2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO FIN10 - How to Use Bond Funds Creatively...

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

FIN10 - How to Use Bond Funds Creatively While Complying with Legal Requirements

Marilyn J. Cleveland, Dannis Woliver KelleySamuel R. Santana, Dannis Woliver Kelley

APRIL 3-6, 2013, LONG BEACH, CA

These materials have been prepared by CASBO Associate Members. They have not been reviewed by State CASBO for approval, so therefore are not an official statement of CASBO.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

OVERVIEW

Part 1 Legal Requirements for Use of Bond Funds

Part 2 Using Bond Funds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Part 1: Legal Requirements Permissible uses of bond funds

Restrictions on uses of bond funds

Case Study

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Part 2: Creative Use Of Bond Funds

CABs

Technology Endowments

Refunding Bonds

Case Study

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Part 1: Legal Requirements

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Restrictions on Uses of Prop. 39 Bond Funds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Permissible Uses of Bond Funds

• Prop. 46 (2/3rds voter approval)

• Prop. 39 (55% voter approval):

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Permissible Uses of Bond Funds• Operating vs. Capital Expenses

– District operating expenses may not be financed with bonds.

– California Attorney General Opinion.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Case Study• Using Prop. 39 Bond Proceeds for

Project Administrative Costs.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Part 2: Creative Use Of Bond Funds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Capital Appreciation Bonds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Capital Appreciation Bonds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Capital Appreciation Bonds

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Technology Endowments

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Refunding Bonds• Most commonly issued to achieve interest

cost savings.

• Market conditions are conducive to resulting in cost savings.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

1 General Obligation bonds maturing in 20 years are used in compiling this index. The 20-bond index has an average rating equivalent to the Aa2 from Moody’s and AA from Standard & Poor.Source: Bloomberg

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Case Study: Using Bond Funds to Provide General Fund Relief

• Existing lease obligations (“COPs”) were paid off, resulting in over $7 million in savings per year.– Unrestricted rental

income of approximately $4.7 million per year has been freed up for other purposes.

– Developer fees of approximately $2.5 million per year is available for other capital uses.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Savings to District’s Taxpayers• Existing bond debt service was reduced by $12.82

million.• For the taxpayer, annual savings are expected to

average $1.69 per $100,000 of AV.• The median assessed value for a single family

home is $355,120 – so the typical homeowner will pay $6.01 less per year.

2013 CASBO ANNUAL CONFERENCE & SCHOOL BUSINESS EXPO

Marilyn J. Cleveland(415) 543-4111mcleveland@DWKesq.comSamuel R. Santana(562) 366-8500ssantana@DWKesq.com

Please come join us at DWK's Truck Stop @ CASBO on Thursday, April 4, 2013, from 8:30 a.m. to 5:30 p.m., when we will open up DWK's Long Beach office to friends of DWK and provide a comfortable setting for you to make use of our business services (wifi, fax, telephone, copier/scanner), enjoy a light snack, and have an opportunity to chat with colleagues and our attorneys.