Strictly Private and Confidential
$9,500,000 - General Obligation School Building Bonds, Series 2014
August 14, 2014
Gadsden Independent School District No. 16
2
Disclaimer
This presentation was prepared exclusively for the benefit of and internal use by the recipient for the purpose of considering the transaction or transactions contemplated herein. This presentation is confidential and proprietary to RBC Capital Markets, LLC (“RBC CM”) and may not be disclosed, reproduced, distributed or used for any other purpose by the recipient without RBC CM’s express written consent.
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3
History of Assessed Valuation
2010 2011 2012 2013 2014*
Residential $414,742,749 $418,843,096 $429,846,775 $444,769,473 $460,825,365
Non-Residential 334,064,333 338,275,688 370,439,960 378,480,422 406,913,945
Total $748,807,082 $757,118,784 $800,286,735 $823,249,895 $867,739,310
% Change Over Previous Year 5.7% 1.1% 5.7% 2.9% 5.4%
* Preliminary.Source: New Mexico Taxation & Revenue Department.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
$600,000,000
$700,000,000
$800,000,000
$900,000,000
$1,000,000,000
2010 2011 2012 2013 2014*
History of Assessed Valuation
Residential Non-Residential % Change Over Previous Year
4
New vs. Re-Appraisal
TY2013 New Re-Appraisal TY2014
Protested
Property
Est. Protested Value
Back on Tax Roles
% of
Protested
Estimated Final
Value
%
Growth
Total Residential $444,261,425 $11,877,398 2.67% $4,686,542 1.05% $460,825,365 3.73% $2,792,322 $279,232 10.00% $461,104,597 3.79%
Total Non-Residential 219,097,911 7,971,938 3.64% (5,192,732) -2.37% 221,877,117 1.27% 11,969,082 3,590,725 30.00% 225,467,842 2.91%
Total Assessor's Valuation $663,359,336 0.00% 0.00% $682,702,482 2.92% $14,761,404 $3,869,957 20.00% $686,572,439 3.50%
Central Assesment 163,639,459 185,036,828 13.08% 7,988,750 - 0.00% 185,036,828 13.08%
TOTAL AV $826,998,795 $0 0.00% $0 0.00% $867,739,310 4.93% $22,750,154 $3,869,957 20.00% $871,609,267 5.39%
Protested Property/ Total AV $22,750,154 2.62%
TY2012 New Re-Appraisal TY2013
Protested
Property
Protested Value Back
on Tax Roles
% of
Protested
Actual Final
Value
%
Growth
Total Residential $429,846,775 $12,785,724 2.97% $2,771,995 0.64% $445,404,494 3.62% $1,175,314 ($1,143,069) -97.26% $444,261,425 3.35%
Total Non-Residential 228,548,616 3,011,334 1.32% (17,417,052) -7.62% 214,142,898 -6.30% 4,772,969 4,955,013 103.81% 219,097,911 -4.14%
Total Assessor's Valuation $658,395,391 $15,797,058 2.40% ($14,645,057) -2.22% $659,547,392 0.17% $5,948,283 $3,811,944 64.08% $663,359,336 0.75%
Central Assesment 141,891,344 163,639,459 15.33% 9,044,646 - 0.00% 163,639,459 15.33%
TOTAL AV $800,286,735 $15,797,058 1.97% ($14,645,057) -1.83% $823,186,851 2.86% $14,992,929 $3,811,944 25.42% $826,998,795 3.34%
Actual Protested Property/ Total AV $11,180,985 1.36%
TY2011 New Re-Appraisal TY2012
Protested
Property
Protested Value Back
on Tax Roles
% of
Protested
Actual Final
Value
%
Growth
Total Residential $418,843,096 $7,017,707 1.68% $1,276,550 0.30% $427,137,353 1.98% $2,676,584 $2,709,422 101.23% $429,846,775 2.63%
Total Non-Residential 207,279,605 5,052,499 2.44% 9,327,308 4.50% 221,659,412 6.94% 9,249,180 6,889,204 74.48% 228,548,616 10.26%
Total Assessor's Valuation $626,122,701 $12,070,206 1.93% $10,603,858 1.69% $648,796,765 3.62% $11,925,764 $9,598,626 80.49% $658,395,391 5.15%
Central Assesment 130,996,083 141,891,344 8.32% 965,549 - 0.00% 141,891,344 8.32%
