RIDE III Financial Update October 8, 2015

Revised Estimates  At last meeting, briefed an eight-year revenue estimate of $530M.  Since last meeting, received final FY15 figures for Education Capital Projects Sales Tax. Revised estimate accordingly based on increased collections in Education Capital Projects Sales Tax and also applied 1.7% growth rate, consistent with RIDE II. FY 18FY 19FY 20FY 21FY 22FY 23FY 24FY 25Total 69.7M70.9M72.1M73.3M74.6M75.8M77.1M78.5M592.0M

Bonding Proceeds  State law permits the County to bond the proceeds of the capital projects sales tax.  Language must be included in the referendum if the County wishes to pursue bonding.  Done in RIDE II, however, due to timing of the project construction schedule, the County was able to cash finance the projects rather than borrowing the funds.  County’s Financial Advisors estimate amount that can be borrowed and put toward construction at $532.4M assuming borrowing the full amount in summer  Reality is that full amount would not be bonded due to construction timeline and schedule.

Advantages to Bonding  Allows the County to get the funds for construction upfront, allowing construction to begin once design and permitting are done.  May avoid inflationary cost increases that would be incurred if the program were to be done solely on a pay-as-you-go basis.  Allows the County to take advantage of historically low interest rates at tax- exempt rates.

Disadvantages to Bonding  Approximately $59.6M of proceeds would be used for interest and other financing costs.  Depending on the projects selected by the Commission, projects that benefit a particular private user rather than the general public would not be eligible to be tax exempt.  Will need to time borrowings with construction schedule, possibly reducing the amount that can be borrowed. If we do not, County risks arbitrage penalty with IRS for not expeditiously spending bond proceeds.

Staff Recommendation  Include language in the referendum language to bond out the proceeds, allowing future County Council’s the opportunity to decide to bond or not bond.  As the Commission’s priority list comes together, require staff to review construction timelines and eligibility for tax exempt status to see where borrowing may allow the County to accelerate the program and priorities.