Georgia Fiscal Management Council Annual Training Conference October 2017 Georgia State Financing and Investment Commission

Our Role General Bond Info Compliance

HI AK FL MI ME NY PA VA WV OH IN IL WI NC TN AR MO GA SC KY AL LA MS IA MN OK TX NM KS NE SD ND WY MT CO ID UT AZ NV OR WA CA VT NH MA NJ DE MD CT RI

12 Triple-A Rated States by all 3 Rating Agencies HI AK FL MI ME NY PA VA WV OH IN IL WI NC TN AR MO GA SC KY AL LA MS IA MN OK TX NM KS NE SD ND WY MT CO ID UT AZ NV OR WA CA VT NH MA NJ DE MD CT RI 12 Triple-A Rated States by all 3 Rating Agencies Issuer Credit Rating (No Outstanding G.O. Debt): IN, IA, SD, TX

GEORGIA STATE FINANCING AND INVESTMENT COMMISSION Construction Division Financing & Investment Division Constitutional Amendment in 1972 GEORGIA STATE FINANCING AND INVESTMENT COMMISSION “GSFIC”

CAPITAL PROJECT NEEDS WHY BONDS?

Annual Debt Service Payment DEBT SERVICE RATIO Annual Debt Service Payment 10% Prior Year’s Revenues

5.9% 8.1% 5.5%

$767,565,000 General Obligation Bonds 2017A $1,389,645,000 State of Georgia   $767,565,000 General Obligation Bonds 2017A $273,450,000 General Obligation Bonds 2017B (Federally Taxable) $348,630,000 General Obligation Refunding Bonds 2017C

www.emma.msrb.org 373383 373384 373385

WHAT IS THE PROCESS? APPROPRIATIONS BILL GOVERNOR’S BUDGET REPORT Agency Strategic Plan CAPITAL FUNDING NEEDS BUDGET DISCUSSIONS

Section 50 General Obligation Debt Sinking Fund FY 2018 Appropriations Bill University System of Georgia, Board of Regents 348.210 BOND: Georgia Gwinnett College: $11,500,000 in principal for 20 years at 5.77%: Fund construction of Phase IV addition to Academic Building C, Georgia Gwinnett College, Lawrenceville, Gwinnett County. From State General Funds, $984,400 is specifically appropriated for the purpose of financing projects and facilities for the Board of Regents of the University System of Georgia by means of the acquisition, construction, development, extension, enlargement, or improvement of land, waters, property, highways, buildings, structures, equipment or facilities, both real and personal, necessary or useful in connection therewith, through the issuance of not more than $11,500,000 in principal amount of General Obligation Debt, the instruments of which shall have maturities not in excess of two hundred and forty months. This slide gives an example of a bond authorization. We look to 2 documents – the appropriations or budget bill and the tracking document. The appropriations language often states a general purpose whereas the tracking document is more specific. Principal amount is the maximum project amount. There are those unfortunate times when bids come in over this maximum project amount which requires scope modification or delay of project until additional funding is acquired. Maximum debt service amount – this amount is important to us because it translates into a maximum interest rate that we are authorized to fund the project. The state agency - the recipient of the bond proceeds The maximum term of the bonds. Generally the state sells 5-year and 20-year bonds. And finally – the purpose of the authorization. As shared earlier – the appropriations language is often more general which gives us flexibility to use the bond proceeds for various purposes without requiring additional legislative approvals. In this example the $52 million is to be used for facility major improvements and renovations. If the Board of Regents wanted to use some of this money to purpose property they would need to request a redirection of bond proceeds – which I’m sure you’re all familiar with; we’ll go into more detail later in this presentation.

Fiscal Year 2018 Appropriations Bill Agency Type Amount Authorized Percent Higher Education $ 395,025,000 34% K-12 Education 252,325,000 22% Public Safety 131,230,000 11% Economic Development and Water/Sewer 111,850,000 10% Transportation 110,020,000 9% Health Related Agencies 18,210,000 2% Other 147,555,000 13% Total Authorizations $ 1,166,215,000

New Vertical Construction Fiscal Year 2018 Appropriations Bill Bridges – 9% - $100MM Remaining – 6% - $72MM IT Systems – 3% - $31MM Equipment – 2% - $26MM Rail Projects – 1% - $8MM Land Acquisition – 0.4% - $5MM Transit – 0.2% - $2MM Grants 22% $256MM New Vertical Construction 39% $460MM MRR 24% $278MM TOTAL: $1.166 BILLION

WHAT CAN BE FUNDED WITH BOND PROCEEDS? STATE LAW REQUIREMENTS

WHAT CAN BE FUNDED WITH BOND PROCEEDS? STATE LAW REQUIREMENTS PROPERTY OF THE STATE

WHAT CAN BE FUNDED WITH BOND PROCEEDS? STATE LAW REQUIREMENTS PROPERTY OF THE STATE CAPITAL ASSET In general, an outlay must be capitalizable to be reimbursed from bond proceeds, but not every capitalizable outlay will be approved for reimbursement.

WHAT CAN BE FUNDED WITH BOND PROCEEDS? STATE LAW REQUIREMENTS PROPERTY OF THE STATE CAPITAL ASSET USEFUL LIFE In general, an outlay must be capitalizable to be reimbursed from bond proceeds, but not every capitalizable outlay will be approved for reimbursement. Operational expenditures may not be paid from bond proceeds.

Non-Eligible Operational Expenditures Eligible Projects Non-Eligible Operational Expenditures Owned by the State Capital Asset Useful Life Personal Services Land/Property Acquisitions Lease Payments Land Improvements Disposable Items Construction of new buildings Office Supplies Major Renovations of existing buildings Maintenance Agreements for copiers/computers Professional services related to construction/renovations Annual License Agreements for software When in doubt – PLEASE ASK (Sooner is better than later)

TAX-EXEMPT Vs. TAXABLE?

TAX-EXEMPT Vs. TAXABLE? Project Spend-Down

85% 100% 5% Project Spend-Down Expensed Only TAX-EXEMPT Vs. TAXABLE? 6 Months 5% Encumbered 3 Years 85% 5 Years 100% Expensed Only

85% 100% 5% Project Spend-Down Use of Project/Facility Expensed Only TAX-EXEMPT Vs. TAXABLE? Project Spend-Down Use of Project/Facility 6 Months 5% Encumbered 3 Years 85% 5 Years 100% Expensed Only

Notify GSFIC as early as possible in the planning process PRIVATE BUSINESS USE Lease of space in the facility Management or Service Contract Research Contracts Use of space by the Federal Government Naming rights Notify GSFIC as early as possible in the planning process

BOND ISSUANCE PROCESS BOND SALE Project List Project Requests OPB and GSFIC Approval Project Requests Agency submissions and certifications eBonds System Bond Authorizations After the passage of an appropriations bill, bond authorizations are entered in GSFIC’s eBonds system. This provides data for agencies to help submit what projects they want funded in the next bond sale. We work with GSFIC and OPB to determine which projects to approve for the sale and then our Finance team puts together a bond sale. Because of the state’s high credit ratings we are able to sell our bonds competitively. Bids are received through an electronic platform and awarded on an all or none basis. Members of the Commission meet to approve the bids and provide the official award. This usually happens the morning following the day bids have been received.

Gsfic.georgia.gov

QUESTIONS?