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2 Los Angeles Unified School District 333 South Beaudry Ave, Los Angeles, CA Board of Education Report File #: /16, Version: Debt Report Los Angeles Unified School District Page 1 of 1 Printed on 5/20/2016 powered by Legistar

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4 What are the Purposes of the Annual Debt Report? The District s Debt Management Policy requires a Debt Report to be issued each Fiscal Year that provides a: 1. Detailed overview of the District s outstanding debt (General Obligation Bonds (GO Bonds) and Certificates of Participation (COPs)); 2. Summary of the District s statutory Debt Limit and Debt Capacity; 3. Review of the District s tax rate performance on each of its GO bond measures; 4. Summary of debt service savings for taxpayers or the District due to refundings; 5. Review of the District s debt ratio performance compared to large school districts in the nation; and 6. Review of the District s credit ratings. 1

5 1. Overview of Outstanding Debt as of June 30, 2015 General Obligation Bonds (GOs) Certificates of Participation (COPs) Total Par Amount Outstanding $10,296,665,000 $295,942,193 FY Debt Service $824,819,994 $50,070,661 (1) Debt Service Paid By Taxpayers General Fund and Developer Fees All Fixed Rate Debt Yes Yes (1) Includes $4,266,404 of unspent project funds deposited in a refunding escrow 2

6 2. Debt Limit and Debt Capacity Only GOs are considered debt under the legal definition of debt As of 6/30/2015, District s Legal Debt Margin was about $3.0 billion of new GO Bonds (based on FY AV and currently outstanding bonds, the current Legal Debt Margin is about $3.8 billion) Bonded Debt Limitation and Legal Debt Margin As of June 30, 2015, in $000 s Total Assessed Valuation $532,934,207 Bonded Debt Limitation (2.5% times Assessed Valuation) $13,323,355 Less: Outstanding General Obligation Bonds (10,296,665) Equals: Legal Debt Margin (1) $3,026,690 Under the Debt Management Policy, maximum annual COPs debt service is 2.5% of general fund expenditures or $105 million; as of June 30, 2015, maximum annual COPs debt service was $43.9 million (0.70% of general fund expenditures) (1) The District s Comprehensive Annual Financial Report ( CAFR ) reports these figures differently by adjusting them for unamortized bond premiums and discounts and amounts available in the Bond Interest and Redemption Fund to pay bond principal. 3

7 3. Tax Rate Performance Tax rates paid by District taxpayers to pay GO Bond debt service are expressed as $/$100,000 of assessed valuation (AV) in the Debt Report For example, a tax rate of $60/$100,000 of AV means an owner of a $300,000 property pays 3 times $60, or $180, in the given year The District has outperformed the projected tax rates estimated at the time of each bond election Bond Measure Total Authorization ($Billions) (1) (A) Estimated Maximum Tax Rate per $100,000 of AV at Time of Bond Election (B) Actual Maximum Tax Rate per $100,000 of AV to Date (C) Current Tax Rate per $100,000 of AV (FY ) Prop BB $2.400 $67.36 $50.55 $32.05 Measure K $3.350 $60.00 $46.46 $34.11 Measure R $3.870 $60.00 $52.37 $34.85 Measure Y $3.985 $60.00 $53.23 $28.70 Measure Q $7.000 $60.00 None issued as of 6/30/2015 None issued as of 6/30/2015 (1) As of June 30, 2015, no remaining unissued bonds under Prop BB and Measure K; $ million of remaining Measure R authorization; and $ million of remaining Measure Y authorization 4

8 4. Refunding Savings Finance regularly monitors market conditions for opportunities to refinance outstanding debt at lower interest cost In , the District sold $326 million of refunding GO bonds that generated $81 million of savings Debt Refunded (since 1991) Number of Series Savings GO Bonds 17 $489 MN COPs (includes restructurings) 21 Approx. $418 MN* * Represents savings to the General Fund, $407 MN of which was attributed to shifting the cost of COPs debt service from the General Fund to general obligation bonds. 5

