Bond Investor Presentation Jennifer Mott, CFA Chief Financial Officer Executive Vice Chancellor April 23, 2018 Key Strengths • Experienced Leadership Team (see Appendix) • Solid Mission and Culture of Accountability (see Appendix) • Strong Academic & Community Presence • Positive Economic Impact (see Appendix) • Debt Management • Historical Achievements & High Ratings • Fiscally Responsible and Conservative Financial Policy • Strong Future Outlook 2 “Education is improving the lives of others and for leaving your community and world better than you found it.” – Marian Wright Edelman Strong Academic and Community Presence 3 LSC Service Area Service Area In-District Service Area 11 School Districts 99,000 Students 2.1M Population 1,400 Square Miles $347M Operating Budget 7,813 Employees 4 About LSC • 84,000+ credit students each semester, total enrollment of more than 99,000 (credit and non-credit). • Six colleges, eight centers, two university centers. (Map of locations available in Additional Information) • One of the top 3 largest colleges in the nation. • One of the fastest-growing college systems in U.S. • Added 40,146 students Fall 2007 to Fall 2017, an 81% increase. • Top 5 associate degree producer, ranked 4th among all community colleges in the U.S. (2014-15). • Leads state-wide Texas Completes and Texas Reverse Transfer student success initiatives. • A member of College Credit for Heroes program helping veterans transition to civilian life quicker. 5 Headcount 6 “An investment in knowledge pays the best interest.” – Benjamin Franklin Debt Management 7 Total Outstanding Debt 8 Debt Service 9 Outstanding GO Debt as Percent of Assessed Value (Comparison of Peer Colleges) 10 Outstanding GO Debt as Percent of Assessed Value (Comparison of Other Taxing Entities) 11 “High achievement always takes place in the framework of high expectation.” – Charles Kettering Achievements and Credit Ratings 12 How We Rank Discipline Ranking All Disciplines 4th All Disciplines-Hispanics 4th All Disciplines-Total Minority 6th All Disciplines-Total Non-Minority 6th All Disciplines-African American 16th Discipline Ranking Education 2nd Nursing, Registered Nursing, rd Administration, Nursing Research and 3 Clinical Nursing Degrees Liberal Arts and Sciences, General Studies, 3rd & Humanities th Rankings based on fall 2014 to fall 2015 data Health Professionals and Related Programs 5 published Sept. 20, 2016 by Community College Week 13 “AAA” S&P Rating Texas Public Community and S&P Rating State Colleges Alamo Community College District AAA Alvin Community College* AA Austin Community College* AA+ College of the Mainland Community College District AA- Collin County Community College District AAA Dallas County Community College District AAA Galveston College** -- Houston Community College System AA+ Lee College AA Lone Star College System District AAA San Jacinto College AA Tarrant County College District** -- * Rated by Moody’s and/or Fitch, comparable to S&P Ratings ** No Outstanding GO Debt 14 S&P Feedback • Participation in the Houston-The Woodlands-Sugar Land metropolitan statistical area’s (MSA) deep and diverse economy, resulting in strong income and wealth levels. • Good financial position with a diverse revenue mix of state funding, local property taxes, and student tuition. • Significant amount of revenue-raising flexibility that offsets potential pressures from enrollment-driven capital needs. • Strong management with well-embedded and likely sustainable financial policies and practices. • Largest institution of higher education in the greater Houston area. • Resident median household effective buying income and per capita income levels are strong. • The College's service area is in one of the fastest growing regions in the state with healthy tax base and future expansion. 15 “A penny saved is a penny earned.” – Benjamin Franklin Fiscally Responsible and Conservative Financial Policy 16 Financial Responsibility Awarded Government Finance Officers Association’s Certificate of Achievement for Excellence in Financial Reporting for fourteen consecutive years (2004-2017). 