1. Funding Considerations September 17, 2015

3. 1. General Obligation Bonds 2. Building Reserve Levy 3. Intercap Loan Factors to consider when selecting a funding mechanism:  Urgency of need of funding (immediate or future)  Funding resources (eligible for state aid)  Election requirements  Cash flow of resources  Term limits on debt  Spending restrictions  Dollar limits on debt  Payment schedule

4. Intercap LoanBuilding Reserve LevyGO Bonds Immediate/Emergency need for funding No immediate need for fundingImmediate need for funding Not eligible for facility reimbursement Eligible for facility reimbursement Election not required under certain circumstances Election required Full or partial cash drawsSet amount of cash received over time All cash is received at one time Maximum term of 15 yearsMaximum term of 20 years Loan repayment can be made from any legally available fund Financial transactions are made from building reserve fund only Project costs are made from building fund. Debt payments are made from debt service fund Debt capacity limitations applyDebt capacity limitations do not applyDebt capacity limitations apply Dollar amount limited for real property and new construction, as well as debt capacity Dollar amount is limited to debt capacity Principal and interest payments made bi-annually. Adjusted interest rates No principal or interest paymentsInterest payments made bi- annually. Principal payments made annually

5.  Eligible Districts:  District mill value per ANB is less than the corresponding statewide mill value per ANB  Eligible Debt:  General Obligation Bonds

6.  School Facility Entitlements:  $300 per ANB for Elementary  $370 per ANB for approved and accredited Junior High or Middle School  $450 per ANB for High School  State share of entitlement: (1-(district mill value per ANB/Facility guaranteed mill value per ANB))  School Facility Reimbursement:  State share of entitlement times the lesser of the total facility entitlement or the district current year debt service obligation

7. In the first year of an eligible bond, an eligible district will receive both an advance and a reimbursement. No GTBA is paid on the bond in the final year. Districts only budget for the advance in the first year, not the reimbursements. 1 st Year Budget Actual Subsequent Years Budget Actual Final Year Budget Actual Advance Property Taxes Fund Balance Reapprop. Facility Reimb. (Debt Payment) Fund Balance = 0 Fund Balance = Facility Reimb. Fund Balance = 0 Fund Balance = Facility Reimb. Fund Balance = 0

8. The amount available for facility reimbursements/advances is subject to:  the appropriation by the State Legislature each biennium  the amount of cash available in the school facility and technology special revenue account Within the available appropriation, the OPI first distributes the state advances. From the remaining appropriation, the OPI distributes state reimbursement for school facilities. If the legislative appropriation for the state reimbursement for school facilities is less than the school facility entitlement amount for which districts qualify or if the cash available in the special revenue is less than the entitlement amount, the OPI will prorate the state reimbursement based on total amount for which districts qualify. Whenever the state reimbursement is prorated, the prorate percentage is applied to the state advance in the ensuing year.

10.  House Bill 373 ~ Doubles Debt Capacity Limitations for Schools.  Senate Bill 157 ~ Generally Revises Tax Reappraisal Laws.  House Bill 114 ~ Treatment of Tax Increment Revenues.

11.  Select Project Team.  Traditional Low Bid Delivery of Project.  Energy Performance Contracts.  Alternative Project Delivery Contracts.  Design-Bid  General Contractor Construction Management  Other  Have Owner’s Representative?  Include Costs in Budget  Using In-house Expertise.

12. Source: Thomson Reuters

13. General Obligation Bonds "AAA""AA""A""BAA" 12016 0.230.270.390.78 22017 0.590.650.781.29 32018 0.860.951.111.62 42019 1.121.231.451.94 52020 1.331.461.712.18 62021 1.611.762.042.51 72022 1.801.982.272.73 82023 1.932.132.452.88 92024 2.052.262.593.02 102025 2.162.372.723.14 112026 2.282.502.863.26 122027 2.372.602.963.35 132028 2.462.703.073.45 142029 2.552.793.173.55 152030 2.632.873.253.63 162031 2.712.953.333.71 172032 2.763.003.383.77 182033 2.813.053.433.82 192034 2.853.093.473.86 202035 2.883.123.503.89 212036 2.923.163.543.93 222037 2.953.193.573.96 232038 2.983.223.603.99 242039 3.013.253.634.01 252040 3.043.283.664.04 Source: Thomson Reuters

15. Source: Department of Revenue

16. Effective January 1, 2015, the tax rates in the following table apply to the property classifications shown until January of 2017, when any new changes may be implemented statutorily. The taxable value is calculated by applying the tax rate to the appraised market value of property, which is then multiplied by the number of mills levied by each taxing jurisdiction to calculate the taxes payable by each property owner. __________________ 1 The tax rate for the portion of the assessed value of a single-family residence in excess of $1.5 million is equal to the residential tax rate multiplied by 1.4. 2 The tax rate for commercial property is the Residential Tax Rate multiplied by 1.4. Class Four Tax Rates Applied to “Assessed Value” to Calculate “Taxable Value” Effective January 1, 2015 (Fiscal Years 2015/16 & 2016/17) Residential Property Commercial & Industrial Property Residential Tax Rate Portion of Assessed Value in Excess of $1.5 million Commercial Tax RateGolf Courses 1.35%1.89% 1 1.89% 2 0.945%