9 5. Debt Ratio Performance District s debt ratios are higher than policy benchmarks primarily because LAUSD has the largest school district capital program in the nation Policy Benchmarks for District s Direct and Overall Debt (As of June 30, 2015) Debt Burden Ratio Benchmark Direct Debt to Assessed Value Overall Debt to Assessed Valuation Direct Debt Per Capita Overall Debt Per Capita Benchmark s LAUSD Value Actual (1) Moody s Median for Aa Rated School Districts With Student Population Above 200, % 1.99% Standard & Poor s Mean for AA Rated School Districts With Student Population Above 150, % Moody s Median for Aa Rated School Districts With Student Population Above 200, % 3.54% Standard & Poor s Mean for AA Rated School Districts With Student Population Above 150, % Standard & Poor s Median for AA Rated School Districts With Student Population Above 150,000 $736 $2,258 Standard & Poor s Mean for AA Rated School Districts With Student Population Above 150,000 $847 Standard & Poor s Median for AA Rated School Districts With Student Population Above 150,000 $1,665 $4,016 Standard & Poor s Mean for AA Rated School Districts With Student Population Above 150,000 $2,639 (1) The District s Comprehensive Annual Financial Report ( CAFR ) reports these figures differently by adjusting outstanding bonds and COPs for amounts held in sinking funds and redemption accounts. 6

10 6. Ratings (As of 6/30/2015) Long-Term Credit Ratings (District's GO Bond Ratings Highlighted in Green) (District's COPs Ratings Highlighted in Blue) (1) Moody's S&P Best Quality Aaa AAA High Quality Upper Medium Grade Medium Grade Aa1 AA+ Aa2 AA Aa3 AA- A1 A+ A2 A A3 A- Baa1 BBB+ Baa2 BBB Baa3 BBB- Below Investment Grade Ba1 and lower BB+ and lower (1) S&P rates COPs one notch lower than the rating on GO bonds, whereas Moody's rates COPs two notches lower than the rating on GO bonds. District s GOs have had high quality ratings District s COPs have had upper medium grade ratings As of 6/30/2015, ratings Outlooks were Stable District s TRANs, issued when necessary, have been rated MIG 1 (Moody s)/sp-1+ (S&P) highest short-term ratings Following SB222 enactment on January 1, 2016, rating agencies approach changed This resulted in a AAA GO bond rating from Fitch 7

11 FY Debt Report Conclusions 1. As of June 30, 2015, the District had capacity to issue about $3.0 billion of new GO bonds (1), assuming such issuance stays within Proposition 39 tax rate requirements; 2. Tax rates paid by taxpayers on the District s GO Bonds have generally been lower than estimated at the time of each bond election; 3. District s debt ratios are higher than national benchmarks, due to LAUSD s massive bond program compared to other rated school districts; 4. As of 6/30/15, the District s credit ratings were unchanged; and 5. Effective January 1, 2016, SB222 enabled California school districts to achieve higher ratings on GO bonds by two rating agencies. (1) As of today, capacity for new GO Bonds is almost $3.8 billion, due to the ongoing paydown of prior bonds, refundings, new money issuance, and increased AV in FY

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13 Los Angeles Unified School District 333 South Beaudry Ave, Los Angeles, CA Board of Education Report File #: /16, Version: 1 Impact of Proposition 30 Expiration and New Extension Proposal Los Angeles Unified School District Page 1 of 1 Printed on 5/20/2016 powered by Legistar

14 Proposition 30 (Prop 30) May 24, 2016

15 Background What is Prop 30 all about? Prop 30, The Schools & Local Public Safety Protection Act of 2012, is a temporary tax measure that provides temporary tax revenue directed to K-14 education. Two components of Prop 30: Sales and Use Tax (SUT) Increase expires end of 2016 Personal Income Tax (PIT) - Increase for residents with annual income over $250,000 expires end of

16 Prop 30 Revenue How much revenue is generated for the State? Two Components of Proposition 30 (In Billions) SUT ends in PIT ends in Personal Income Tax Sales Tax 3

