Description: This article is financial plan which is projected by Kenneth Adix from Pflurgervill ISD. He is the CFO of the district. He gives a brief overview on what district debt history has been and what their financial plan is going forward.
My name is Kenneth Adix and I’m the CFO for Pflugerville ISD and what I’d like to share with you in this clip is information on our debt plan and our debt history as a district.
I’ve been with the district since 2009. One of the things that’s very important when you are borrowing money is what your bond rating is.
Because the higher the bond rating you receive, you’re viewed as a safer borrower from and by the investors, and you’ll pay a lower interest rate as a result of a higher bond rating.
Our bond rating has been increased twice since I’ve got here in 2000. From 2009 to 2010 SP raised our rating and then when we issued our last bond in 2014, they upgraded us to a AA currently.
Even though there are over a thousand districts in the state, there are only 18 districts in the state that have a higher bond rating, we’re currently at the double A, so we’re able to achieve very favorable borrowing rates when we issue our bonds.
One of the things that the rating agencies have favorable about what we’ve done is the district over the last five years is that we’ve paid our debt at a faster clip than what we were absolutely required to do so.
It’s analogous to be with a credit card, you have the option of making your minimum monthly payments or paying off your credit cards faster than the minimum payments.
What we all know on a personal level, whether it’s our credit card or our mortgage, the less length of time we borrow, the lower our cost is going to be. To ultimately repay the debt that we have when we defeat, we started defeating or paying down our debt earlier five years ago.
If we stay on that path through our next bond that we plan to do in 2019, then we will have diffused or paid off early a hundred and seventy six million dollars worth, that’s a tremendous amount.
But the thing, when you start talking large numbers, it’s simply hard for the mind to comprehend it. When you talk millions, one hundred millions, billions of dollars, you have to put that into context. Here’s an example that should help you.
If I held up one sheet of paper, let’s assume that this sheet of paper is worth $100,000. You’d be very happy if I handed you this sheet of paper, because that’s a lot of money. Likewise if I took 10 sheets of paper, I can hold up a million dollars.
Ten sheets of paper, I can do a million dollars in one hand. If this is a million a ream of copy paper, 500 sheets is 50 million. That means that a whole box of copy paper is 500 million.
Our current deb at the end of this month when we close our fiscal year is 689 million dollars. If you were to do that in sheets of hundred thousand dollars, sheets of paper it would be this much. It is our current debt level of 689 million of the budget that we’ve proposed to the board for next year.
If we stay on that path for the next two years and keep our tax rate at 50 cents for this coming year, what will happen between now and the next time we borrow in 2019 is that we will defeat and pay off this much debt here and that’ll go off from our collective books.
In 2019 we don’t know how much we’re going to borrow, but the current estimate is ballpark about three hundred million dollars, because we’re going to give our growth the demographers projecting, we’re going to grow six to eight hundred kids out in the first or two in the foreseeable future.
If you took the example of simply, how much debt would come on if we borrowed three hundred million dollars, it looks like this, you would have a box with six reams of copy paper in it. Now the next piece is when you borrow money, if what we’re trying to do as a district is repay our debt over a 15-year period of time, because the difference in borrowing 300 million dollars over 15 years versus 25 years is a difference of a hundred million dollars.
By staying on the path, that’s being recommended to the Board, the difference is that if we borrowed over a 15 year period of time, this box would have eight reams of paper in it. If we borrowed it over a 25 year period of time, this box would literally be totally full, and our collective debt two years from now would be a billion dollars.
As a taxpayer, if we keep on the path, we’re currently on keeping our tax rate at 50 cents for the coming year, that’s going to reduce our expected interest cost, the next time we borrow in 2019 by over a hundred million dollars.
Conversely, if we change course, and put it into perspective as a tax payer well, what if I wanted to amortize that over 25 years, and what would that do for me, it would lower your tax rate by two pennies and it would be worth about 40 dollars a year to you in terms of your tax rate.
They’re context in terms of giving you a brief overview on what our debt history has been and what our game plan is going forward.