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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) [email protected] R. Santana(562) [email protected]
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.