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?
Project Funding Options
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: Internal
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
Parameters: External
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
Project Funding Plans
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 1
$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 2
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 3
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)
Fix the Fork Funding Plan 4
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
GO Bond Example
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 Participants
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 1
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
Bond Issuance Process 2
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
Discussion
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