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Loans for airport development. |
05LSO-0325.L1 |
FISCAL NOTE
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FY 2007 |
FY 2008 |
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NON-ADMINISTRATIVE IMPACT |
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Anticipated Revenue Decrease: |
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GENERAL FUND |
82,000 |
84,000 |
115,000 |
Source of Revenue Decrease:
The revenue decrease to the General Fund is a result of the difference between the interest earned on the PMTF and the interest rate applied to the loaned funds.
Assumptions:
Loan demand is unknown. The above assumes the entire $10,000,000 is loaned out in early FY06; therefore, the interest rate on the loans would be set at the rate of interest earned on the PMTF during FY05 which is projected to be 2.52 percent. Decrease in revenue to the General Fund for FY06, FY07 and FY08 would be the difference between the projected rate of return on the PMTF each year and the interest earned on the loan (the interest earned on the PMTF during FY05). The projected annual rate of return on the PMTF is 2.52 percent for FY05; 3.34 percent for FY06; 3.36 percent of FY07 and 3.67 percent for FY08. It should be noted that the anticipated rate of return on the PMTF will increase as the assets in the fund are fully invested in a diversified portfolio, with an anticipated rate of return expected to reach between 7.5 percent and 8 percent within the next 10 years. Although it is unknown what the term of these loans will be, it is assumed they will be at least 10-year loans. Assuming the rate of return for the PMTF portfolio is projected to be approximately 8 percent and the entire $10,000,000 is outstanding, the decrease in revenue would amount to $548,000 each year (the difference between the interest on $10,000,000 at 2.52 percent (interest rate on loan) and 8 percent – the anticipated rate of return on the PMTF assets.
Prepared by: Sharon Garland, State Treasurer's Office Phone: 777-7408