West Contra Costa USD Proposed Refunding Plan Presentation to the Facilities Subcommittee January 11, 2012.

West Contra Costa USDProposed Refunding Plan

Presentation to the Facilities SubcommitteeJanuary 11, 2012

Continued Low Interest Rates

Interest rates have been relatively low for a relatively long period of time.

West Contra Costa Unified School District Facilities Subcommittee | page 2

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Jan-11 Feb-11Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12

Recent History of Municipal Interest Rates

30-Year MMD Spot 20-Year MMD Spot 10-Year MMD Spot

Refunding Discussions

The District has been involved in ongoing discussion of refunding strategies since this past summer.

In June, the financing team identified tax rate issues and discussed the issuing of refunding bonds as a potential solution.

The District board authorized the issuance of refunding bonds on a maturity-by-maturity basis upon meeting a 4% present value savings target.

The District board also approved a strategy which emphasized economics over re-structuring alone and accepted the fact that tax rates might exceed targeted maximums.

At the end of the day, a dramatic decrease in rates heading into the sale allowed the District to meet both objectives.


2011 GO Refunding Bonds

Largely do to favorable market conditions, the 2011 GO Refunding Bonds issue was very successful.

Issued $95 million in refunding bonds (out of approx. $200 million authorized).

Provide 3.24% borrowing cost and generated $7.35 million in present value savings. (7.79% of refunding bond proceeds)

2000 Measure M refunding structured to maximize savings in tax year 2016-17.

2002 Measure D refunding structured to maximize savings in tax year 2011-12 and 2012-15.

Both bond programs are expected to meet tax rate targets for at least the current and next tax year.


Refunding Candidates

At this point, there are relatively few bonds that are attractive refunding candidates.

The three series of bonds authorized for refunding but not yet refunded (Election of 2000 Series C, Election of 2002 Series A, and Election of 2002 Series B) are currently callable but all maturities prior to 2024 have been refunded.

The Election of 2002 Series C current interest bonds are callable beginning August 1, 2013.

All other bonds of the District have more than two years remaining until the call date or are noncallable.


Tax Rate Constraints

At the same time, the financing team continues to be concerned about tax rate management issues, particularly with regard to the 2002 Measure D and 2005 Measure J Bonds.

2002 Measure D program would have exceeded target tax rate had refunding bonds not been issued.

Both of these programs call for escalating debt service through program maturity.

2000 Measure M program may also exceed tax rate targets if tax base declines return.

Potential long-term solutions include the return of robust tax base growth, the ability to refund and restructure existing debt service, and/or the availability of tax rate stabilization funds.


Refunding Strategy

At the last Facility Subcommittee meeting, the financing team proposed the following strategy.

Plan to issue refunding bonds in connection with release of new assessed values this summer.

Continue to monitor the market and plan to refund if interest rates move significantly downward.

Include additional bonds with shorter maturities in order to increase the District’s flexibility to impact tax rates over the next several years.

Such strategy recognizes the vulnerability of the various programs to further fluctuation in the tax base, and the increasingly limited number of opportunities to effect restructuring.


Refunding Resolution

The Board will consider a refunding resolution on January 18th.

Resolution will authorize the refunding of certain bonds, (those already authorized to be refunded plus the election of 2002, Series C bonds) under certain circumstances (provided that present value savings exceed 4% of refunding proceeds).

Resolution authorizes staff to direct the disclosure counsel to prepare a preliminary official statement which would be brought back for approval by the Board prior to the sale of bonds.

Having the Board signed off on the refunding plan and having the initial authorization in place will reduce the time necessary to bring the bonds to market.


Timing

With such authorization in place, the District will be able to have the refunding bonds in the market within four weeks.

Disclosure counsel will be able to prepare an official statement within two weeks time.

The rating process can be conducted as the disclosure documents are prepared.

Investor outreach will be ongoing.

The Board will consider one more action item before refunding bonds are sold.


Current Rates

Although treasury rates have not fallen, judging from MMD, interest rates available to the District are now modestly lower than when we passed on refunding bonds in August and November.


Date 10 Year Treasury 5 Year MMD 10 Year MMD 15 Year MMD 20 Year MMD

8/10/11 2.13 0.90 2.26 3.00 3.45

11/8/11 2.06 1.19 2.29 2.98 3.44

12/1/11 2.11 1.09 2.22 3.01 3.51

1/11/12 1.90 0.84 1.79 2.47 2.97

West Contra Costa USD Proposed Refunding Plan Presentation to the Facilities Subcommittee January 11, 2012.

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