17 Funding Budget 2017 – 2018 $373,733,091 Funding Sources 2017 – 2018 Property Tax - $152,113,453 State Funds - $77,952,734 Misc. Activities - $17,230,947 Tuition and Fees - $126,435,957 18 Property Tax Rates As of 4/2/18 19 Certified Tax Values Certified Property Tax Value History Certified Tax Values as of 4/2/18 20 Cash Reserves FY17 Budget FY17 Actual FY18 Budget Fiscal Year Fiscal Year Ending Balance: Long-Term Cash Beginning Balance: 52.0 52.0 52.0 Total Expenditures 335.2 317.9 352.3 % Reserves 15.5% 16.4% 14.8% FY18 Estimates Ending Cash Reserve % 15.5% 16.0% Target FY18 Ending Long-Term Cash Balance 54.6 56.4 Addition to FY18 Beginning Reserves Required 2.6 4.3 FY18 Budgeted Addition to Reserves 7.5 ($millions) 21 “Your input determines your outlook. Your outlook determines your output, and your output determines your future.” – Zig Ziglar Future Outlook 22 Impact of Hurricane Harvey • LSC facilities sustained $39 million in damage (includes wind damage at CyFair, flood damage at University Park, flood damage at North Harris, and severe flood damage at Kingwood). • System-wide, the number of credit hours has decreased 2% and the number of contact hours has decreased 3%. • Due to this decrease, LSC’s revenue from tuition and fees is down $3 million, however this will not affect state funding which makes up 21% of LSC’s total revenue. Budget cuts were also immediately made to offset this $3 million. • Most of the decreases are due to flooding at LSC-Kingwood, which sustained more damage than any of the other five main campuses, losing 80% of its facilities. • The number of students enrolled at LSC-Kingwood in the Spring semester has only decreased 2% since last year, while credit and contact hours each decreased 13%. • Six of the nine LSC-Kingwood main campus’ buildings are undergoing renovations, however most of the classes have been moved to other LSC sites or online. The number of students taking online classes has increased by 7%. 23 5-Year Financial Plan • 5-Year Planning Tool • Student tuition and fees-rate changes • Out-of-District / Out-of-State Fee • Differential Fee • Credit Tuition 24 Estimated Population Growth 25 Head Count Growth 26 Construction Projects Phase I Completion • CyFair Instructional Building – CASA • CyFair Cypress Center Workforce Expansion • Kingwood Student Services Expansion • Kingwood Process Technology Building • Montgomery Live Entertainment Technology Building • Montgomery Conroe Center Workforce Expansion • North Harris Construction and Skilled Trades Technology Center • Tomball Health Science Center Building Buildout • Tomball South Entrance • UP Science and Innovation Building 27 Construction Projects Phase I Still In Works • CyFair Advanced Technology Building (Westway) – Fall 2018 – Construction to begin end of March • Magnolia Satellite Center – Fall 2020 tentative – Pending land purchase • East Aldine Satellite Center – Fall 2019 – Finalizing Guaranteed Maximum Price now after March Board approval • North Harris Transportation and Logistics Institute – Fall 2019 – Currently refining program scope to bring within budget • Oil and Gas Training Center – In process of hiring consultant to write technical specifications 28 Construction Projects Phase II • Kingwood Healthcare Instructional Building – Fall 2020 – Construction Manager contract with Tellepsen contract executed – Programming to begin end of March • Montgomery Student Services Building – Fall 2020 – Contract for design with Harrison Kornberg signed 3/10/18 • UP Instructional Arts Building – Fall 2020 – Construction Manager contract with Brookstone pending execution 29 Construction Projects Phase III • North Harris Victory Center Expansion • Tomball Student Services Building • For all campuses, renovation projects, traffic infrastructure, and repair and replacements 30 APPENDIX “The strength of the team is each individual member. The strength of each member is the team.” – Phil Jackson Experienced Leadership Team A1 Board of Trustees Alton Smith, Ed.D. Kyle A. Scott, Ph.D. Ken E. Lloyd Myriam Saldívar Chair Vice Chair Secretary Assistant Secretary Trustee, District 3 Trustee, Position 2 Trustee, District 9 Trustee, District 6 David Holsey, DDS Art Murillo David A. Vogt Linda S. Good, JD Ron Trowbridge, Ph.D. Trustee, Position 1 Trustee, District 4 Trustee, District 5 Trustee, District 7 Trustee, Position 8 A2 Chancellor’s Cabinet (Administration) Dr. Stephen C. Head, Ph.D. Mario K. Castillo Link Alander Helen Clougherty Chancellor COO & General Counsel Vice Chancellor-College Services Vice Chancellor & Chief of Staff (34 Years of Service) (3 Years of Service/ 12 Years Legal Experience) (14 Years of Service) (10 Years of Service) Alicia Harvey-Smith Jennifer Mott Quentin Wright EVC Academic & Student Success CFO & EVC Finance & Operations Special Assistant to the Chancellor (1+ Years of Service/ 18 Years Experience) (1+ Years of Service/ 11 Years Experience) (3 Years of Service/ 9 Years Experience) A3 Chancellor’s Cabinet (College Presidents) Shah Ardalan Seelpa Keshvala Gerald F. Napoles President LSC-University Park President LSC-Cy Fair President LSC-North Harris (10 Years of Service/ 30 Years Experience) (2 Years of Service/ 20 Years Experience) (2 Years of Service/ 16 Years Experience) Lee Ann Nutt Katherine Persson Rebecca L. Riley President LSC-Tomball President LSC-Kingwood President LSC-Montgomery (5 Years of Service/ 19 Years Experience) (34 Years