond example

GO Bond Example

  • Estimated GO Bond amount: $5.0 Million

    • 10 year repayment term (2014 – 2023)

  • “Worst Case” blended interest rate: 5.00%

    • Current estimated blended rate is 3.00%

  • “Worst Case” annual debt service: $650,000

  • Repayment sources:

    • 1% POST sales tax ($1.2 million annually)

    • Existing General taxes (property and 2% sales)

    • External: Basalt Sanitation District, assessments


Bond issuance participants

Bond Issuance Participants

  • Issuer: Town of Basalt

  • Independent Bond Advisor: Ehlers

  • Bond Counsel: Kutak Rock

  • Rating Agency: Standard & Poor’s

  • Paying Agent: TBD

  • Bond Underwriter: TBD

  • Bondholders: TBD


Bond issuance process 1

Bond Issuance Process 1

  • Key Pre-Election Steps

    • August 13: Council reviews funding plan and ballot question, authorizes staff to proceed

    • August 27: Council calls for November 6 election on ballot question

    • September 20: TABOR pro/con statements submitted to counties for distribution to voters

    • September – October: Town mailer, website, other outreach as permitted by state law

    • October 15: Counties mail ballots to voters


Bond issuance process 2

Bond Issuance Process 2

  • November 5: Election Day

  • If Voters Approve Question

    • November 12: Council authorizes bond sales

    • November 18: S&P rating call / visit

    • November 26: Competitive bond sales and Council award to winning bidders

    • Mid-December: Town receives and invests bond proceeds (in sync with project timeline)

    • Ongoing: Post-issuance compliance


Discussion

Discussion

  • Town Policy: Cash vs. Debt

  • Fix the Fork Funding Plan

  • G.O. Bonds: Uses, Debt Service, Participants, Issuance Process

  • Proposed Ballot Question andKey Steps / Dates


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