Transcript Slide 1

Greenville County Schools
An Alternative Approach to Financing
and Delivery of a Capital Program
October 7, 2007
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Greenville County School District, SC
• 2006-2007 membership- 66,682
• District covers 800 square miles
• 54th largest school district in the US
and growing
• 94 Schools
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Elementary – 47
Middle – 17
High – 14
Career / Technology – 4
Child Development – 5
Special Centers - 7
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This is Greenville…
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But this is ALSO Greenville….
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The Growing Facilities Problem
• In November of 1998, almost 10,000 of the 61,000 students
in Greenville County were in “temporary” classrooms
• Growing by around 1000 students per year
• Lunch began at 10:30 with 3 shifts, only ½ students had
seats in each shift
• Most of the 83 schools were old and in desperate need of
repair or replacement
• Inflation was growing faster than their ability to pay
• 2 failed referenda
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SDGC LRFP…What happened?
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The Baby Boom Schools got old
Tax Cut Fever
Parents became focused on Education
Mold • Asbestos • Lead Paint • Plaintiffs’ Lawyers
Baby Boom Echo
Tax Cut Fever #2
In-Migration
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Impact of Inflation
The same 1,000 student school:
1995 Cost = $6,000,000
2001 Cost = $11,500,000
(a real cost increase of 14% per year)
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SDGC Long Range Building Plan
• 1993 cost to cure = $336,000,000
– annual expenditure $30,000,000
• 1997 cost to cure = $554,000,000
– annual expenditure $40,000,000
• 1999 cost to cure = $712,000,000
– annual expenditure $65,000,000
• 2002 cost to cure = $783,000,000
• Debt Situation
– Constitutional Debt Limit = $100,000,000
– Existing Debt = $100,000,000
• Projected to take 28+ years to complete LRFP
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Property Tax Increases (1990-2000)
90
70
Tax Rate
60
50
40
30
20
14
10
14
13
12
12
12
11
10
10
10
10
8
6
4
2
0
0
1990
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1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Years to completion
-----------------------Reassessment------------------------
80
14
The Bottom Line
“An analysis of the district's long-range facilities plan
last year showed that the district might never have
been able to complete the remaining schools with
conventional financing, and construction costs would
have topped $1.4 billion instead of the $800 million
projected by Institutional Resources.”
Greenville News, May 21, 2002
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The Perfect Storm
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Confluence of factors made a solution possible
A champion on the board of trustees
An administration willing to take the chance
A motivated group of minds from the private sector
A community fed up with the decaying schools AND
rising taxes
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The Plan
• “Equal” school facilities across the district
• Fund all construction now through innovative use of
installment purchase bonds
• Maintain millage at or below 42.5 mills by using
conservative growth assumptions in tax revenue
• Complete the program in 5 years
• Leverage economies of scale in design, procurement and
construction to achieve cost savings
• Allow the District to use a 5 year planning horizon
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Installment Purchase Revenue Bond Structure
School District
Creates Non-Profit Issuer
(63-20 Corporation)
Non-Profit Corporation
Issuer
Purchase Bonds $$
Bondholders
Debt Service
Installment Purchase
Revenue Bonds
Proceeds
to School
Construction
Annual GO
Issuance
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Bond Proceeds
Labor Forecast- LRFP
Construction Personnel Forecast – Direct Labor – Current LRFP
CHART IIIb.1(E)1A
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Labor Forecast- Recommended
Construction Personnel Forecast – Direct Labor – Recommended InRe Plan
CHART IIIb.1(E)1B
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The Reality
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Implementation was delayed by lawsuit
First school groundbreaking in March 2002
Construction cost escalation impacted budgets
Program converted from 2/3 renovate and 1/3 new to 2/3
new and 1/3 renovate
• Assessed value of property and tax revenues grew faster
than expected
• Funds from additional growth were used to pay for “growth”
schools
• Expected completion of program mid-2008 (7 years versus
projected 5)
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Construction Cost Escalation Impacts Total Budget
4600
4000
Actual timeframe to let contracts
4400
3500
Orginal expected timeframe to let contracts
4200
3000
4000
2500
Materials Cost
Index
3800
2000
3600
Building Cost
Index
Source: Engineering News Record
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7/1/2006
4/1/2006
1/1/2006
10/1/2005
7/1/2005
4/1/2005
1/1/2005
10/1/2004
7/1/2004
4/1/2004
1/1/2004
10/1/2003
7/1/2003
4/1/2003
1/1/2003
10/1/2002
7/1/2002
4/1/2002
1/1/2002
10/1/2001
7/1/2001
4/1/2001
1/1/2001
10/1/2000
7/1/2000
4/1/2000
1500
1/1/2000
3400
Total Costs*
2041 Completion
$3.21 Billion
2007 Completion
$1.88 Billion
BEST Program
Best Program
Installment Purchase
“Pay As You Go”
Traditional Financing 5% inflation
5% Inflation
*Source- Greenville County School District
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2052 Completion
$4.982 Billion
“Pay As You Go”
Traditional Financing 6% inflation
6% Inflation
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Other Highlights
• Community brainstorming sessions yielded 528
documented suggestions of which 418 were
implemented
• Minority participation increased 9 times over
previous construction programs
• “Mass customization” through development of
automated, district-wide ed specs customized for
each school’s curriculum and programmatic needs
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Other Highlights (cont.)