17 Prop 30 and LCFF Revenue What portion of the District revenue is attributable to Prop 30? The District receives its share of the Prop 30 revenue through the Local Control Funding Formula (LCFF). Education Protection Act (EPA) accounts for approximately 13% of the LCFF revenue. SUT 2% (ends in 2016) PIT 11% (ends in 2018) 4

18 Prop 30 Expiration What happens to education funding as Prop 30 expires? In November, under a moderate economic growth scenario, the Legislative Analyst Office (LAO) estimates a no cliff effect. 5

19 Prop 30 Expiration Other Scenario What happens if there is an economic downturn as Prop 30 expires? Budget is based on moderate scenario 6

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21 INFORMATIVE

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26 No Advance Materials Available

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28 Los Angeles Unified School District 333 South Beaudry Ave, Los Angeles, CA Board of Education Report File #: /16, Version: 1 Draft Office of Inspector General Work Plan Los Angeles Unified School District Page 1 of 1 Printed on 5/20/2016 powered by Legistar

29 OFFICE OF THE INSPECTOR GENERAL DRAFT FY 2017 ANNUAL WORK PLAN Budget, Facilities and Audit Committee Tuesday, May 24, 2016

30 FY 2017 OIG Annual Work Plan Introduction Auditing standards require an annual work plan describing the audits planned for the year and that the plan be approved by the organization s governing body. The OIG s Work Plan is comprehensive and incorporates (i) the Board s suggested areas of focus, (ii) District Management s suggested areas of focus, and (iii) the results of the OIG s robust risk assessment process. The Work Plan is intended to be dynamic and flexible so that we are able to be responsive to emerging risks and changing priorities. 2

31 FY 2017 OIG Annual Work Plan Background The FY 2017 OIG Annual Work Plan is scheduled to go before the Board of Education for approval at the June 14, 2016 Regular Board Meeting. The Work Plan is presented in three sections covering Internal Audits, Contract Audits, and Investigations. 3

32 FY 2017 OIG Annual Work Plan Internal Audits Performance audits of programs, processes, functions and systems District-wide. Performed mainly to (i) evaluate the efficiency and effectiveness of District operations, (ii) determine if activities are being carried out in accordance with District policies, applicable laws and regulations, and (iii) assess whether desired outcomes are being achieved. 4

33 FY 2017 OIG Annual Work Plan Internal Audits (27_projects) Information Technology & Telecommunications School Safety Cafeteria and Food Services Financial Operations Special Education School Audits School Construction & Modernization Program Employee Training District Programs and Processes Follow-Up Reviews Discretionary Audits 5

34 FY 2017 OIG Annual Work Plan Contract Audits Audits of the District s procurement system including contracts for goods and services as well as for the school construction and modernization program. Performed to help ensure that (i) District vendors and contractors comply with the requirements of their contracts, (ii) funds, especially bond funds, are expended as intended, and (iii) the District received the goods and services paid for. 6

35 FY 2017 OIG Annual Work Plan Contract Construction Contracts Audits (45_projects) Professional Services & Supplies Contracts Special Reviews Technical Evaluations Change Order Audits Pre-Award Audits 7

36 FY 2017 OIG Annual Work Plan Investigations Investigate allegations of improper or illegal activities by District employees, contractors or other entities doing business with the District. Most investigations result from the receipt of allegations of improper activity and from OIG audit referrals. The remaining workload consists of proactive projects designed to prevent waste, fraud, and abuse. 8

37 FY 2017 OIG Annual Work Plan Investigations OIG Fraud Hotline (7 Areas) Employee Integrity Whistleblower Allegations School Construction & Modernization Program Due Diligence & Background Investigations Charter Schools Workers Compensation & Benefits Fraud 9

38 FY 2017 OIG Annual Work Plan Once approved by the Board of Education, the complete FY 2017 OIG Annual Work Plan and details about each project can be found on the OIG website: 10

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