West Contra Costa USD Presentation to the Facilities Subcommittee June 12, 2012

West Contra Costa USDPresentation to the Facilities SubcommitteeJune 12, 2012

GOB Refunding The District has been discussing the possibility of

refunding certain outstanding general obligation bonds not included in the 2011 GO Refunding Bonds or added on to the Election of 2010, Series A, Bonds since January.

Bonds under consideration include the (a) Election of 2000, Series C, (b) Election of 2002, Series A, (c) Election of 2002, Series B, and (d) Election of 2002, Series C.

Bonds were excluded from prior transactions because savings did not reach District established 4% threshold given structuring priorities (no acceleration).

Improvement of rates in December and January brought pressure to move ahead with a transaction that was now “in the money”.

The financing team recommended a patient approach.

West Contra Costa Unified School District Facilities Subcommittee | page 2

Plan for July Sale

To date, the District has been following the recommendation to issue refunding bonds after the release of 2012-13 assessed value information in July.

The District’s 2000 Measure M, 2002 Measure D, and 2005 Measure J bond programs are significantly constrained.

The County is currently levying tax rates at the targeted maximum on all four post-2000 bond measures.

Additional knowledge about 2012-13 assessed values would provide some benefit in terms of efficiently structuring debt service to meet immediate constraints.

At the same time, the District has been taking action to remain flexible to enter the market quickly if desirable.


1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

10-year AAA MMD and 10-year Treasury Yields since Jan 2011

10-year AAA MMD 10-year Treasury

Recent Market Movements

In recent weeks, rates on U.S. treasury securities have decreased dramatically.


Recommendation to Accelerate Sale Decreases in interest rates are the primary reason

that the financing team has recommended to accelerate the sale.

The recent market movement puts the ten-year treasury at its all-time low.

Strong market movements often suggest increase volatility on a good forward basis.

Difficult to turn down an opportunity to issue refunding bonds at the time that interest rates (by some measures) are at an all-time low.

The County Assessor has given us some feedback that assessed values will be flat into 2012-13.


Other Considerations

There are certain downsides that remain for such strategy.

Interest rates might continue to decrease into July.

2012-13 assessed values could differ significantly from current projections.

In the event that assessed values unexpectedly decrease significantly, tax rates could exceed targeted maximums in tax year 2012-13 despite the intent of the District to address such concern through refunding.


Widening of Credit Spreads

Market developments in the past week make it clear that the District will not receive the full benefit of the improvement in U.S. treasury rates.

After reaching a historical low in early June, 10-year Treasury rates have increased by 15 basis points.

During the same period, 10-year MMD rates have increased by about 15 basis points, despite the fact that municipals did not participate in the earlier Treasury rally.

Investors have started to push for wider spreads or remain hesitant about entering the market.


Savings

Still, we expect the proposed refunding transaction to produce $8.5 million in present value savings.


Par Amount $95,000,000

Available Proceeds $105,000,000

Effective Borrowing Rate (TIC) 4.20%

Present Value Savings $8,500,000

Percent PV Savings 8.25%

Impact of 10 bp market movement $1.2 million

Bonds to Be Included

The financing team is recommending that the following bonds be included in the refunding.


Refunded Par

PV SavingsCall Date

Call Price

Election of 2000, Series C

$43,115,000 $3,705,000 Current 100%

Election of 2002, Series A

11,515,000 965,000 Current 100%

Election of 2002, Series B

40,460,000 3,310,000 Current 100%

Election of 2002, Series C

7,610,000 520,000 8/1/2013 101%

Total $102,700,000 $8,500,000

Rating Confirmations

All three rating agencies have confirmed the ratings on the District’s bonds.


Rating Outlook

Moody’s Aa3 Stable

S&P A+ Stable

Fitch A+ Stable

Rating Rationale

The following strengths and weaknesses were highlighted in published rating reports.

Strengths

Well-sized and stabilizing assessed valuation

Strong reserves

Participation in the Bay Area economy

Challenges

Uncertain funding environment for California school districts

High overall debt burden


Investor Outreach The District has scheduled investor outreach events

on Wednesday and Friday of this week.

The District will conduct a net road show tomorrow at noon California time.

The District plans on conducting one-on-one investor meetings on Friday.

The purpose of the investor outreach program is three-fold: to counter unwarranted negative impressions of the investor community, to cultivate investor interest in individual transactions, and to build the District’s reputation as a leader in investor outreach.

The closing of the refunding transaction in July will allow the District greater latitude in implementing a more general program.


Schedule

The District plans to price bonds next week and to close two weeks later.


Date Event

Wednesday, June 13th One-on-one investor calls and net road show.

Monday, June 18th * Pre-pricing call.

Tuesday, June 19th * Pricing Call.

Thursday, June 26th Finalize Official Statement.

Week of July 2nd County Assessor releases preliminary 2012-13 assessed valuation figures.

Week of July 9th Meeting with County Treasurer-Tax Collector’s Office.

Monday, July 9th All closing documents signed and returned to bond counsel.

Tuesday, July 10th Closing.

* Tentative.

AV by Jurisdiction


City of El Cerrito, $2,919,955,318 ,

13.2%

Town of Hercules,

$2,433,770,611 , 11.0%

City of Pinole, $1,742,147,028 ,

7.9%

City of Richmond, $10,928,282,886

, 49.3%

City of San Pablo, $1,189,432,247 ,

5.4%

Kensington (Unincorporated), $890,362,985 ,

4.0%

Other Unincorporated

Contra Costa County,

$2,066,611,997 , 9.3%

Assessed Valuation

City of El Cerrito, $145,997,766

Town of Hercules,

$121,688,531

City of Pinole, $87,107,351

City of Richmond, $546,414,144

City of San Pablo, $59,471,612

Kensington (Unincorporated)

, $44,518,149

Other Unincorporated

Contra Costa County,

$103,330,600

Bonding Capacity (Assuming 5% of Tax Base)

Documents

West Contra Costa USD Presentation to the Facilities Subcommittee June 12, 2012