Information Item

Subject: District Debt and Bond Information

Background:
Historically, the District has issued bonds to update facilities and to meet other capital
needs. At the October meeting, the Board received an information item documenting the
application and use of previous bond issues. Over the last three years, the District has
issued over $21 million in bonds for capital work to upgrade facilities which was focused
on the safety and security of students, and to meet prior health life safety commitments.

In 2008, the District issued working cash bonds to fund operations. At that time, the
Districts operating fund balance was very low and there was a need for cash to pay the
bills. When the District issued the 2008 bonds, there was a written provision that allowed
the District to refinance the debt in the future, prior to the end date of the bonds.

Presently, there is an opportunity for the District to refinance up to $10 million of bonds
before the end of the calendar year. This refinance would allow the District to save an
estimated $1 million in interest costs due to the difference between the rates of 2008 and
current interest rates. It would also free up $5 million of the Districts borrowing capacity
in the future.

Administrations Analysis:

Attached is a presentation by Mesirow Financial, the Districts underwriter, which reviews

the Districts current borrowing capacity and potential savings if a refinance is done before
year end.

The District has a strong fund balance; however, a portion of that balance, $10 million of
the operating fund balance, is due to the 2008 bond issue. It is recommended that if the
District does refinance the 2008 bonds, the proceeds of 2017 be transferred to the Capital
Fund to be used for future projects approved in the upcoming Master Facility Plan.

Implementation or Assessment Plan:

Attached is a schedule prepared by Ehlers and Associates, the Districts Financial

advisor. This time table of a bond issuance would close before the end of the calendar
year to allow for a lower interest rate. In addition to the Resolution that would need to

11.07.17
be adopted by the Board of Education at the December meeting, the Board will be
required to hold a separate hearing between November 27th and December 4th.
The Finance committee will review this topic again in more detail at its meeting
November 9th, 2:00 PM at PMSA.

11.07.17
Refunding Savings Opportunities to
Enhance Capital Improvement
Initiatives

Proviso Township High Schools

District Number 209

November 7, 2017

Todd Krzyskowski Daniel Barlow Melanie Castellanos

Managing Director Vice President Analyst
312.595.7842 312.595.6203 312.595.2270
tkrzyskowski@mesirowfinancial.com dbarlow@mesirowfinancial.com mcastellanos@mesirowfinancial.com
 Executive Summary A $5 Million Savings Opportunity
What is Proviso THSD 209s most significant current financing/refunding opportunity?

The Districts 2008A Bonds have interest rates of 5.46% to 6% and are pre-payable in 2018

Estimated current interest rates are 1.85% to 3.00%

Reducing the interest rate on the approximate $24 million of outstanding bonds would produce significant savings.

What is the best way to maximize the savings from reducing interest costs on the 2008A Bonds?

Use District funds on hand to pay off $10 million of the 2008A Bonds that were issued for operations, but proceeds were never spent

Issue $10 million of tax-exempt (bank qualified) bonds in 2017 for capital improvements
Begin Board action on November 7, 2017 and determine date to hold BINA hearing if District decides to proceed.

Second portion of 2008A Bond refunding would be completed in late 2018.

Reducing the interest rates on the overall $24 million of outstanding 2008A Bonds would decrease debt service by over $5.2 million.

How is the Current Market environment for Issuing Bonds in Illinois?

Overall Illinois interest rate environment has improved since the budget agreement and school funding accord

Proviso THSD #209 has a A credit rating that has recently improved due to improved fiscal management and results

What will Proviso 209s future borrowing capacity be after the 2008A refunding/restructuring?

The Districts overall debt margin will approximate $105 million of which approximately $30 million could done with a levy-backing and
no direct referendum

2
 A Refunding of 2008A Bonds Could Reduce Interest Costs by $5 million
and Increase Non-Referendum Borrowing Capacity By a Like Amount

The 2008A Bonds were originally issued to advance refund a portion of the 2004 Bonds. Now the 2008A Bonds themselves will
be callable prior to maturity on or after 12/1/2018.

Based on current interest rate estimates, a refunding could reduce debt service payments by approximately $5.2 million over the
remaining life of the Bonds. This equates to approximately $4.1 million in net present value savings.