17. Prior to January 1, 2015, Class Four property was subject to a six-year reappraisal cycle and the Legislature, in an effort to prevent large property tax increases resulting from the periodic statewide reappraisals, provided for the phase-in of increases in valuation, less the amount exempted, and the phased-in tax rate reduction, which are shown in the table below. - - - Prior Tax Rates Effective January 1, 2009 through December 31, 2014 - - - Information to Calculate Annual Taxable Value for Class Four Property Resulting from the Last Six Year Cycle Reappraisal Annual (Cumulative) Phase-In Amount of Reappraisal Value Annual Exemption Applied to “Phase-In Value” to Calculate “Taxable Market Value” Tax Rate Applied to “Taxable Market Value” to Calculate Tax Year ResidentialCommercial“Taxable Value” 2014/15 16.67% (100.02%)47.0%21.5%2.47% 2013/14 16.67% (83.35%)45.520.32.54 2012/13 16.67% (66.68%)44.019.02.63 2011/12 16.67% (50.01%)41.817.52.72 2010/11 16.67% (33.34%)39.515.92.82 2009/10 16.67% (16.67%)36.814.22.93

19. Below are the assessed, taxable market and taxable valuations of real and personal property located within the Billings Elementary District for the fiscal years shown. __________________ 1 Fiscal year 2015/16 assessed valuation is based on the current reappraisal effective January 1, 2015. 2 Taxable Market Valuation is no longer available commencing in 2015/16. The 2015 Legislature eliminated the calculation to determine Taxable Market Valuation by eliminating the homestead and comstead exemptions, which exemptions were applied to assessed valuation of applicable property to determine the Taxable Market Valuation of such property. 3 Fiscal year 2009/10 was the first year for the prior six-year valuation cycle where the 2009 reappraisal amounts were used to determine taxable value. Fiscal Year Assessed Valuation 1 Percent of Change Taxable Market Valuation 2 Percent of Change Taxable Valuation Percent of Change 2015/16$11,650,594,23511.67%-----$194,587,61411.04% 2014/1510,433,356,8480.44$6,572,130,5351.81%175,238,139(1.99) 2013/1410,387,538,6961.736,455,299,3034.89178,803,1781.57 2012/1310,211,165,3630.596,154,532,5252.83176,034,060(0.55) 2011/1210,151,163,7350.885,985,087,23812.18177,014,5091.03 2010/1110,062,184,3982.086,623,402,263n/a175,218,2964.52 2009/10 3 9,856,792,513n/a5,335,244,0574.33167,648,0900.98 2008/09n/a 5,114,046,567(6.99)166,020,0275.35 2007/08n/a 5,498,218,9647.59157,587,8406.48 2006/07n/a 5,110,110,5787.03147,991,0323.36 2005/06n/a 4,774,317,5636.65143,178,9314.41 2004/05n/a 4,476,606,150n/a136,732,413n/a

20.  Low-interest Loan Program  Variable Interest Rate  Rates change every February 16  Average rate over last 15 years: 2.85%  Current rate: 1.25%  15-year Loan Term or useful life of project  187 different school districts have utilized INTERCAP  Over 300 school loans for $42 million have been financed  10% of our $77 million portfolio is with schools www.investmentmt.com

21.  20-9-471 MCA – Schools may finance through INTERCAP without a vote for the following…  New and used vehicles and equipment  Remodel or Renovate within existing walls  Energy retrofit projects  Cash-flow purposes  New construction and purchase of real property must be voter-approved  Finance using  General Obligation Bonds  Building Reserve Fund Loan  General Fund Loan www.investmentmt.com

22. General Obligation Bonds  Title 20 Chapter 9 Part 4 MCA  15-year term or useful life of the project, whichever is less  Must be within District’s legal debt limit  Provide copy of Resolution calling for bond election 20-9-421 and 20-20-201 MCA  Copy of the Ballot  Notice of Election Include when and where it was posted and published  Copy of Certificate of Election  Bond Counsel required at borrower’s expense www.investmentmt.com

23. Building Reserve Fund Loans  Title 20 Chapter 9 Part 502 MCA  Statute sets a 5-year limit for pledging the fund  Loan maturity date will match levy expiration  For loan to be repaid with NEW levy, provide: Copy of Resolution calling for the election Copy of ballot, notice of election, where and when posted/published and certificate of election  For loan to be repaid with an EXISTING levy, provide: Copy of Resolution calling for the election Previous and current years’ balance sheet and income statements for the building reserve fund Next year’s budget for the building reserve fund www.investmentmt.com

24. General Fund Loans  Title 20 Chapter 9 Part 471 MCA  15-year term, or useful life of project  Equipment, vehicles, renovation within existing building Provide previous and current years’ balance sheet and income statements for general fund  New construction and real property acquisition Election information New portion of building cannot constitute more than 20% of existing square footage 20% square footage limitation may not be exceeded within any 5-year period

25.  Funds always available – no deadlines  100% financing  No up-front costs  No pre-payment penalty  Variable interest rate – currently 1.25%  Maximum loan amount depends on legal debt authority  Loan term maximum is 15 years, the useful life of the project, or other statutory limit  Application on website www.investmentmt.com  Under $1 million, staff approved  Over $1 million, Board of Investments Loan Committee approved at quarterly meeting www.investmentmt.com

26. Montana Board of Investments Bond Program Office Louise WelshJulie Flynn Sr. Bond Program OfficerBond Program Officer lwelsh@mt.govjflynn2@mt.gov (406) 444-0891(406) 444-0257 www.investmentmt.com