1. Montana Association of School Business Officials 2014 Annual Summer Conference School District Financing Getting ‘er Done June 16-18, 2014 1

2. Dorsey & Whitney LLP Missoula Public Finance Dan has been with Dorsey’s Public Finance practice group since 2001. He represents cities, towns, counties, school districts, water and sewer districts, and other districts in an array of public financings. His practice includes representation of the State of Montana in connection with various types of financings, such as general obligation bonds, coal severance tax bonds, state revolving fund bonds, and INTERCAP bonds. 2 Dan Semmens Partner, Public Finance Missoula (406) 721-6025 semmens.dan@dorsey.com

3. I. Types of Bonds and Debt Limitations 3 A.Types of School District Bonds 1.General obligation bonds are bonds that pledge the full faith and credit of and the taxing power of the school district. 2.Impact aid revenue bonds are revenues bonds that pledge and are payable solely from federal impact aid basic support payments. The full faith and credit of and taxing power of the school district is not pledged to the repayment of impact aid revenue bonds. 3.Bonds issued under 20-9-471. 4.Qualified Zone Academy Bonds.

4. I. Types of Bonds and Debt Limitations 4 B. Debt Limitations on Amount of Bond Issue. 1.First need to recognize that the term “school district” for bonding purposes means any elementary district, high school district, K-12 school district, county high school district, or community college district.

5. I. Types of Bonds and Debt Limitations 5 B. Debt Limitations on Amount of Bond Issue. 2.For an elementary district or a high school district the debt limit is 50% of the taxable value of the taxable property in the district, unless B.4 below applies.

6. I. Types of Bonds and Debt Limitations 6 B. Debt Limitations on Amount of Bond Issue. 3.For a K-12 district debt limit is 100% of the taxable value of the taxable property in the district, unless B.4 below applies. Need to allocate costs between elementary program and high school program for state debt service aid purposes.

7. I. Types of Bonds and Debt Limitations 7 B. Debt Limitations on Amount of Bond Issue. 4.For an elementary district with a mill value per elementary ANB or high school district with a mill value per high school ANB that is less than the corresponding statewide facility guaranteed mill value per ANB, the debt limit is 50% of the corresponding facility guaranteed mill value per ANB times 1,000 times the ANB of the district. For a K-12 district with an elementary program mill value per ANB and a high school program mill value per ANB that is less than the corresponding statewide facility guaranteed mill value per ANB, the debt limit is the sum of (a) 50% of the elementary program facility guaranteed mill value per ANB times 1,000 times the elementary program ANB of the district and (b) 50% of the high school program facility program guaranteed mill value per ANB times 1,000 times the high school ANB of the district.

8. I. Types of Bonds and Debt Limitations 8 B. Debt Limitations on Amount of Bond Issue. 5.The following counts against the debt limit: outstanding general obligation bonds and those proposed to be issued; registered warrants; bonds under 20-9-471; any other loans or notes payable as general obligation.

9. II. Steps Required When Issuing A General Obligation Bond 9 A.Determine Type of Election 1.A school district may choose to conduct a school bond election in conjunction with a regular school election or by special election called by the board of trustees at the polls, in conjunction with a general election or a primary election, or by a mail ballot election.

10. II. Steps Required When Issuing A General Obligation Bond 10 A.Determine Type of Election 2.If a school bond election is held in conjunction with a regular school election or at a special election at the polls, the success or failure of the election is contingent on voter turnout. If the turnout percentage is 40% or more, the bond proposition passes if a majority of votes were cast in favor; if the turnout percentage is more than 30% but less than 40%, then the bond proposition passes if at least 60% of the votes were cast in favor; and if the turnout percentage is less than 30%, then the bond proposition must be rejected. If a school bond election is held in conjunction with a general election or a primary election or at a mail ballot election, then the bond proposition passes if the majority of votes are cast in favor.

11. II. Steps Required When Issuing A General Obligation Bond 11 A.Determine Type of Election 3.For a school bond election to be conducted by mail ballot, the district or county election administrator must submit a written mail ballot plan to the Montana Secretary of State for approval at least 60 days prior to the date of the election. For a school bond election no matter how conducted, the district must adopt the resolution calling for the bond election at least 40 days before the election and give notice to the county election administrator at least 35 days prior to the date of the election. The effect of this is that a resolution calling for a mail ballot election in some form should be adopted by the board of trustees at least 60 and preferably about 70 days before the election.