Bank Qualified Bonds (limited to $10 million annually) traditionally provide the lowest interest costs. Thus, issue up to $10 million
of bank qualified refunding bonds in 2017 where the interest rate benefit of Bank Qualification is greatest.

Sensitivity of savings to interest rate changes: Each 10 basis point increase in interest rates would reduce net present value
savings by approximately $150,000.

This proposed tax-exempt refunding approach increases cumulative savings by approximately $280,000 ($100,000 on a present
value basis) versus an approach that would require some taxable bonds.

Refunding Assumptions Interest Rate Comparison Debt Service Savings Analysis

(a) (b) (c)
BQ / Non-BQ tax-exempt interest 2008A Estimated New Debt Service = (a) - (b)
rates estimated as of 10/11/2017 2008A Accreted 2008A Estimated Interest Capital Net Present
BQ bonds issued 11/1/2017 Outstanding Value at Interest New Bond Rate Prior 2008A Improvement Refunding Estimated Value
Non-BQ bonds issued 11/1/2018 Date Principal Redemption Rate Yields Differential Debt Service Bonds Bonds Total Savings Savings
2008A Bonds called on 12/1/2018 12/1/2018 - - - 397,583 - 397,583 (397,583) (389,016)
Discount factor of 2.70% used for PV 12/1/2019 - - - 367,000 630,717 997,717 (997,717) (950,237)
calculation 12/1/2020 300,794 520,759 5.460% 580,000 367,000 582,200 949,200 (369,200) (345,826)
Underlying rating: "A/Stable" 12/1/2021 2,406,344 4,207,518 5.560% 1.850% NBQ 3.710% 4,960,000 367,000 3,587,200 3,954,200 1,005,800 895,860
Issuance costs assumed at no greater 12/1/2022 2,249,806 3,969,091 5.650% 2.030% NBQ 3.620% 4,960,000 367,000 3,587,000 3,954,000 1,006,000 873,065
than 1.75% of refunding par 12/1/2023 2,096,691 3,735,773 5.750% 2.240% NBQ 3.510% 4,960,000 367,000 3,587,000 3,954,000 1,006,000 850,706
Sensitivity Analysis: Approximately 12/1/2024 1,965,598 3,519,616 5.800% 2.470% NBQ 3.330% 4,960,000 367,000 3,587,000 3,954,000 1,006,000 828,948
$150,000 per 10 basis point change in 12/1/2025 1,840,904 3,312,734 5.850% 2.610% NBQ 3.240% 4,960,000 2,087,000 1,866,800 3,953,800 1,006,200 807,934
interest rates 12/1/2026 1,722,509 3,114,979 5.900% 2.880% BQ 3.020% 4,960,000 3,953,200 - 3,953,200 1,006,800 787,794
12/1/2027 1,595,186 2,913,454 6.000% 2.980% BQ 3.020% 4,960,000 3,952,000 - 3,952,000 1,008,000 768,642

Totals 14,177,832 25,293,925 Totals 35,300,000 12,591,783 17,427,917 30,019,700 5,280,300 4,127,870

Note: Results are preliminary and subject to change based on market conditions and other factors.
3
 The Districts Non-Referendum Financing Capacity Would Increase
from $25 to Almost $30 Million By Completing the Refunding Plan

The present value of the Districts available future non-referendum debt service levy capacity, based on the projected debt service
extension base (DSEB), is approximately $25.5 million. In other words, the District could borrow this amount today by bonding
into all available non-referendum levy capacity over the next 20 years.

If the District defeases/refunds the 2008A Bonds, bonding capacity under the DSEB will increase by approximately $4.1 million
to $29.6 million.