TOTAL AV $757,118,784 $12,070,206 1.59% $10,603,858 1.40% $790,688,109 4.43% $12,891,313 $9,598,626 74.46% $800,286,735 5.70%
Actual Protested Property/ Total AV $3,292,687 0.42%
TY2010 New Re-Appraisal TY2011
Protested
Property
Protested Value Back
on Tax Roles
% of
Protested
Actual Final
Value
%
Growth
Total Residential $414,742,749 $9,539,915 2.30% ($5,097,867) -1.23% $419,184,797 1.07% $927,880 ($341,701) -36.83% $418,843,096 0.99%
Total Non-Residential 210,980,842 1,115,353 0.53% (12,168,192) -5.77% 199,928,003 -5.24% 13,010,716 7,351,602 56.50% 207,279,605 -1.75%
Total Assessor's Valuation $625,723,591 $10,655,268 1.70% ($17,266,059) -2.76% $619,112,800 -1.06% $13,938,596 $7,009,901 50.29% $626,122,701 0.06%
Central Assesment 123,083,491 130,996,083 6.43% 286,418 - 0.00% 130,996,083 6.43%
TOTAL AV $748,807,082 $10,655,268 1.42% ($17,266,059) -2.31% $750,108,883 0.17% $14,225,014 $7,009,901 49.28% $757,118,784 1.11%
Actual Protested Property/ Total AV $7,215,113 0.96%
Source: Dona Ana & Otero County Assessor's Office PTD-02 and PTD-03 Reports.
5
History of Tax Rates
0.322 0.322 0.317 0.308 0.298 0.276 0.268 0.267 0.265 0.256
2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 2.000 1.936
2.238 1.926 1.756
3.858 4.044 3.676
2.587
0.827 1.198
12.076 12.400 12.575
10.480 10.308 10.676
11.752
14.345 13.515 13.150
0
2
4
6
8
10
12
14
16
18
2014* 2013 2012 2011 2010 2009 2008 2007 2006 2005
Operational Residential
Two Mill Levy Residential
ETN Debt Service
Bonds Debt Service
Total Residential Tax Rate 16.636 16.648 16.648 16.646 16.650 16.628 16.607 16.612 16.607 16.540
Operational Two Mill Levy Total TotalTax Year Resid. Non-Resid. Resid. Non-Resid. ETN Bonds Debt Service Resid. Non-Resid.
2014* $0.322 $0.500 $2.000 $2.000 $2.238 $12.076 $14.314 $16.636 $16.814
2013 0.322 0.500 2.000 2.000 1.926 12.400 14.326 16.648 16.826
2012 0.317 0.500 2.000 2.000 1.756 12.575 14.331 16.648 16.831
2011 0.308 0.500 2.000 2.000 3.858 10.480 14.338 16.646 16.838
2010 0.298 0.500 2.000 2.000 4.044 10.308 14.352 16.650 16.852
2009 0.276 0.500 2.000 2.000 3.676 10.676 14.352 16.628 16.852
2008 0.268 0.500 2.000 2.000 2.587 11.752 14.339 16.607 16.839
2007 0.267 0.500 2.000 2.000 - 14.345 14.345 16.612 16.845
2006 0.265 0.500 2.000 2.000 0.827 13.515 14.342 16.607 16.842
2005 0.256 0.500 1.936 2.000 1.198 13.150 14.348 16.540 16.848
*Estimated
Debt Service
Source: New Mexico Public Education Department
*Estimated
History of Total Residential Tax Rates
6
Debt Management Plan Overview
Bond Election Timing
Every four years
– $38,000,000 bond election approved by voters on February 4, 2014 with bonds to be sold as follows:
• $9,500,000 to be sold on September 25, 2014
• $9,500,000 to be sold in 2015, 2016 and 2017 or as directed by the District
– Next bond election – February 2018 for approximately $37,000,000
– Next two mill levy election – February 2018
Bond Maturity Schedule
Declining debt service to permit new bonds in future without tax increase
10 final maturity (20-year maximum maturity pursuant to State law)
Create capacity by retiring debt as quickly as cashflow from tax levy will permit
G/O Education Technology Lease Purchase Certificates of Participation (COPs)
Sold annually or biannually (or as directed by the District) to pay for technology equipment, software, hardware, tech support and maintenance
Notes will be retired within two years
Bond & COP Tax Rate
Maintain a combined GOB & COP debt service tax rate at or below $14.35 level
