City of Burlingame

Financing Alternatives for Capital Projects

The PFM Group
February 29, 2016 Public Financial Management, Inc.
PFM Asset Management, LLC
PFM Advisors

San Francisco
50 California Street, Suite 2300
San Francisco, CA 94111
p. 415-982-5544
Summary of Financing Alternatives
Assuming $50 million in Project Funds*

General Obligation Bonds supported by increase in ad valorem tax

Lowest cost of debt
Estimated Annual Debt Service: $2.88 million
Maximum levy rate: $33 per $100,000 Assessed Valuation
2/3 vote is required
Lease Revenue Bonds supported by Parcel Tax, Sales Tax, or Utility User Tax
Estimated Annual Debt Service: $2.96 million
Parcel Tax required: $341 per parcel
Or Sales Tax Required: 0.34%
Or Utility User Tax Required: 2.96%
50% vote is required if undertaken as a general tax; 2/3rds if undertaken as a special tax
General taxes can only be considered during Council elections; i.e. November 2017
Community Facilities District (CFD) Bonds supported by Special Tax
Estimated Annual Debt Service: $3.20 million
Special Tax Required: $369 per parcel
2/3 vote is required

* Preliminary numbers, subject to change

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Summary of Financing Alternatives
Assuming $50 million in Project Funds*

General Lease
Type Obligation Revenue CFD Bonds
Bonds Bonds
Estimated Annual Debt Service $2,875,000 $2,958,000 $3,197,000
Estimated True Interest Cost 3.93% 4.16% 4.29%
Tax Levy Rate (per $100k AV) $33 - -
Special Tax Required - - $369
Parcel Tax Required - $341 -
OR Sales Tax Required - 0.34% -
OR Utility User Tax Required - 2.96% -

* Preliminary numbers, subject to change

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General Obligation Bond - $50 million in Project Funds

Requires 2/3rds voter approval

For $50 million, levy starts at $33 per 100,000

Annual Tax
Assessed Value
Does not negatively affect general fund debt Payment*
capacity $500,000 $164
$735,000 (median) $236

Annual debt service approximately $2.88 million

$1,000,000 $314
per year $1,500,000 $462
$2,000,000 $605

Increased tax burden distributed on the basis of

assessed property values

* Preliminary numbers, subject to change

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Sample General Obligation Financing*

Project Fund Raised $50 Million $45 Million $40 Million $35 Million
Estimated Annual Debt $2,875,000 $2,589,000 $2,303,000 $2,016,000
Service
Estimated True Interest
3.93% 3.93% 3.93% 3.93%
Cost
Tax Levy Rate $33 $29 $26 $23

* Preliminary numbers, subject to change

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Lease Revenue Bonds Supported by Parcel Tax Revenues

Requires a 50% vote for a general tax (not to be used for a specific purpose) or 2/3 for a
Special Tax

The debt service on a borrowing for $50 million in project fund proceeds could be
supported by a tax of $341 per parcel

Proceeds would be generated through the issuance of Lease Revenue Bonds

The asset created would provide security for the bonds

The increase in general fund revenues would increase general fund debt capacity

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Lease Revenue Bonds Supported by Sales Tax Revenues

Requires a 50% vote for a general tax (not to be used for a specific purpose) or 2/3 for a
Special Tax

The debt service on a borrowing for $50 million in project fund proceeds could be
supported by a sales tax of 0.34%

Proceeds would be generated through the issuance of Lease Revenue Bonds

The asset created would provide security for the bonds

The increase in general fund revenues would increase general fund debt capacity

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Sales Tax Background

In November 2012 statewide election, voters approved Proposition 30, resulting in a temporary state sales
tax rate increase from 7.25% to 7.50%
Increase is effective through December 31, 2016
Revenue accrues solely to the State to address budget deficits of prior years

Of the 7.50% state sales tax rate, 1% accrues to local governments

0.25% to county transportation
0.75% to the Citys General Fund

In November 2012, San Mateo County voters also approved Measure A, which raised the County sales tax
from 1.00% to 1.50%, for ten years

As a result, Citys sales tax rate is currently 9.00%

No evidence of a negative impact on consumer spending as a result of these tax increases

Source: Burlingame 2015-16 Budget

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Sales Tax Rates in San Mateo County

Most cities in San Mateo County, including Burlingame, have a sales tax rate of 9.00%

Highest is Half Moon Bay at 9.5%

South San Francisco passed a sales tax measure in November, raising their rate to 9.25%

City Tax Rate City Tax Rate

Atherton 9.00 % Menlo Park 9.00 %
Belmont 9.00 % Millbrae 9.00 %
Brisbane 9.00 % Pacifica 9.00 %
Burlingame 9.00 % Portola Valley 9.00 %
Colma 9.00 % Redwood City 9.00 %
Daly City 9.00 % San Bruno 9.00 %
East Palo Alto 9.00 % San Carlos 9.00 %
Foster City 9.00 % San Mateo 9.25 %
Half Moon Bay 9.50 % South San Francisco 9.25 %
Hillsborough 9.00 % Woodside 9.00 %
Source: State Board of Equalization, Effective as of July 1, 2015 (except South San Francisco as noted above)

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Lease Revenue Bonds Supported by Utility User Tax

Utility User Taxes (UUT) are taxes imposed on the consumption of certain utility services

Requires a 50% vote for a general tax (not to be used for a specific purpose)

The debt service on a borrowing for $50 million in project fund proceeds could be
supported by a UUT increase of 2.96%

Proceeds would be generated through the issuance of Lease Revenue Bonds

The asset created would provide security for the bonds

The increase in general fund revenues would increase general fund debt capacity

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Sample Lease Revenue Bond Financing*

Project Fund Raised $50 Million $45 Million $40 Million $35 Million
Estimated Annual Debt $2,958,000 $2,664,000 $2,369,000 $2,075,000
Service
Estimated True Interest 4.160% 4.160% 4.160% 4.160%
Cost
Parcel Tax Required $341 $308 $274 $240
OR Sales Tax Required 0.34% 0.31% 0.28% 0.24%
OR UUT Required 2.96% 2.66% 2.37% 2.08%

* Preliminary numbers, subject to change

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Lease Revenue Bond Capacity

The City will have additional capacity when debt service on the pension bonds drops significantly after
fiscal year 2018

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$ Millions

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Fiscal Year

Existing Debt Service Additional Capacity Estimated Sales Tax Revenue

Preliminary numbers, subject to change

Estimated Sales Tax Revenue is based on the $50 million in Project Fund Scenario

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Community Facilities District Bonds

Pursuant to 1982 Mello-Roos CFD Act, CFDs can be formed and bond issues authorized by
a 2/3 vote of the property owners in the special district

Bonds are sold to finance various infrastructure and CFDs may provide various public
services

The debt service on a borrowing for $50 million in project fund proceeds could be
supported by a special tax of $369

Debt service and/or the public services are paid for by special taxes on property within the
district

Secured by the value of the taxed property, which can be foreclosed if special taxes are
unpaid

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Sample Community Facilities District Bond Financing*

Project Fund Raised $50 Million $45 Million $40 Million $35 Million
Estimated Annual Debt $3,197,000 $2,879,000 $2,560,000 $2,242,000
Service
Estimated True Interest 4.29% 4.29% 4.29% 4.29%
Cost
Special Tax Required $369 $332 $296 $259

* Preliminary numbers, subject to change

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Questions?

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