$8,000,000

$7,000,000

$6,000,000
Approximately
Annual Levy ($)

$25.5 million of
$5,000,000
borrowing
capacity
$4,000,000

$3,000,000

$2,000,000
Existing Non-Referendum Debt Service
$1,000,000 Remaining Levy Capacity
District 209's Projected DSEB

$0

Levy Year

Note: Existing Non-Referendum Debt Service comprises debt service on the 2008A, 2015A, 2016, 2016B and 2016C non-
referendum bonds. Available levy capacity assumes long-term CPI growth of 1.0% and 4.25% present value discount factor.
4
 CREDIT RATINGS MATTER: The Districts Improving Credit Rating
Will Be Further Supported by Executing a Cost Effective Refunding
Issuers with strong credit ratings enter the market from a position of strength. With all of the much discussed bond market dislocation, investors have
been rewarding those issuers that have kept their house in order
The 2008A refunding and expected substantial interest cost savings are a credit positive for the District and yet another example of
prudent fiscal management with focus on cost reductions.
Use the 2008A refunding as an opportunity to re-engage rating agencies and illustrate the many positive financial trends at the District: (1)
improving cash position, (2) plans to tackle capital improvement needs (3) transition to balanced budget from history of structural deficits.
While not guaranteed, an upgrade to the high-A category is possible.
A solid investment grade credit rating provides ongoing ready access to the capital markets for any refunding or new money financings that may be
considered. Double-A range usually results in increased investor demand for an issuers bonds even with the very challenged Illinois credit picture.
Credit ratings directly impact financing costs. An issuers borrowing rates (generally
Investors Standard
expressed as a spread off the AAA index) are largely determined by the issuers credit Moodys
rating although other factors can be involved. Investor demand is usually greater for Service & Poors
AA rated debt versus A or BBB rated debt.
Aaa AAA
Change In Credit Spreads Over Time (Spread to 20-Yr AAA MMD)
Aa1 AA+
1.4% Aa2 AA
10 Yr Avg Increased Aa3 AA-
1.2% 8/14/2015 investor Current
8/15/2016 demand A1 A+ District 209
1.0% A rating
8/15/2017 A2
A3 A-
0.8%

0.6% Baa1 BBB+

Baa2 BBB
0.4% Investment Baa3 BBB-
grade rating
0.2% breakpoint Ba BB
B B
0.0%
C C
AA MMD A MMD BBB MMD

5
 Proposed 2017 Financing Timeline

November 7: Board discussion on financing goals and refunding opportunity.

BINA Hearing authorized.

November 27 or 28: Bond Issue Notification Act (BINA) Hearing held.

December 12: Board adopts resolution authorizing payment of $10 million

2008A Bonds from funds-on-hand, and bond resolution authorizing the issuance
of $10 million of working cash bonds for capital improvements
Can FOP meeting be held on same date?

December 20: FOP meets to adopt bond resolutions

Week of December 17 or 25: District officials will need to be available to sign

bond documentation

Note: If the FOP is able to meet prior to December 20, the District will have
greater flexibility to get documents signed prior to holidays.

6
 Appendix
Supplemental Information for Reference

7
 In 2015, the District Began a Sequential Multi-Year Finance Plan that (1)
Funded High Priority Capital Improvements, (2) Avoided Unnecessary
Draws on District Liquidity, and (3) Minimized Rate Impact on Local
Taxpayers
District completed 30-day public notice period in December 2015
for not-to-exceed $50 million issuance of working cash bonds.
Determined Districts capital Approximately $40 million of this authority remains. Only need
project funding needs to hold Bond Issue Notification Act (BINA) hearing to use.
Issued approximately $10
million of Bank Qualified Review capital needs in light of District objectives and tax
(BQ) working cash bonds base growth
at favorable interest rates Issue additional bonds as needed
Completed in March 2015 Refund/restructure the Series 2008A Bonds to reduce
to access the 2014 Levy interest costs and manage District tax rate

2015 2016 2017 2018

2014 Qualified Zone
Academy Bond (QZAB)
financing
$1.34 million
Very low cost financing -
.57%
Applied for and received a
special allocation from the
Illinois State Board of
Education (ISBE)
Issued approximately $10
Million of BQ working cash
bonds to fund high-priority
capital needs
Refunded the Series 2004
Bonds to reduce interest
costs by $1.1 million and
manage District tax rate

8
 Summary of Financing Mechanisms for Illinois School Districts
Proviso 209 issued $10 million of working cash bonds in both 2015 and 2016 to methodically fund high priority capital needs within
the District.

