1. BOARD MEMBER’S GUIDE TO CAPITAL FACILITY PLANNING OPTIONS FOR A SCHOOL DISTRICT 1

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3. How Should We Finance? Address your capital facilities needs with:  General Obligation Bond Initiative  Lease Certificates of Participation 3

4. General Obligation Bond Issue Basics A means of legally borrowing for the long term Election required MonthsEVEN numbered yearsODD numbered years February (Bonds only)2/3 April4/7 August4/72/3 November4/72/3 4

5. General Obligation Bond Issue Basics Full faith and credit of issuer  Legal obligation to levy taxes sufficient to retire debt General Obligation Bonding capacity restricted to 15% of Assessed Valuation Lower interest rates and lower costs of issuance than lease financings 5

6. Working Towards No-Tax Increase General Obligation Bond Issue Proposals Form C Calculation Prepay existing bonds  Maintain the levy  Save on interest expense 6

7. Lease Certificates of Participation Basics Another means of legally borrowing money for the long-term No election required unless an increase in the operating levy is necessary  In the case of an operating levy increase, only simple majority voter approval is required. However, if the new total operating levy ceiling exceeds $6.00, then two-thirds is necessary. 7

8. A public hearing must be conducted for any new project  Published twice in the local newspaper with the second publication occurring at least seven days prior to the hearing Consideration of Project Pursuant to Section 177.088, Revised Statutes of Missouri, as amended Notice is hereby given to those persons residing within the ________ School District, Missouri (the “District”) that a public hearing will be held on October 20, 2016 commencing at 6:30 p.m. in the Administration Office for the purpose of considering a capital facilities lease financing through the Missouri Association of Rural Education to provide funds for security upgrades including door replacement, fencing, radios, cameras, overhead gates, and network access controls; and other repairs and improvements to the existing facilities of the District, pursuant to Section 177.088, Revised Statutes of Missouri, as amended. Lease Certificates of Participation Basics 8

9. Annual lease payments are paid out of Fund 4  Sources of revenue include a capital project’s levy, classroom trust funds, or 7.00% allowable transfer Proceeds are maintained by trustee (construction fund does not appear on the District’s books) Size of financing is restricted by the ability to pay  Lease payments cannot be available for budget cuts Lease Certificates of Participation Basics 9

10. Annual payments are subject to appropriation by the Board of Education (even if a levy received voter approval) Results in slightly higher interest rates and costs of issuance compared to General Obligation Bonds Lease Certificates of Participation Basics 10

11. BondsLeases Election Required No election required unless an operating levy increase is necessary 4/7 or 2/3 voter approval, depending on election date Simple majority voter approval if election is required Dedicated levy towards repayment of bonds - minimal impact on operating fund Limited flexibility to meet annual payments if operating revenue is cut Size of financing restricted to bonding capacity Size of financing only restricted by District’s ability to pay Lower cost of issuance Higher cost of issuance Lower rates of interest than lease financings Slightly higher interest rates than general obligation bonds Bond vs. Lease Summary 11

12. Election Results 2016 L.J. Hart & Company results: No tax increase proposals: 100% passage rate (19/19) Tax increase proposals: 44% passage rate (11/25) 2015 L.J. Hart & Company results: No tax increase proposals: 95% passage rate (18/19) Tax increase proposals: 50% passage rate (12/24) 2014 L.J. Hart & Company results: No tax increase proposals: 93% passage rate (38/41) Tax increase proposals: 57% passage rate (17/30) 12

13. Credit Ratings Credit ratings are rating agencies’ opinions on the issuer’s willingness and ability to meet its financial obligations in full and on time One of several tools that investors can use when making investment decisions Provides lower rates of interest on financing Expands market of investors 13

14. Credit Ratings for G.O. Bonds State of Missouri Direct Deposit Program AA+ rating by Standard & Poor’s Corporation The State of Missouri pays the Direct Deposit Program rating fee  District must still pay for an underlying rating 14

15. Credit Ratings for LCOP 2016 S&P Rating Fee Schedule Par Amount <$1M$1-2M$2-5M$5-10M$10-15M Rating Fee $10,000$11,500$12,000$16,000$19,500 Not eligible for the Missouri Direct Deposit Program District must pay a fee to obtain the credit rating Credit assessment path to determine the viability of a strong credit rating 15

16. Standard & Poor’s Ratings Ratings of A- and higher are typical of Missouri School Districts 16

17. Financial Management Policies that Influence Creditworthiness Economic Changes (including major employers and taxpayers) Enrollment Trends Budgeting (methodology, amendments, and updates) Long-Term Financial Planning Long-Term Capital Planning Investment Management Policies Debt Management Policies Reserve and Liquidity Policies 17

18. Building Planning Process Short-term Plans Long-term Plans 18

19. Develop Your Base Administration  Immediate awareness  Encourage participation Board of Education  Awareness of facts to properly answer voter questions  Long Range Planning Committee present report with public recommendation 19

20. Steering Committee Members  Current Board members  Former Board members  Influential community members (Clergy, Bankers, Lawyers, Doctors, etc.) Sub-Committees  Finance  Phone  Advertising  Public Relations 20

21. L.J. Hart & Company Missouri School District Clients 1992-Present Staffed to Serve Your Needs (636) 537-9939 or (800) 264-4477 21