Maintain SB9 levy @ $2.00
7
Bonding Capacity
14-Aug-14
2014 Preliminary Assessed Valuation $867,739,310
6% of Assessed Valuation $52,064,359
Less Outstanding Debt (As of August 14, 2014) 36,205,000
Less General Obligation Bonds, Series 2014 9,500,000
Total Debt Outstanding 45,705,000
Debt Capacity $6,359,359
% Bonded to Capacity 87.79%
BONDING CAPACITY
8
Outstanding and New Issue Debt Service
Tax Year Current GOB Requirements Total Total TotalEnding Principal Interest Total Principal Coupon Interest Principal Interest Requirements2014 10,705,000.00$ 1,249,458.10$ 11,954,458.10$ - - - 10,705,000.00$ 1,249,458.10$ 11,954,458.10$
2015 6,005,000.00 1,087,573.00 7,092,573.00 3,350,000.00$ 4.000% 301,888.89$ 9,355,000.00 1,389,461.89 10,744,461.89
2016 6,350,000.00 912,415.00 7,262,415.00 575,000.00 4.000% 246,000.00 6,925,000.00 1,158,415.00 8,083,415.00
2017 6,600,000.00 718,867.00 7,318,867.00 600,000.00 4.000% 223,000.00 7,200,000.00 941,867.00 8,141,867.00
2018 5,125,000.00 502,439.00 5,627,439.00 925,000.00 4.000% 199,000.00 6,050,000.00 701,439.00 6,751,439.00
2019 4,125,000.00 351,491.00 4,476,491.00 500,000.00 4.000% 162,000.00 4,625,000.00 513,491.00 5,138,491.00
2020 3,025,000.00 231,715.50 3,256,715.50 500,000.00 4.000% 142,000.00 3,525,000.00 373,715.50 3,898,715.50
2021 2,425,000.00 149,250.00 2,574,250.00 500,000.00 4.000% 122,000.00 2,925,000.00 271,250.00 3,196,250.00
2022 1,575,000.00 76,500.00 1,651,500.00 800,000.00 4.000% 102,000.00 2,375,000.00 178,500.00 2,553,500.00
2023 975,000.00 29,250.00 1,004,250.00 850,000.00 4.000% 70,000.00 1,825,000.00 99,250.00 1,924,250.00
2024 900,000.00 4.000% 36,000.00 900,000.00 36,000.00 936,000.00
TOTAL 46,910,000.00$ 5,308,958.60$ 52,218,958.60$ 9,500,000.00$ 1,603,888.89$ 56,410,000.00$ 6,912,847.49$ 63,322,847.49$
G/O Bonds, Series 2014
9
Bond Sale Calendar
GADSDEN INDEPENDENT SCHOOL DISTRICT NO. 16
$9,500,000 - General Obligation School Building Bonds, Series 2014
Preliminary Financing Schedule (As of July 16, 2014)
Date Activity Responsibility
Thurs., Aug 14 Regular Board meeting to adopt Blanket Notice of Sale Resolution for G/O Bonds at 5:00pm
SD, RBC, BC
Fri., Sep. 5 Rating visit with Moody’s in Dallas at 9:30 AM (Central Time) SD, RBC
Thurs., Sep. 18 Post Preliminary Official Statement on i-dealprospectus.com RBC
Thurs., Sep. 18 Publish Notice of Sale for G/O Bonds BC
Thurs., Sep. 25 Public sale for Series 2014 G/O Bonds at 10:00 AM SD, RBC, BC
Thurs., Sep. 25 Regular Board meeting to adopt final G/O Bond Resolution at 5:00pm SD, RBC, BC
Fri., Sep. 26 Notice of Adoption for G/O Bonds published in paper of local circulation BC
Thur., Oct. 23 Executed closing documents returned to bond counsel SD, RBC, BC
Mon., Oct. 27 Thirty day limitation of action period expires
Wed., Oct. 29 Bond Closing SD, RBC, BC
Working Group Key
Code Participant Role SD Gadsden Independent School District No. 16 Issuer
RBC RBC Capital Markets Financial Advisor
BC Cuddy & McCarthy Bond Counsel
Note 1: School Board meets 2nd and 4th Thursday of every month Note 2: Publications in Las Cruces Sun News
11
Short-Term Market
Market Overview
SIFMA vs. LIBOR
Source: Bloomberg
Yields in the short-term tax-exempt variable rate demand note (VRDN) market moved higher last week, particularly in the second half of the week. As the demand from August coupon reinvestments waned, yields were pushed higher, although in a controlled fashion of roughly 1 bps per day.
