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Strictly Private and Confidential $9,500,000 - General Obligation School Building Bonds, Series 2014 August 14, 2014 Gadsden Independent School District.

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Presentation on theme: "Strictly Private and Confidential $9,500,000 - General Obligation School Building Bonds, Series 2014 August 14, 2014 Gadsden Independent School District."— Presentation transcript:

1 Strictly Private and Confidential $9,500,000 - General Obligation School Building Bonds, Series 2014 August 14, 2014 Gadsden Independent School District No. 16

2 1 Disclaimer This presentation was prepared exclusively for the benefit of and internal use by the recipient for the purpose of considering the transaction or transactions contemplated herein. This presentation is confidential and proprietary to RBC Capital Markets, LLC (“RBC CM”) and may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without RBC CM’s express written consent. By acceptance of these materials, and notwithstanding any other express or implied agreement, arrangement, or understanding to the contrary, RBC CM, its affiliates and the recipient agree that the recipient (and its employees, representatives, and other agents) may disclose to any and all persons, without limitation of any kind from the commencement of discussions, the tax treatment, structure or strategy of the transaction and any fact that may be relevant to understanding such treatment, structure or strategy, and all materials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment, structure, or strategy. The information and any analyses contained in this presentation are taken from, or based upon, information obtained from the recipient or from publicly available sources, the completeness and accuracy of which has not been independently verified, and cannot be assured by RBC CM. The information and any analyses in these materials reflect prevailing conditions and RBC CM’s views as of this date, all of which are subject to change. To the extent projections and financial analyses are set forth herein, they may be based on estimated financial performance prepared by or in consultation with the recipient and are intended only to suggest reasonable ranges of results. The printed presentation is incomplete without reference to the oral presentation or other written materials that supplement it. Employees of RBC CM are expressly prohibited from directly or indirectly: (a) offering any company favorable research coverage as an inducement for the receipt of investment banking business; or (b) threatening to retaliate with adverse coverage or comments if such business is not awarded. All recommendations, ratings, price targets and opinions regarding a company are determined independently by RBC CM’s Research Department. IRS Circular 230 Disclosure: RBC CM and its affiliates do not provide tax advice and nothing contained herein should be construed as tax advice. Any discussion of U.S. tax matters contained herein (including any attachments) (i) was not intended or written to be used, and cannot be used, by you for the purpose of avoiding tax penalties; and (ii) was written in connection with the promotion or marketing of the matters addressed herein. Accordingly, you should seek advice based upon your particular circumstances from an independent tax advisor.

3 2 History of Assessed Valuation

4 3 New vs. Re-Appraisal

5 4 History of Tax Rates History of Total Residential Tax Rates

6 5 Debt Management Plan Overview  Bond Election Timing  Every four years – $38,000,000 bond election approved by voters on February 4, 2014 with bonds to be sold as follows: $9,500,000 to be sold on September 25, 2014 $9,500,000 to be sold in 2015, 2016 and 2017 or as directed by the District – Next bond election – February 2018 for approximately $37,000,000 – Next two mill levy election – February 2018  Bond Maturity Schedule  Declining debt service to permit new bonds in future without tax increase  10 final maturity (20-year maximum maturity pursuant to State law)  Create capacity by retiring debt as quickly as cashflow from tax levy will permit  G/O Education Technology Lease Purchase Certificates of Participation (COPs)  Sold annually or biannually (or as directed by the District) to pay for technology equipment, software, hardware, tech support and maintenance  Notes will be retired within two years  Bond & COP Tax Rate  Maintain a combined GOB & COP debt service tax rate at or below $14.35 level  Maintain SB9 levy @ $2.00

7 6 Bonding Capacity

8 7 Outstanding and New Issue Debt Service

9 8 Bond Sale Calendar

10 Weekly Municipal Market Update August 11, 2014

11 10 Short-Term Market Market Overview SIFMA vs. LIBOR Source: Bloomberg Yields in the short-term tax-exempt variable rate demand note (VRDN) market moved higher last week, particularly in the second half of the week. As the demand from August coupon reinvestments waned, yields were pushed higher, although in a controlled fashion of roughly 1 bps per day. The SIFMA Index was reset at 0.05%, down 1bps on the week.