The District still has $40 million of Working Cash authority remaining from a 30-day notice period it passed in December 2015.
This additional authority expires on December 21, 2018. District just needs to hold a BINA hearing to use the $40 million.

Alternate
Building Working Cash Tort Funding Life Safety Debt Revenue
Bonds Bonds Funding Bonds Bonds Bonds Certificates Bonds
Purpose School Capital Projects Capital Projects Pay tort Life safety Capital Capital
construction & Cashflow Pay claims judgments or projects Projects Projects
renovation settlements Operating
Expenses
Referendum Required? Yes 30-day notice 30-day notice No No No 30-day notice
period period period
Separate Tax Levy Yes Yes Yes Yes Yes No; paid from Yes; paid from
Available? Operations Operations or
other source
Subject to Debt Service No Only if capped Only if capped Only if capped No No
Extension Base?
Public Hearing Required Yes Yes Yes No Yes
(BINA)?
Final Maturity Limit 20 Years 20 Years 20 Years 20 Years 20 Years 20 Years 40 Years
Subject to Debt Limit Yes Not at time of Not at time of Yes Yes No (if levy is
issuance issuance not accessed)
Other Restrictions Principal limited Often a 2-step Revenue
by a working process involving coverage tests
cash calculation initial issuance of may apply
debt certificates

9
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10
 DRAFT

PROVISO TOWNSHIP HIGH SCHOOL DISTRICT

Approximately $10 Million General Obligation (Limited Tax) Bonds
Series 2017 (Bank Qualified)

Preliminary Timetable
As of October 25, 2017

October 2017 November 2017 December 2017 January 2018

S M T W T F S S M T W T F S S M T W T F S S M T W T F S
1 2 3 4 5 6 7 1 2 3 4 1 2 1 2 3 4 5 6
8 9 10 11 12 13 14 5 6 7 8 9 10 11 3 4 5 6 7 8 9 7 8 9 10 11 12 13
15 16 17 18 19 20 21 12 13 14 15 16 17 18 10 11 12 13 14 15 16 14 15 16 17 18 19 20
22 23 24 25 26 27 28 19 20 21 22 23 24 25 17 18 19 20 21 22 23 21 22 23 24 25 26 27
29 30 31 26 27 28 29 30 24 25 26 27 28 29 30 28 29 30 31
= BOE Meeting 31

Dates Action Who?

November 7, 2017 District to present working cash bond issue to BOE Bond Counsel, Admin,
and discuss financing options, defeasance and Municipal Advisor (MA),
timetable Underwriter
Board President authorizes a Public Hearing and the
Publication of Hearing Notice for the Bond Issue
Notification Act (BINA) Hearing (publication must
happen between 7- 30 days before the BINA
Hearing)
November 15, 2017 Public Hearing Notice Published Admin

November 27th, 28th or Hold BINA Hearing BOE, Admin, Bond

December 4th
Week of December 4
December 12, 2017
December 13, 2017
Counsel, Underwriter, MA,
Rating Agency (RA) Call (S&P) RA, Admin, MA,
Underwriter
BOE adopts Bond Parameters Resolution for the BOE, Admin, Bond
Working Cash Bonds, Series 2017 at the regular Counsel, Underwriter, MA
Board meeting
BOE also adopts Resolution to defease the series
2008 bonds
Receive Bond Rating RA

December 14, 2017 POS finalized and distributed MA, Underwriter

December 20, 2017
December 21, 2017
Between Bond Sale and
Bond Closing
Financial Oversight Panel meets to adopt FOP, Admin
Parameters Resolution
Price the bonds and execute bond purchase Underwriter, MA, Admin,
agreement Designated Rep
Closing documents finalized Bond Counsel, Admin, MA,
Underwriter
December 28, 2017 Bond Closing and funds invested Bond Counsel, Admin, MA,
Underwriter
Distribution:
Todd Drafall, CFO, District 209
Todd Krzyskowski, Dan Barlow and Melanie Castellanos; Mesirow Financial (Underwriter)
Erin Bartholomy and Joseph Saverino; Chapman and Cutler, (Bond Counsel)
Prepared by: Adrienne Booker and John Piemonte; Ehlers (MA)