General%20Obligation%20Bonds%20and

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• General Obligation Bonds and
• Developer Fees and Agreements

2008 School Finance Conference
Presented by John R. Baracy Vice President Stone
Youngberg LLC
January 19, 2008
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Discussion Items

• General Obligation Bonds
• Developer Fees and Agreements

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GO Bonds

• Secured by an Ad valorem tax on all taxable
  property within the School Districts boundary
• Ad valorem taxes create anew revenue stream for
  theSchool District
• Requires voter approval oftax

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GO Bonds

• Unlimited ability to raise taxes provides
  investors with greatest security and lowest
  borrowing cost
• School Facilities Improvement District (SFID) can
  be formed by School Districts to tax only a
  portion of their territory

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Bond Approval Method

• Two methods available under State law
• Proposition 46 (1986) Required 2/3rds
  favorable vote
• Proposition 39 (2000) Requires 55 favorable
  vote

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Prop 46 v. Prop 39

• Types of Facilities
• Maximum Tax Rates
• Election Dates
• Accountability Measures

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GO Bond Uses

• Prop 46 Bonds may fund
• land acquisition
• purchase or construction of new school facilities
• renovation and repair of existing school
  buildings
• permanent improvements to school grounds
• Prop 39 Bonds may fund
• All the above PLUS
• Furnishing and equipping of school facilities
• Lease of real property for school facilities

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GO Bonds

• Prop 46
• No maximum tax rate
• Prop 39
• Establishes a maximum tax rate(per 100,000 of
  assessed value)
• 30 for elementary andhigh school districts
• 60 for unified school districts
• 25 for community college districts

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Election Dates

• Prop 46
• Any Tuesday 89 Days in Advance of Election
• Prop 39
• February 5, 2008 and June 3, 2008 Primary
  Elections
• November 4, 2008 General Election
• Other dates only if coincide with regularly
  scheduleddistrict-wide election

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Accountability Measures

• Prop 46
• Annual Report(1)
• Prop 39
• Annual Report(1)
• Citizens Oversight Committee (COC)
• Performance and Financial Audits

(1)Required under the Government Code.
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New Legislation Effecting GO Bonds

• AB 1482, also known as the Canciamilla Bill, went
  into affect on January 1, 2007
• Prior to the bond sale, the Board must adopt a
  resolution that
• Designates / approves method of sale
• States reasons for the method of sale selected
• Discloses the bond counsel, and the underwriter
  and financial advisor if eitheror both are used
  for the sale
• Estimates the costs associated with the issuance
• After the bond sale, the actual costs associated
  with the issuance must be
• Presented to the Board
• Disclosed at the next scheduled public meeting
• Submitted to the California Debt and Investment
  Advisory Commission (CDIAC)

• AB 1368, also known as the Mullin Bill, went into
  affect on January 1, 2008 allowing Bond
  Anticipation Notes (BANs) to amortize over 5
  years

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Californias 2006 GO Bond Issues
(in Billions)
Total Amount 14.9 Billion Total Transactions
323
212 Issues
39Issues
K-12 School Facilities
Community College Facilities
General Government (1)
72Issues
(1)Includes Flood Control Storm Drainage,
Healthcare Facilities, Multifamily Housing,
Multiple Capital Improvements, CorrectionalFacili
ties, Parks, Public Building, Public Transit,
Seismic Safety Improvements, Wastewater Water.
Source California Debt and Investment Advisory
Commission (CDIAC)
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Annual K-12 GO Bond Volume
1997-2006
Total Amount 42 Billion Total Transactions
1,837
212 Issues
Source California Debt and Investment Advisory
Commission (CDIAC)
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Developer Fees

• General
• Level One fees are defined as general school
  facilities fees
• Level Two Nominally 50 of construction costs
  with fees to be used for new school construction
• Level Three Nominally 100 of construction
  costs, authorized when the State does not have
  available funds (option is currently suspended).
• More unpredictable than Mello-Roos districts due
  to absence of a formal tax structure
• Securitization of Developer Fees
• If a school district selects to securitize the
  developer fees, generally a Certificates of
  Participation (COP) long term debt instrument
  is issued
• Unless a school district pledges both general
  fund and developer fees (double-barrel pledge),
  securitizing the revenue stream will be very
  costly

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Developer Fees
Advantages
Disadvantages

• Must be for new construction only.
• During times of slower growth, less revenue
  available to pay off debt is the stream is
  securitized.
• - Unpredictable revenue stream.