The SIFMA Index was reset at 0.05%, down 1bps on the week.
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300%
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%
SIFMA vs LIBOR Average
12
Long-Term Market
Market Overview
U.S. Treasury Yield Curve Changes
Municipal GO “AAA” MMD Yield Curve Changes
Source: Bloomberg and Thomson Municipal Market Data
The weakness in equity markets in the previous week spilled over to early last week, as the S&P 500 Index was down nearly 1% through Thursday’s close. However, news reports on Friday that Russian President Putin was pulling back, at least temporarily, from what looked to be an imminent invasion of Ukraine, appeared to be the spark for a sharp snapback in stocks. By Friday’s close, equities had recovered their losses from early in the week to finish up fractionally. The “risk off” weakness in equities early in the week provided a good backdrop for Treasury bonds, which traded to their low yield levels for the year. Treasuries were also able to hold on to the majority of their gains on Friday when stocks were rallying. For the week as a whole, the yield on the 30-yr Treasury declined by 5bps to 3.23% and the yield on the 10-yr was down by 7bps to 2.42%. Readers will recall that we started 2014 with yields of roughly 3% on the 10-yr and 4% on the 30-yr, with many analysts predicting that yields would head higher as the Fed began its tapering of quantitative easing (QE) purchases of Treasuries and agency securities. Now, as we near the end of QE, we are sharply lower in yield than we were when we began the year, even as the unemployment rate has dropped and there are some signs that inflation may be picking up.
The muni market gained along with Treasuries last week, outperforming the Treasury market by declining in yield more. Yields on the Municipal Market Data (MMD) AAA GO curve decreased by between 10bps and 12bps for maturities of 10-yrs and longer, with the larger declines in the middle of the yield curve. The outperformance for munis on the week was due to yields declining on Friday even as Treasury yields increased slightly after the equity market recorded its large gains on the day. It will be interesting to see if munis can maintain those gains in the upcoming week, especially as we will see one of the heavier new issue calendars of the summer (more than $6bn) that includes three large issues, each of more than $800mm – Minnesota GO’s, New York City GO’s, and the Port Authority of New York and New Jersey. This upcoming week also sees the expiration of the short extension given to the Puerto Rico Electric Power Authority (PREPA) to repay two letters of credit (LOC) totaling nearly $675mm. Those LOCs originally were scheduled to expire on July 7th, but were extended first until July 31st and then to August 14th. According to data from Lipper, municipal bond mutual funds saw inflows of $17mm last week – this was a decline from the $17mm of inflows in the preceding week. High yield funds again saw inflows of $60mm as they continued to recover some funds lost earlier that coincided with some of the most negative headlines coming out of Puerto Rico.
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
Year
08/08/2014 08/08/2013
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 15 yr 20 yr 30 yr
08/08/2014 08/08/2013
13
Municipal Market Fund Flows
According to data from Lipper, for the week ended August 06, 2014, weekly municipal bond funds reported $17 million in inflows, down from previous week’s $419 million of inflows
- For the year, weekly and monthly municipal funds have recorded $11.155 billion in net inflows and have only recorded net weekly outflows 6 times (31 reporting weeks thus far)
- For the third consecutive week, high yield municipal funds experienced modest inflows, recording $60 million in net inflows.
