PPT (179KB)

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Texas Military Preparedness CommissionTexas Military Preparedness Commission

Office of the Governor

Texas Military Preparedness Commission

Revolving Loan Fund 23 February 2006

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Agenda

Overview of RLF Program Bob Rasmussen (TMPC)

Finance and Legal Structure Kim Edwards (TPFA)

Credit Analysis Piper Montemayor (OGEDT)

Proposed Timeline Bob Rasmussen (TMPC)



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RLF Program—78th Legislature (SB 652)

Established TMPC and RLF concept Applicable to Defense Communities with active bases

Application submitted with Military Value

Enhancement Statement that describes project and benefits

TMPC evaluates project and administers loans BRAC evaluation criteria Feasibility of project Creditworthiness

TPFA issues bonds to fund loans Legislature’s intent is for RLF program to be

self-supporting—no legislative appropriations Texas Military Preparedness CommissionTexas Military Preparedness Commission


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Amendments to RLF—79th Legislature

Loan program expanded to include: Economic development projects for defense

communities adversely impacted by BRAC 2005 Minimize negative economic impact

Create jobs

Infrastructure projects for communities positively impacted by BRAC 2005

Communities required to submit Community Redevelopment Value Statement relating the project to BRAC 2005 actions



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Potential Applicants

Political subdivisions adjacent to, near, or encompassing part of an active military installation or an installation closed as a result of BRAC 2005

Criteria: Increase military value for BRAC scoring Provide positive economic impact, such as job creation,

for communities negatively impacted by BRAC 2005 Assist communities with infrastructure projects that

support new missions

Number of Eligible Communities: Approximately 45



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Project Criteria

Funds must be expended completely within 5 years from when loan was awarded

Minimum amount of loan will be $1M with a maximum determined by available funds and creditworthiness

Applications must be submitted with either Military Value Enhancement Statement; or Economic Redevelopment Value Statement

Projects are generally expected to be related to facilities or infrastructure



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Key Action Steps Joint Conference between TMPC and TPFA and

Interested Defense Communities

Explain program

Review rules, application, criteria, and timelines

Communities submit Letters of Interest

TMPC Commissioners review Letters of Interest and determine if sufficient demand exists to implement the program

Applications requested

TMPC Commissioners approve applications

TPFA sells bonds to fund loans Loans Available to Eligible Applicants Dec 2006

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Agenda







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Program Mechanics

INVESTORS

TMPC

TPFA

A B C D

TPFA Bonds

Bond Proceeds

Loans

LOANS

$$

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Program Mechanics

INVESTORS

TMPC

TPFA

A B C D

Debt Service

Loan Payments

Loans

Loan Repayment

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Benefits of RLF

State’s AA/AA+/AA1 General Obligation Credit rating: Provides a lower interest rate for entities with a lower credit rating.

Economies of Scale: combining several small bond issues into one larger bond issue

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Example of Debt Service Savings

Tax Exempt: $20M for 20 years Rating

InterestRate1

Total Debt

Service Savings2

State of Texas AA1/AA+/AA 4.373% $31,134,830 -

El Paso Aa3/AA 4.443% $31,343,757 $208,927

Corpus Christi A1/A+/AA- 4.532% $31,605,387 $470,557

Texarkana A2/A+ 4.570% $31,710,809 $575,979

Taxable: $20M for 20 years

State of Texas AA1/AA+/AA 5.341% $33,953,530 -

Brooks Development Authority3 NR 6.842% $38,517,817 $4,564,287

1 Based on market conditions as of February 15, 2006; TIC reflects 20 year level debt service with premium bonds sized to fund a $20 million project, underwriter’s discount and cost of issuance.

2 Over 20 year life of bond issue

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Loan Terms and Structure

Loan Terms and Repayment Schedule will be tailored to meet the needs of each borrower

Final term of the loan can not exceed useful life of the project or asset

Pre-payment provisions (call feature) of the loan will match the call feature of the bonds TPFA issues

TPFA Bonds are “Self-Supporting” – all costs and debt service will be paid from loan payments

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What is the Interest Rate?

Interest rate will be the market rate for State of Texas General Obligation Bonds on the date the bonds are sold (November 2006)

February 15, 2006: 4.373% Tax-exempt; 5.341% Taxable

Taxable vs. Tax-exempt: Facilities with a substantial “non-governmental” or private business use or guarantee may not qualify for tax-exempt interest rates.