• Development of comprehensive, district-wide design guide
• Innovative techniques and technologies to reduce future
maintenance, operations or capital renewal expenditures
• “Green Schools” implemented
• Long-term maintenance plan and forecasting system
developed
• All school design, warranty and maintenance
documentation electronically captured and stored in an
online retrieval system
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Prototype Design
Mountain View ES
Simpsonville ES
Blythe ES
Robert E. Cashion ES
Paris ES
Thomas E. Kerns ES
Sue Cleveland ES
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Southeast Area ES
Cherrydale ES
Monaview ES
Tax Millage Used for Greenville Plan
Where it Will Go if 5 Yr. Reassessments
& Growth Match the Last 10 Years
80
70
60
50
40
30
20
10
14
0
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Tax Revenue Impact
300,000,000
250,000,000
Total Value 42. 5 Mils
(1)
Value of 42.5 mils.
200,000,000
150,000,000
Total Funds "Requested" for Program by InRe
(2)
100,000,000
Capacity Reserved By SDGC
50,000,000
Funds Required for $800 Million BEST Bonds Debt Service
0
2002
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2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Wall Street Reaction
“The associated Standard & Poor’s underlying rating upgrade on Greenville County School
District, SC’s GO bonds to ‘AA’ from ‘AA-’ reflects the district’s addressing of its unmet and
significant capital needs by the issuance of the $800 million installment purchase revenue
bonds, issued through BEST Corp. Prior to this issuance, the district was hampered by a
restrictive, unvoted GO bond debt limit that seriously hindered its ability to effectively
address, on a timely basis, its capital requirements.”
Standard & Poor’s – March 11, 2002
“Moody’s Investors Service has upgraded the Greenville County School District general
obligation underlying rating to Aa3 from A1. The rating upgrade affects $95 million of debt
and is based on Moody’s belief that the district’s plan for funding its sizable capital program
will result in a manageable debt burden while addressing pressing long term capital needs.”
MANAGEABLE DEBT POSITION EVEN WITH SIZABLE BORROWING PLAN
“Moody’s believes that the district’s plan to issue $760 million of Installment Purchase
Revenue bonds through a non-profit entity will enable the school district to address pressing
capital needs without placing significant fiscal constraint on the district”
Moody’s Investors Service – August 22, 2001
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The Domino Effect
School District
Capital Needs
Results
Dorchester 2, SC
$132 million
Financed construction of 4 new schools, 6 renovations,
and 2 site acquisitions to meet growing enrollment. The
district was able to maintain the same tax millage and
received a credit rating upgrade.
Berkeley, SC
$230 million
Financed construction of 3 new schools and 7 additions
and renovations while reducing millage by approximately
10%. $18 million in funds added to program from interest
earnings.
Lancaster, SC
$39 million
Financed construction of new schools for rapidly growing
Indian Land area. Avoided 13.5 mill increase to fund
existing debt and received ratings upgrade.
Newberry, SC
$84 million
Financed 2 new schools, 7 additions and renovations, and
additional technology. Maintained millage below their 56
mill self-imposed cap.
Laurens, SC
$16 million
Financed construction of high school wing and the
replacement of primary school. Maintained millage.
Fort Mill, SC
$84 million
Financed 2 new elementary schools, additional wing at
new high school, athletic facilities and technology
upgrades. Maintained millage.
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Can This Be Accomplished Elsewhere?
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This May Never be Done Again, but if you want to try:
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Have political courage
Assemble a great team
Clearly demonstrate and quantify needs
Identify revenue source to pay for those needs with
reasonable assumptions (including savings to be
realized from program)
• Develop a financing alternative that is cost effective
Time = Money
• Persevere, persevere, persevere
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Questions/ Comments
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Contact Information
Didi Abi-Arrage
President, In Re Financial, LLC
Tel. 864-918-3816
30 Patewood Drive, Suite 200
Greenville, SC 29615
[email protected]
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