Quarterly Newsletters 2016/2017 2nd Quarter Newsletter | Page 23

Proposed Educational Technology Improvement Act

New Mexico public and charter schools are challenged to properly fund educational costs in New Mexico. The funding needs for public schools have gone beyond operational expense shortfalls to include capital and technology needs, which are the subject of this article. We have observed that educational technology needs are growing rapidly as new educational programs are being introduced or expanded requiring new and expanded revenue streams.

Many of our public schools have taken advantage of the Educational Technology Lease Purchase Note program to provide critical funding for computer replacement, to fund new technology programs, provide backbone infrastructure and required annual license fee expenses. The outstanding amount of Education Technology Lease purchase obligations as of June 30, 2016 was $81.17 million. 22 districts are currently participating with outstanding lease purchase obligations. Payment for annual lease obligation payments is made from property taxes. The average property tax rate tax imposed to pay for the annual lease payments is .376 mills or $0.376 per $1,000 of Assessed Valuation. In addition, there is a five year maturity limit required under state law to properly match financing length to the life of the technology financed. Educational Technology Notes count against the District’s constitutional debt limit of 6% which is impacting school districts.

In addition to the debt limitation, another consideration with using Educational Technology Lease Purchase Notes is the costs of issuance of such notes, which can average 1-10% of the amount issued. A third consideration is the need to repay the lease over five years. The question is becoming, “is there a better method to fund such needs on a pay-as-you-go-basis – no borrowing and no costs of issuance?” Currently, an alternative measure is being developed which may look like the Public School Capital Improvements tax (the Two Mill Levy which our school districts have been using for 40 years for maintenance costs). A new voter-approved two mill levy can be legislatively created and permit public schools to ask for voter approval, which would be used to fund technology needs. If there is sufficient interest, the measure could be introduced this session. Please contact your legislator if you want more information about supporting this initiative. If you have any questions, please contact RBC Capital Markets, LLC at 505-872-5999.

RBC Capital Markets is not acting as a fiduciary or as a municipal, financial, commodity or investment adviser. The information provided is not intended to be and should not be construed as “advice” within the meaning of Section 15B of the Securities Exchange Act of 1934. RBC Capital Markets is a registered trademark of Royal Bank of Canada. RBC Capital Markets is the global brand name for the capital markets business of Royal Bank of Canada and its affiliates, including RBC Capital Markets, LLC (member FINRA, NYSE and SIPC). ® Registered trademark of Royal Bank of Canada. Used under license. © Copyright 2016. All rights reserved.

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