Capital Facilities Planning June 29, 2017 Jon Gores Managing Director (206) 389-4043 jgores@dadco.com

Discussion Topics Election Results Capital Facilities Financing Tax Rate Projections

Washington State Election Results-School Districts Only 2015 M&O Levies 46 Passed and 2 Failed Capital Project Levies 16 Passed and 2 Failed Transportation Levies 2 Passed and 1 Failed Bond Authorizations 23 Passed and 22 Failed 2016 M&O Levies 132 Passed and 3 Failed Capital Project Levies 29 Passed and 3 Failed Transportation Levies 3 Passed and 0 Failed Bond Authorizations 26 Passed and 21 Failed 2017* M&O Levies 41 Passed and 1 Failed Capital Project Levies 11 Passed and 1 Failed Transportation Levies 0 Passed and 0 Failed Bond Authorizations 20 Passed and 11 Failed * Includes the February 14, 2017 and April 25, 2017 elections only. Source: Washington Secretary of State: Election and Voting website and individual County Auditor websites

Voting Patterns-Bond Issues Passed per Year (Years 1993 through April 2017-Schools Only) Source: State of Washington, Office of Superintendent of Public Instruction

Voting Patterns-Bond Issues Passed by Month Statewide (Years 1992 through April 2017-Schools Only) Source: State of Washington, Office of Superintendent of Public Instruction

Voting Patterns-Bond Issues Passed by Purpose Statewide (Years 1992 through April 2017) Source: State of Washington, Office of Superintendent of Public Instruction

2017-2018 Special Election and Resolution Filing Dates

Capital Financing Options Types of School District Bonds Voted – Unlimited Tax General Obligation Bonds (UTGO) Non-voted – Limited General Obligation Bonds (LGO) Voter approved bonds are (UTGO) Repaid with property taxes Approved with a 60% yes vote, 40% validation 5% Debt Capacity = $31,973,616 – $3,335,000 (Outstanding Debt) = $28,638,616 Non-voted bonds are (LGO) Repaid with existing revenue Can’t be used for “new” construction 3/8 of 1% Debt Capacity = $2,398,021 – $0* = $2,398,021 * As of September 1, 2016

Capital Financing Options Capital Projects Levy (no debt limit) Simple majority Two to six year collection No interest cost Bonds are the primary method used by Washington School Districts to finance the “local share” of capital projects because Cash is generated upfront Payments can be spread over time Districts have some control over taxpayer impacts

District’s Current Debt The District has one outstanding Unlimited Tax General Obligation Bond (UTGO) issues: UTGOR Bonds, 2012 All of the District’s voter approved UTGOR Bonds will be repaid on or before December 1, 2019

Historical Bond Tax Rates Over the past 18 years the District’s bond tax rate has ranged from $2.66 in 2000 to a 2017 bond tax rate of $1.52. Year Historical Bond AV   Bond Levy Rate/$1000 2000 $244,450,389 $2.66 2001 255,314,186 $2.04 2002 286,058,158 $1.89 2003 303,510,969 $1.78 2004 313,746,887 $1.50 2005 328,014,998 $1.59 2006 349,871,942 $2.46 2007 368,191,168 $2.22 2008 376,680,379 $2.17 2009 391,703,426 $2.30 2010 402,044,713 $2.24 2011 462,763,615 $1.99 2012 473,500,098 $2.11 2013 472,863,350 2014 481,901,900 $2.10 2015 624,938,562 $1.62 2016 599,659,302 2017 639,472,316 $1.52

Sample Bond Proposition SCHOOL DISTRICT NO. 123 BONDS FOR CONSTRUCTION OF SCHOOL FACILITIES The Board of Directors of XYZ School District No. 123, adopted Resolution No. 456, concerning a proposition to finance construction of school facilities. This proposition would authorize the District to construct a new elementary school (Grades K-3) to replace XYZ Elementary School on the existing site and construct additional classrooms to replace portable classrooms at XYZ Middle School; issue no more than $19,544,500 of general obligation bonds maturing within 20 years; and levy annual excess property taxes to repay the bonds, all as provided in Resolution No. 456. Should this proposition be: Approved………. ____ Rejected………… ____

Tax Rate Planning Interest Rates Bond Rating Assessed Value Assumptions for Tax Rate Planning: Interest Rates Bond Rating Assessed Value Bond Structure

Tax Rate Planning Interest Rates Lower interest rates result in lower tax rates for bonds. Interest rates are determined when bonds are actually sold. Assumption: Future Bond Sales Current rates plus 1.50% (150 basis points).