Tax code does not define federal government as a “governmental” entity

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Legal Pledge

Any lawful revenue source can be pledged to repay the loan

Will vary by type of borrower (City, Economic Development Authority, Port Authority)

Examples: Property Tax (General Obligation pledge); Enterprise Revenue System (Utility, Municipal Airport); Sales Tax

Please consult your legal counsel

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Other Costs

TMPC Application fee: $500 - due when application is submitted; refunded when loan is funded

TMPC Administrative fee: 1/10 of 1% (10 bp) of par amount of loan ($1,000 per $1 million loan). Due when loan is funded.

Costs of Issuance

Arbitrage Rebate Compliance

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Example Costs of Issuance Allocation

Bond Counsel Financial

Advisor Rating Agency

Fees Official

Statement printing and distribution

Miscellaneous

Loan Amount

% of Total

Pro Rata COI

Borrower A

$5,000,000

25% $50,000

Borrower B

$10,000,000

50%$100,00

0

Borrower C

$4,000,000

20% $40,000

Borrower D

$1,000,000

5% $10,000

Total$20,000,0

00100%

$200,000

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Example Sources and Uses Schedule

Borrower A

Borrower B

Borrower C

Borrower D

Total

Sources:

Loan Proceeds

$5,055,000

$10,110,000

$4,044,000

$1,011,000

$20,220,000

Uses:

Project Fund $5,000,000

$10,000,000

$4,000,000 $1,000,000 $20,000,000

TMPC Fee $5,000 $10,000 $4,000 $1,000 $20,000

TPFA Cost of Issuance

$50,000 $100,000 $40,000 $10,000 $200,000

Total $5,055,000

$10,110,000

$4,044,000

$1,011,000

$20,220,000

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Example Debt Service Schedule

Period Ending

Borrower #1 $5 MM - 10

Year


Year


Year


Year Total

6/30/2008 264,552$ 586,612$ 225,838$ 56,664$ 1,133,667$ 6/30/2009 664,538 780,506 379,894 92,681 1,917,619 6/30/2010 665,338 781,806 376,394 95,581 1,919,119 6/30/2011 665,338 782,506 377,594 93,381 1,918,819 6/30/2012 664,538 777,706 378,394 96,081 1,916,719 6/30/2013 662,938 777,406 378,794 93,681 1,912,819 6/30/2014 665,438 781,406 378,794 96,181 1,921,819 6/30/2015 666,563 779,441 378,228 93,541 1,917,772 6/30/2016 665,906 781,219 376,919 95,713 1,919,756 6/30/2017 663,813 781,881 379,913 92,738 1,918,344 6/30/2018 - 779,875 376,250 94,375 1,250,500 6/30/2019 - 780,000 380,750 95,500 1,256,250 6/30/2020 - 778,875 379,375 96,375 1,254,625 6/30/2021 - 781,375 377,250 97,000 1,255,625 6/30/2022 - 777,500 379,250 97,375 1,254,125 6/30/2023 - 782,125 - - 782,125 6/30/2024 - 780,125 - - 780,125 6/30/2025 - 781,500 - - 781,500 6/30/2026 - 781,125 - - 781,125 6/30/2027 - 779,000 - - 779,000

6,248,959$ 15,411,990$ 5,523,635$ 1,386,867$ 28,571,451$

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Example Debt Service Schedule

TPFA - Texas Military Preparedness CommissionSeries 2006 Fixed Rate Bonds - Debt Service Breakdown

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Year

Deb

t Se

rvic

e

Borrower #2 Debt Service Borrower #3 Debt Service Borrower #4 Debt ServiceBorrower #1 Debt Service Bond Debt Service

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Consult your bond counsel and financial advisor.

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Agenda







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Credit Analysis

Credit Review Review Repayment Ability Security Review (if applicable)

Documents required at the time of application Comprehensive Annual Financial

Reports Full Credit Rating Report

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Agenda







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Proposed Timeline:

Date Action

April 3, 2006 Letters of Interest Due

April 20, 2006 TMPC Commissioners Review Letters of Interest and Determine if Program can be implemented

June 1, 2006 Communities Submit Applications

June 15, 2006 TMPC Commissioners Approve Applications for Creditworthiness Review

July 31, 2006 Creditworthiness Review Completed

August 17, 2006

TMPC Commissioners Approve Applications

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Proposed Timeline (continued):

Date Action

August 30, 2006 Letters of Commitments from Communities (City Council/Board Resolution)

September 7, 2006

TPFA Board Approves Requests for Financing

November 7, 2006

Bond Review Board Planning Session

November 16, 2006

Bond Review Board Approval

November 20, 2006

Loan Agreements Signed—TMPC and Communities

December 14, 2006

Loans Funded

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Questions?

Primary Points of Contact:

Applications and Timeline

Al Casals – (512)936-0517 [email protected]

Finance Questions

Kim Edwards – (512)463-5544 [email protected]

Credit Questions

Piper Montemayor – (512)463-6735 [email protected]