Lipper Municipal Fund Flows
Period ended August 06, 2014
Until Fund Flows stabilize, trading in the municipal market will remain volatile
($5,000)
($4,000)
($3,000)
($2,000)
($1,000)
$0
$1,000
$2,000
Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Sep-13 Jan-14 May-14
Fun
d F
low
($
mill
ions
)
Flow Change
4-Wk Moving Avg
($5,000)
($4,000)
($3,000)
($2,000)
($1,000)
$0
$1,000
$2,000
7/2 7/9 7/16 7/23 7/30 8/6
14
Tax-Exempt Market Dynamics
Muni Bonds: 2014 Issuance versus Redemptions Net Inflows in 24 of the First 31 Weeks of the Year
2013 & 2014 Municipal Weekly Volume Credit Spreads Remain Tight for Highly Rated Issuers
Source: Bloomberg, Lipper and Thomson Municipal Market Data
$0
$10
$20
$30
$40
$50
Pa
r Am
oun
t ($
BN
)
Actual Supply RBC Forecast Supply Redemptions
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jan
-13
Feb
-13
Mar
-13
May
-13
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-13
Au
g-13
Se
p-13
Oct
-13
Dec
-13
Jan
-14
Mar
-14
Ap
r-14
May
-14
Jul-1
4
$ m
illio
ns
CompetitiveNegotiatedAverage
0
50
100
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250
Au
g-09
Au
g-10
Au
g-11
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g-12
Au
g-13
Au
g-14
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is P
oint
Spr
ead
to A
AA
MM
D
AA Spread
A Spread
BBB Spread
($5,000)
($4,000)
($3,000)
($2,000)
($1,000)
$0
$1,000
$2,000
Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Sep-13 Jan-14 May-14
Fun
d F
low
($
mill
ions
)
Flow Change
4-Wk Moving Avg
15
Comparison of Minimum vs. Current vs. Maximum AAA MMD
2013 & 2014 Comparison Historical Ten Year Comparison
Source: Thomson Municipal Market Data
0.00
1.00
2.00
3.00
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7.00
5 10 15 20 25 30
%
Min
08/08/2014
Max
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7.00
5 10 15 20 25 30
%
Min
08/08/2014
Max
Current 2013 & 2014 10 Year08/08/2014 Min Max Min Max
5 1.18 0.72 1.60 0.62 3.9710 2.15 1.65 3.04 1.47 4.8615 2.63 2.05 3.82 1.80 5.4720 2.95 2.35 4.27 2.10 5.7425 3.15 2.63 4.44 2.42 5.8830 3.20 2.69 4.51 2.47 5.94
1.000%
2.000%
3.000%
4.000%
5.000%
6.000%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
10 Yr 20 Yr 30 Yr
16
Current Municipal Market Conditions: “AAA” MMD
“AAA” MMD January 1, 2007 to Present Shift in “AAA” MMD Since July 2013
Source: TM3, Thomson Reuters10, 20, and 30 year “AAA” MMD shown to represent different average lives of municipal transactionsRates as of August 8, 2014
Maximum
Minimum
Current
2007 2008 2009 2010 2011 2012 20130.250% 0.790% -0.900% 0.520% -1.130% -0.740% +1.330%
January 1, 2007 to Present
Shift in 30-year "AAA" MMD
10 Year 20 Year 30 Year
4.860% 5.740% 5.940%
1.470% 2.100% 2.470%
2.150% 2.950% 3.200% 3.457%3.121%2.152%Average
3.220%2.990%2.140%Minimum
4.510%4.270%3.040%Maximum
30 Year20 Year10 Year
July 1, 2013 to Present
After closing at 3.30% the previous week, the 30-year “AAA” MMD decreased by 10 bps from August 1 – August 8 to a current rate of 3.20%
1.500%
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2.500%
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4.000%
4.500%
5.000%
Jul Aug Sep Oct Nov Dec Jan FebMar Apr May Jun Jul Aug
17
Bond Buyer 20 General Obligation Bond Index
Bond Buyer 20 GO Index since January 1961
Today’s 4.33% level is lower than 79.51% of historical rates since January 1961
Source: Bloomberg as of July 31, 2014 {Bond Buyer Index unavailable at time of distribution}Weekly yields and indexes released by the Bond Buyer. Updated every Thursday at approximately 6:00pm EST. 20 Bond General Obligation Yield with 20 year maturity, rated AA2 by Moody's Arithmetic Average of 20 bonds' yield to maturity.
53 Year Historical Perspective
% of Time in Each Range Since 1961
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0% Bond Buyer 20 GO Bond Index
Today's Rate at 4.33%
Yield Range
Less than 3.50% 8.76%
3.50% - 4.00% 6.44%
4.01% - 4.50% 11.12%
4.51% - 5.00% 10.80%
5.01% - 5.50% 15.06%
5.51% - 6.00% 10.48%
6.01% - 6.50% 8.12%
6.51% - 7.00% 7.40%
7.01% - 7.50% 6.69%
7.51% - 8.00% 3.93%
Greater than 8.00% 11.19%
Total 100.00%