Standard & Poor’s Global Ratings – Founded 1860 Tax Rate Planning Bond Rating A higher bond rating results in lower interest rates. Assumption: AA+ (with State Guarantee) A+ District Rating (Pending) A Guide to Bond Ratings Standard & Poor’s Global Ratings – Founded 1860 Highest Quality AAA AA+, AA, AA- A+, A, A- BBB+, BBB, BBB- Lowest Quality NR (Nonrated)

Financial Performance Tax Rate Planning Bond Rating (Continued) Bond raters consider the local economy, District finances, and other factors Assumption: AA+ (with State Guarantee) A+ District Rating (Pending) The Rating Governmental Factors Economy Debt Factors Financial Performance Debt Factors Economy

Tax Rate Planning Assessed Value Year Historical Bond AV New Construction Bond Levy Rate/$1000   % change 2000 244,450,389 $2.66 N/A 2001 255,314,186 $2.04 4.4% 2002 286,058,158 $1.89 12.0% 2003 303,510,969 $1.78 6.1% 2004 313,746,887 $1.50 3.4% 2005 328,014,998 $1.59 4.5% 2006 349,871,942 $2.46 6.7% 2007 368,191,168 $2.22 5.2% 2008 376,680,379 $2.17 2.3% 2009 391,703,426 $2.30 4.0% 2010 402,044,713 $2.24 2.6% 2011 462,763,615 4,477,415 $1.99 15.1% 2012 473,500,098 5,223,700 $2.11 2013 472,863,350 2,532,349 -0.1% 2014 481,901,900 4,149,390 $2.10 1.9% 2015 624,938,562 9,249,531 $1.62 29.7% 2016 599,659,302 4,922,035 -4.0% 2017 639,472,316 8,098,887 $1.52 6.6%

Tax Rate Planning Assessed Value (Continued)

Tax Rate Planning Assessed Value (continued) Projected Assessed Value Growth Final 2017: 6.64% growth Projected 2018-2039: 1.00% annual growth An individual’s taxes will be based on the assessed value for their property Higher assessed values will lower the District’s tax rates (but not the overall payment ) New construction vs. increase in value of existing property

Increases in Property Values Will Not Increase School District Tax Collections Changes in property values don’t change the amount of taxes authorized Local school taxes can only be increased by a vote of the people Changing property values will change tax rates, but not tax collections Year Home Value Tax Rate Tax Bill XYZ School District Home Value 2016 $100,000 $5.00/$1,000 $500 Assume a 20% increase in Assessed Value for XYZ School District #1: 20% increase 2017 $120,000 $4.17/$1,000 $500 #2: 10% increase 2017 $110,000 $4.17/$1,000 $459 #3: 30% increase 2017 $130,000 $4.17/$1,000 $542

Tax Rate Planning Bond Structure State law gives Districts great flexibility in determining bond structures Options Level Debt Level Tax Rate Stepped Level Tax Rate

Level Debt Results in level annual payments for the life of the bonds.

Level Tax Rate Attempts to result in a level annual tax rate over the life for the bonds* * Based on assessed value projections.

Stepped Level Tax Rate Allows for the issuance of future bonds

Bond Tax Rate Summary * Actual proceeds for CPF: $13,765,000 Interest Rates: Current rates plus 150 basis points Bond Rating: AA+ State Guarantee District Rating: A+ (Pending) Assessed Value Growth: Final 2017: 6.64% growth; Projected 2018-2039: 1.00% annual growth Scenario #7 #8 #9 #10 Authorization Amount $28,600,000 $32,600,000 Bond Sale Dates and Amounts $14,300,000 $16,300,000 $14,300,000* June 1, 2018 December 1, 2019 Bond Tax Rates Actual 2017 $1.52 Projected 2018 1.82 2019 3.17 3.60 2.87 2.66 2020 3.61 2.65 2025 2030 2035 Final Maturity 2039 2044 2049 Interest Cost $18,102,000 $20,565,000 $25,343,000 $33,197,000 Term 20 Years 25 Years 30 Years 2019 Bond Tax Rate increase over 2017 Bond Tax Rate $1.65 $2.08 $1.35 $1.14 * Actual proceeds for CPF: $13,765,000

Tax Rate Comparison

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