• Can supplement other financing sources in
  areas of consistent growth.
• Best use in diversifiedareas (multiple
  developers in growing school district)
• No tax restrictions on expenditures (bond
  proceeds are restricted).

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Developer Agreements

• Background Public school districts are
  required to provide facilities to house
  students within their respective
  jurisdiction.
• Senate Bill 50 (SB 50)
• Creates 50/50 split construction costs of new
  schools.
• Over time, hasnt kept up with escalated
  construction costs.
• Current environment requires school districts to
  engage in aggressive mitigation negotiations for
  utilizing other financing vehicles (CFDs) and
  streams of revenue (special tax).

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Developer Agreement Timeline

• Developer typically contacts school district.
• Information is gathered regarding developers
  project needs, likely student generation
  factors and determines potential revenue stream
  identified.
• Special tax consultant and underwriter work
  identified with developer and school district
  during negotiations of the School Facilities
  Impact Mitigation Agreement (SFIMA)
• Once terms are settled, school district board
  adopts the SFIMA
• The SFIMA is recorded on title and becomes an
  obligation of the respective property

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Great Questions and Answers
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The Presenter
CONTACT INFORMATION515 South Figueroa Street,
Suite 1060Los Angeles, California 90071Phone
[phone]Fax [phone]Email
jbaracy_at_syllc.com

• John R. Baracy
• Vice President
• John R. Baracy is a Vice President in our Los
  Angeles office.  He brings over thirteen years of
  experience to California and Arizona education
  finance.  John has expertise in the structuring
  of new money and refunding issues, analysis of
  debt capacity, tax rate analysis, rating agency
  credit presentations, arbitrage rebate
  requirements, derivative financings, and
  investment of bond proceeds for general
  obligation bonds, certificates of participation,
  Mello-Roos bonds, and all other education
  financing vehicles.  Most recently, John has been
  assisting K-12 clients with financing solutions
  pertaining to GASB 45.  He is currently
  structuring transactions totaling nearly 500
  million for school districts looking to fund GASB
  45-related obligations with bond proceeds.
• John is a member of the 2008 CASH Statewide
  General Obligation Bond Committee.  He comes from
  an education family his parents are
  long-standing administrators for a school
  district and community college in Arizona.  John
  has a bachelors of science degree from Arizona
  State University.  He also enjoys playing golf
  and is an active snowboarder.
• Stone Youngberg LLCStone Youngberg was
  founded in San Francisco in 1931The firm was
  established to advise, structure, underwrite and
  sell California municipal bonds. In addition to
  its headquarters office in San Francisco, the
  firm maintains public finance and sales offices
  in Los Angeles, San Diego, New York, Chicago,
  Phoenix, Richmond and Annapolis.
• Today, Stone Youngberg is Californias largest
  regional investment bank devoted to municipal
  bonds. Over the past five years, Stone
  Youngberg has led all investment banks and
  financial advisors by structuring the most
  long-term government financings in California.
• Stone Youngbergs leading status in local
  California municipal finance reflects the firms
  75-year dedication to helping local public
  agencies achieve their financial goals. In 2005,
  Stone Youngberg underwrote 222 financings for
  California public agencies. Since 2001, Stone
  Youngberg has participated on over 1,270
  transactions representing 23.9 billion of
  California financings as sole or senior managing
  underwriter or financial advisor in all areas of
  municipal finance. The firms website is
  www.syllc.com.