1. Texas Military Preparedness Commission
Revolving Loan Fund
23 February 2006
Texas Military Preparedness Commission
Office of the Governor

2. Texas Military Preparedness Commission
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)
Texas Military Preparedness Commission
Office of the Governor

3. 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 Commission
Office of the Governor

4. 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
Texas Military Preparedness Commission
Office of the Governor

5. Texas Military Preparedness Commission
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
Texas Military Preparedness Commission
Office of the Governor

6. Texas Military Preparedness Commission
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
Texas Military Preparedness Commission
Office of the Governor

7. 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

8. Texas Military Preparedness Commission
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)
Texas Military Preparedness Commission
Office of the Governor

9. Program Mechanics $ A B C D INVESTORS TPFA TMPC TPFA Bonds
Bond Proceeds
TMPC
LOANS A B C D
Loans

10. Program Mechanics A B C D INVESTORS TPFA TMPC Debt Service
Loan Payments
TMPC
Loan
Repayment A B C D
Loans

11. 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

12. Example of Debt Service Savings
Tax Exempt: $20M for 20 years
Rating
Interest
Rate1
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
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

13. 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

14. 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

15. 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

16. Other Costs
TMPC Application fee: $ 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

17. Example Costs of Issuance Allocation
Loan Amount
% of Total
Pro Rata COI
Borrower A
$5,000,000
25%
$50,000
Borrower B
$10,000,000
50%
$100,000
Borrower C
$4,000,000
20%
$40,000
Borrower D
$1,000,000 5%
$10,000
Total
$20,000,000
100%
$200,000
Bond Counsel
Financial Advisor
Rating Agency Fees
Official Statement printing and distribution
Miscellaneous

18. 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
$200,000

19. Example Debt Service Schedule

20. Example Debt Service Schedule

21. Consult your bond counsel and financial advisor.

22. Texas Military Preparedness Commission
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)
Texas Military Preparedness Commission
Office of the Governor

23. 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

24. Texas Military Preparedness Commission
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)
Texas Military Preparedness Commission
Office of the Governor

25. Proposed Timeline: Date Action April 3, 2006 Letters of Interest Due
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

26. 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

27. Questions? Primary Points of Contact: Applications and Timeline
Al Casals – (512)
Finance Questions
Kim Edwards – (512)
Credit Questions
Piper Montemayor – (512)