Ross Sinclaire Associates LLC Kentucky Interlocal School Transportation

Ross, Sinclaire & Associates, LLC Kentucky Interlocal School Transportation Association (KISTA) Presented to: Southeastern States Pupil Transportation Conference 1

Background/Overview • On May 14, 1988 the worst drunk driving accident in the nation’s history occurred in Carrolton, Kentucky. • A drunk driver hit a bus traveling from an amusement park which killed 24 children, 3 adults and injured 40 others. • Following this accident, the Kentucky Department of Education established one of the highest state safety standards for school buses in the nation. • With the increased safety standards, school districts in Kentucky now pay approximately $65, 000* (on average) for each school bus unit which are equipped with diesel engines. (* This does not take into consideration 2007 increased EPA standards) • In order to provide a low cost financing tool for school districts to pay for their school buses, several superintendents joined together to form an organization known as the Kentucky Interlocal School Transportation Association or KISTA. 2

What is KISTA? • A not-for-profit association of fifteen Kentucky school districts established pursuant to Kentucky Revised Statutes, Sections 65. 210 through 65. 300 (“Interlocal Cooperation Act”). • The Board of Directors for KISTA are school superintendents or their designees. • The Board of Directors serve without pay and establish policies and procedures of the Association. 3

KISTA NEW BUS PROGRAM 4

What does the KISTA New Bus Program Offer? • Financing mechanism for school districts to purchase new buses • Offers tax-exempt rates v. conventional financing rates • Stream-lined purchasing process (KISTA works closely with Kentucky Department of Education “KDE”) • Self-insured Collision Policy offered with each new bus financed through the KISTA Program • Annual used bus auction offered to school districts at no cost 5

KISTA New Bus Program History • Program in existence since 1991 • Over 1, 900 new school buses have been financed using the KISTA Program totaling more than $116 million • 130 out of 176 school districts in Kentucky have financed bus purchases through KISTA 6

How does the KISTA New Bus Program Work? • School district adopts formal Resolution to participate in the KISTA Program • School district enters into an Equipment Lease & Security Agreement with KISTA • School district purchases buses in accordance with the KDE Division of Pupil Transportation’s purchasing procedure based on state-approved purchasing contract • School district receives bus units in accordance with delivery schedule of vendor • School district is responsible for their lease payments based on their prorata portion of the total equipment costs and costs of issuance 7

KISTA New Bus Program Pay-Back Mechanism • KISTA sells 10 -year bonds to fund equipment purchases • Total amount of bonds determined by participant’s equipment purchases and costs of issuance • School district’s portion of the costs of issuance factored into their lease payments • School district makes lease payments semi-annually each March 1 and September 1 • School district’s payments may be off-set by the transportation component of the SEEK* fund allotment (*In Kentucky, SEEK is the reimbursement program known as Support Educational Excellence in Kentucky) 8

KISTA New Bus Program Sample Payment Schedule 9

KISTA New Bus Program Sample Sources and Uses of Funds 10

KISTA New Bus Program Document Process • Invoices - Once received are submitted to the appointed Paying Agent Bank for payment • Certificates of Origin – Once received are forwarded to the appointed Bond Counsel and then sent on to the appropriate school district. The school district then takes the information to the local County Clerk’s office to file for the Title • Bus Unit - Upon receipt, it is recommended that the unit be inspected prior to accepting delivery to insure the school district is not liable for damages incurred during transport. 11

KISTA New Bus Program Self-Insurance Policy • Automatically built into the Program • School district deposits 2% of their participation amount into Insurance Reserve Fund upon closing (this cost is included in prorata cost of issuance) • All claims submitted directly to KISTA (no outside company) • Collision ONLY coverage (does not include storm damage) • $5, 000 deductible per claim • Initial 2% deposit rebated back to the participating school district after the bonds are retired • Since 1991, only 17 claims involving accidents have been processed through KISTA • Approximately $93, 000 paid out for repairs of damaged units 12

Financing vs. Cash Payment Considerations • A school district can manage its cash flow needs better by knowing in advance the future fiscal year payments required to meet its school bus debt obligations • Typically, newer vehicles have improved: – Fuel economy – Safety measures – On Maintenance needs • Purchasing several new school buses of the same make and model year allows for: – Interchangeability of replacement parts, such as fuel and oil filters, tires, brake shoes, etc. – Mechanic familiarity with maintenance and repair issues – Less wasted or overstocked inventory 13

True Cost of Borrowing 14

KISTA USED SCHOOL BUS AUCTION 15

KISTA Annual Used School Bus Sealed Bid Auction • Ross, Sinclaire & Associates, LLC (“RSA”) acts as Financial Advisor to KISTA and solicits Kentucky school districts for participation in the annual used school bus sealed bid auction • School district participation is voluntary • Schools provide detailed lists of used bus inventory for sale in the auction • RSA distributes bid packages to potential bidders 16

History of KISTA Used Bus Sale • RSA began hosting the auction in 1992 • RSA has sold more than 2, 800 buses for school districts state-wide • The sale averages 200 -250 buses for sale each year • Bus prices range from $100 to $10, 000 • Solicitations are mailed to over 75 potential bidders nation-wide representing: – Small, non-profit organizations – Large, world-wide distributors – Local vendors – Repair facilities – Individuals 17

How does the Used Bus Bid Process Work? • RSA receives sealed bids from potential bidders on the appointed date and hour • RSA evaluates each bid received to ensure bidding eligibility • RSA electronically calculates each bid and determines the best bid for EACH school bus • RSA is prepared to award winning bids within 48 hours of the bid opening • Winning bidders are notified and school districts are given two weeks to accept or reject bids received • Winning bidders are responsible for payment of buses directly to school districts (no middle man) • Winning bidders are given approximately one month from acceptance of bid to take possession of bus/buses 18

What are the Benefits to the School Districts Who Participate? • Absolutely no cost to participate • No hassle of holding local public auctions • No hassle of soliciting public/private bids • Eliminates costs of advertising, mailing, etc. to solicit bids • Higher bids received due to more competition between bidders • Overall greater chance of eliminating used bus inventory 19

Can a Financing Program Similar to KISTA Work in Your State? • Legal and Financing Issues – Does your state permit one governmental unit to act in concert with another governmental unit in order to provide financing for public projects (approximately 45 states have supporting legislation)? – What legal structure will allow for the debt obligations to be ratable? • • General obligation debt vs. revenue debt State intercept, global ratings for all public school districts Mixed credit issues State and local approvals – Negotiated vs. competitive bids – Players • Bond counsel • Financial Advisor 20

Can Other Equipment Purchases be Financed under a KISTA Type Program? • Virtually any equipment, included any type of vehicle, computers and technology related equipment, virtual libraries, etc. • Kentucky is currently planning on financing $25 million of White Board systems for public school systems, using a mix of New Markets Tax Credit funds, tax free financings and state funds. 21

For More Information…. Please contact: Ross, Sinclaire & Associates, LLC P. O. Box 398 400 Democrat Drive Frankfort, Kentucky 40601 800 -255 -0795 www. rsamuni. com 22