12 11 Long-Term Market Market Overview U.S. Treasury Yield Curve Changes Municipal GO “AAA” MMD Yield Curve Changes Source: Bloomberg and Thomson Municipal Market Data The weakness in equity markets in the previous week spilled over to early last week, as the S&P 500 Index was down nearly 1% through Thursday’s close. However, news reports on Friday that Russian President Putin was pulling back, at least temporarily, from what looked to be an imminent invasion of Ukraine, appeared to be the spark for a sharp snapback in stocks. By Friday’s close, equities had recovered their losses from early in the week to finish up fractionally. The “risk off” weakness in equities early in the week provided a good backdrop for Treasury bonds, which traded to their low yield levels for the year. Treasuries were also able to hold on to the majority of their gains on Friday when stocks were rallying. For the week as a whole, the yield on the 30-yr Treasury declined by 5bps to 3.23% and the yield on the 10-yr was down by 7bps to 2.42%. Readers will recall that we started 2014 with yields of roughly 3% on the 10-yr and 4% on the 30-yr, with many analysts predicting that yields would head higher as the Fed began its tapering of quantitative easing (QE) purchases of Treasuries and agency securities. Now, as we near the end of QE, we are sharply lower in yield than we were when we began the year, even as the unemployment rate has dropped and there are some signs that inflation may be picking up. The muni market gained along with Treasuries last week, outperforming the Treasury market by declining in yield more. Yields on the Municipal Market Data (MMD) AAA GO curve decreased by between 10bps and 12bps for maturities of 10-yrs and longer, with the larger declines in the middle of the yield curve. The outperformance for munis on the week was due to yields declining on Friday even as Treasury yields increased slightly after the equity market recorded its large gains on the day. It will be interesting to see if munis can maintain those gains in the upcoming week, especially as we will see one of the heavier new issue calendars of the summer (more than $6bn) that includes three large issues, each of more than $800mm – Minnesota GO’s, New York City GO’s, and the Port Authority of New York and New Jersey. This upcoming week also sees the expiration of the short extension given to the Puerto Rico Electric Power Authority (PREPA) to repay two letters of credit (LOC) totaling nearly $675mm. Those LOCs originally were scheduled to expire on July 7th, but were extended first until July 31st and then to August 14th. According to data from Lipper, municipal bond mutual funds saw inflows of $17mm last week – this was a decline from the $17mm of inflows in the preceding week. High yield funds again saw inflows of $60mm as they continued to recover some funds lost earlier that coincided with some of the most negative headlines coming out of Puerto Rico.

13 12 Municipal Market Fund Flows  According to data from Lipper, for the week ended August 06, 2014, weekly municipal bond funds reported $17 million in inflows, down from previous week’s $419 million of inflows  For the year, weekly and monthly municipal funds have recorded $11.155 billion in net inflows and have only recorded net weekly outflows 6 times (31 reporting weeks thus far)  For the third consecutive week, high yield municipal funds experienced modest inflows, recording $60 million in net inflows. Lipper Municipal Fund Flows Period ended August 06, 2014 Until Fund Flows stabilize, trading in the municipal market will remain volatile

14 13 Tax-Exempt Market Dynamics Muni Bonds: 2014 Issuance versus RedemptionsNet Inflows in 24 of the First 31 Weeks of the Year 2013 & 2014 Municipal Weekly VolumeCredit Spreads Remain Tight for Highly Rated Issuers Source: Bloomberg, Lipper and Thomson Municipal Market Data

15 14 Comparison of Minimum vs. Current vs. Maximum AAA MMD 2013 & 2014 ComparisonHistorical Ten Year Comparison Source:Thomson Municipal Market Data

16 15 Current Municipal Market Conditions: “AAA” MMD “AAA” MMD January 1, 2007 to PresentShift in “AAA” MMD Since July 2013 Source:TM3, Thomson Reuters 10, 20, and 30 year “AAA” MMD shown to represent different average lives of municipal transactions Rates as of August 8, 2014 3.457%3.121%2.152%Average 3.220%2.990%2.140%Minimum 4.510%4.270%3.040%Maximum 30 Year20 Year10 Year July 1, 2013 to Present After closing at 3.30% the previous week, the 30-year “AAA” MMD decreased by 10 bps from August 1 – August 8 to a current rate of 3.20%

17 16 Bond Buyer 20 General Obligation Bond Index Bond Buyer 20 GO Index since January 1961 Today’s 4.33% level is lower than 79.51% of historical rates since January 1961 Source: Bloomberg as of July 31, 2014 {Bond Buyer Index unavailable at time of distribution} Weekly yields and indexes released by the Bond Buyer. Updated every Thursday at approximately 6:00pm EST. 20 Bond General Obligation Yield with 20 year maturity, rated AA2 by Moody's Arithmetic Average of 20 bonds' yield to maturity. 53 Year Historical Perspective % of Time in Each Range Since 1961

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