Financing Public Infrastructure Bonds or Public-Private Partnerships Gary Weir Katrielle Machida Zach Roberts

Community Faces a Challenge Government makes issue a priority Community Faces a Challenge Appropriate Interest Rate Assigned Based on CR Investment used as Capital for project Investors Purchase Bonds Bond is made available for investors Financial institution Creates/Broker Bond Funds Raised to Pay Investors Back Including Interest Bond Process Complete Project Built

http://alaska.municipalbonds.com/bonds/recent/

ALASKA STRENGTHS Very large cushion against revenue volatility in Constitutional Budget Reserve Fund (CBRF) and other funds Conservative fiscal practices, highlighted by use of 2008 oil revenue windfall to rebuild CBR Potential to transition over time to natural gas from oil production as primary revenue source ALASKA CHALLENGES Narrow economic base Political challenges to imposition of other significant revenue streams Relatively weak pension funding, although funding will be improved by reserve transfers WHAT COULD MAKE THE ALASKA RATING GO DOWN Sustained low oil prices relative to prior assumptions Accelerating decline in petroleum production volume Prospect that financial reserves will be fully depleted in the near term Use of non-recurring measures beyond financial reserve expenditures to achieve budget balance Current Alaska Ratings Moodys: Aaa Standard and Poors: AA+ (Downgrade) Fitch: AAA

Bond Pros Provide communities with resources to develop and make improvements for current public use. Exempt from federal and state taxes. If a community has a high credit rating, then they can get a low interest rate. Bond Cons Federal government loses revenues from tax exemptions Burden placed on tax payers (property owners) Requires consensus from voters.

Alaska Municipal Bond Bank Authority Established in 1975 Independent from the State of Alaska Sells bonds on the markets Helps communities get good rates for bonds In the past 10 years, $112 million has been saved by communities across Alaska AMBBA is administratively supported by Department of Revenue staff, a board of five directors who determine the Bond Bank’s actions such as setting interest rates and approving loans. The AMBBA is Independent and separate from the State of Alaska, although the governor appoints three private sector board member and the other two board members are the Commissioner of Revenue and the Commissioner of Commerce, Community & Economic Development (or their assigned representatives).

The Bond Bank Has funded projects in the following communities: City of Kaktovik City & Borough of Yakutat City of Wrangell City of Wasilla City of Kodiak City of Ketchikan City of King Cove City of Sand Point City of Homer Haines Borough City of Petersburg Kenai Peninsula Borough City of North Pole Bristol Bay Borough City of Dillingham City of Cordova Aleutians East Borough City & Borough of Sitka City of Adak City of Bethel Lake & Peninsula Borough Municipality of Anchorage City of Unalaska City & Borough of Juneau City of Craig City of Kenai City of Nome Fairbanks North Star Borough Ketchikan Gateway Borough City of Galena City of St. Paul Inter-Island Ferry Authority City of Palmer City of Fairbanks City of Seward City of Valdez Municipality of Skagway City of Hoonah Northwest Arctic Borough Matanuska-Susitna Borough City of Soldotna Kodiak Island Borough 2014, the AMBBA had funding projects in 21 cities and Boroughs across Alaska plus the Inter-Island Ferry Authority.

TODAYS REALITY Taxpayers and Municipal budgets are maxed out Growth in school-aged population creating overburdened facilities Traditional means of increasing funds is frowned upon The quality of public schools has a direct effect on the municipality’s desirability as a place to live

April 5th 2016 ASD Bond $49.3M Proposed True Cost of Borrowing - $84.8M $15,000 – Agency Fees $154,300 - Bond Issuance Cost $25.7M - Interest

Public-Private Partnership Defined A method of development that uses private capital, public interest and improvement, and combined risk and responsibility in order to deliver projects that would otherwise be beyond the reach of the public. Agreements involve a government agency contracting a private company to renovate, construct, etc. Public agency typically maintains ownership, private agency is given additional decision rights to determine how the project will be completed.

The History of PPP’s 1990: UK needed a way to increase public infrastructure without increasing the budget Have grown rapidly, worldwide since their inception Successful projects include: Bridges, dams, roads, power-plants, re- development of downtowns, mixed use- development, public garages, schools, airports, and city halls

Pros/Cons PROS CONS No campaign process like a municipal bond No spending cuts to social programs or tax increase Significant savings and reduced delivery time Risk is shared = better quality built Growing pains are still being learned Significant investment capital limits the amount of private companies that can bid Short-term political attractiveness - Cronyism

Niagara Falls SD Issue Two unsustainable high schools – bags collecting rainwater in the hallway from the asbestos filled ceiling 44,000 industrial jobs lost over 35 years New schools needed – decreasing tax revenue

Niagara Falls SD Solution Developed a 6 entity Public-Private Partnership Form a SPDC Assign responsibilities Sell Certificates of Participation to raise $83M Author a plan for the SD to take ownership of the new school

The New Niagara Falls High School Community Pride Houses 2,400 students Each student issued a laptop Performing Arts Center High amp amphitheater Spacious gymnasium Olympic size swimming pool Indoor walking track Student Pride Student run educational access television station Extensive internship program offered to H.S students in hospitals and banks Student donated over 130 pints of blood to celebrate a librarians birthday Students organized a fly-over with local ANG units as a commemoration to 9/11

Private-Public Partnership at UAF Wood Center

Conclusion The Time for Alternative Financing is here Bonds have their time and place Benefits of Public-Private Partnerships Reduced construction time Newer technology/More Environment friendly Maximize land potential