12. II. Steps Required When Issuing A General Obligation Bond 12 A.Determine Type of Election 4.Unless the county election administrator agrees to conduct the mail ballot election on behalf of the school district, the district is responsible for the conducting the mail ballot election and must comply with all requirements of the Mail Ballot Act, including providing notice of the mail ballot election, causing the county election administrator to close the voter rolls, arranging for the printing of the ballots, designing a plan for proper care of voted ballots; and canvassing the ballots.

13. II. Steps Required When Issuing A General Obligation Bond 13 B.The Ballot 1.The school district must prepare the ballot, and if the issuance of bonds for more than one purpose is to be considered at one school bond election, then there must be a separate ballot for each purpose. 2.The ballot must be printed in substantially the following form: OFFICIAL BALLOT SCHOOL DISTRICT BOND ELECTION INSTRUCTIONS TO VOTERS: Make an X or similar mark in the vacant square before the words "BONDS--YES" if you wish to vote for the bond issue; if you are opposed to the bond issue, make an X or similar mark in the square before the words "BONDS--NO.’ Shall the board of trustees be authorized to issue and sell (state type of bonds here: general obligation or impact aid revenue) bonds of this school district in the amount of _____ dollars ($ ____), bearing interest at a rate not more than _____ percent (____%) a year, payable semiannually, during a period not more than ____ years, for the purpose ____________ (here state the purpose the same way as in the notice of election)? [ ] BONDS -- YES. [ ] BONDS -- NO.

14. II. Steps Required When Issuing A General Obligation Bond 14 C.General Concepts on Ballot Questions 1.Specific enough so voter knows what he/she is voting on 2.Not so specific that school district paints itself into a corner 3.If you say it, you build it 4.Money left over 5.Retaining an architect 6.Can issue less, not more 7.Site selection matters 8.60-day challenge period

15. III. Points to Consider in a General Obligation Bond Election 15 1.Debt Limitation 2.Retaining an Architect 3.Scope of Project and Description 4.Type of Election 5.Allocations Between Elementary and High School Districts 6.Site Selection Election 7.Who will conduct the election?

16. IV. Bonds Issued Under 20-9-471 16 1.20-9-471 Bonds are purchased by the Board of Investments.

17. IV. Bonds Issued Under 20-9-471 17 2.Can issue them without an election if paying for costs of renovating, rehabilitation, or remodeling school facilities.

18. IV. Bonds Issued Under 20-9-471 18 3.Maximum term is 15 years.

19. IV. Bonds Issued Under 20-9-471 19 4.Count toward general obligation debt limit.

20. IV. Bonds Issued Under 20-9-471 20 5.Are not true general obligation bonds in that taxing power is not pledged to the repayment of the bonds.

21. IV. Bonds Issued Under 20-9-471 21 6.More like “general fund” obligations – payable from any legally available fund.

22. IV. Bonds Issued Under 20-9-471 22 7.Do not qualify for state advance or reimbursement of debt service.

23. IV. Bonds Issued Under 20-9-471 23 8.Can use for conduit bond issues.

24. V. Lease Purchase Financing 24 1.Thought is this is not debt. Need nonappropriation provision.

25. V. Lease Purchase Financing 25 2.Difficult to use for real property financing for school districts. More suitable for equipment financing.

26. V. Lease Purchase Financing 26 3.20-6-609 says the trustees may acquire real and personal property by an agreement to lease for 3 years with an option to purchase. Real property has additional restrictions. Have a one-year lease that has to be renewed by Board of Trustees annually or it expires. Lease payments are essentially principal and interest payments.

27. V. Lease Purchase Financing 27 4.Do not need a vote. But do not have any additional revenue source – no taxing power.

28. 28 Thank You! Dan Semmens semmens.dan@dorsey.com Dorsey & Whitney LLP Main: (406) 721-6025 125 Bank Street, Suite 600 Missoula, MT 59802