Planning for a Successful Bond Measure. Fountain Valley School District Board Study Session July 28, 2016 Charles Heath, Partner

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1 Planning for a Successful Bond Measure Fountain Valley School District Board Study Session July 28, 2016 Charles Heath, Partner

2 The Bond Planning Process

3 The Bond Planning Process à Poll à Election timing à Tax rate à Projects à Political landscape à Competing issues à Potential controversy

4 The Bond Planning Process à Inform and engage internal school community à Parents à Teachers à Staff à PTAs à Inform and engage external community à Elected leaders à Business leaders à Faith community à Ethnic leaders

5 The Bond Planning Process à Resolution calling election à Ballot question à Project list à Tax rate statement à Board vote

6 The Bond Planning Process à Private fundraising à Lawn signs à Direct mail à Endorsements à Phone banks à Precinct walks à Website à Social Media

7 The Bond Planning Process à Ensure strong parent participation à Remind supporters to vote all the way down the ballot

8 November 2016 Bond Timeline Unlikely Voters 15% Likely Voters 85% FVSD Registered Voters: 30,801 Expected Voter Turnout: 26,107 (85%) Votes Needed to Win: 14,359 (15%)

9 FVSD Voter Summary

10 Next Steps - July Prepare messaging documents (fact sheet, talking points, FAQ, web content, outreach presentation, etc.) about facilities needs and potential bond measure Identify key external stakeholders (elected officials, business leaders, civic organizations, service clubs, ethnic community leaders, senior organizations and others) for outreach meetings/presentations and begin scheduling meetings Draft resolution and ballot language and review with OC Taxpayers Association for approval Send informational mailer to all registered voters and parents in the district about facilities needs and potential bond measure Send Superintendent s Update blast to all parents and staff in the district about facilities needs and potential bond measure

11 Next Steps - August Edit and finalize resolution and ballot language August 11: Target Board Meeting date for Board of Trustees to vote to place bond measure on November 8, 2016 ballot August 12 (88 Days Before Date of Election): Deadline to file resolution with Orange County Registrar of Voters placing measure on the ballot August 15: Ballot designation assigned by Orange County Registrar of Voters for local ballot measures Update messaging documents (fact sheet, talking points, FAQ, web content, etc.) to reflect Board action to place measure on ballot and measure letter assignment

12 Next Steps August (cont.) Draft 300 word Official Argument in Favor of bond measure and seek five signers with titles August 19: Deadline to file Official Argument in Favor of bond measure with five signers to Orange County Registrar of Voters If opposition group filed an Argument Against the bond measure, draft 250 word Rebuttal to the Argument Against and seek five additional signers with titles August 22: Target date to send second informational mailer to all registered voters and parents in the district about bond measure on November ballot August 22: Target date to send Superintendent s Update blast to all parents and staff in the district about bond measure on November ballot August 26: Deadline to file Rebuttal to the Argument Against the bond measure with five signers to Orange County Registrar of Voters

13 Next Steps - September Finalize talking points, FAQ and guidelines for teacher and staff involvement in bond measure process for distribution at back to school staff development meetings Finalize bond measure informational fact sheet to be included in student registration/back to school packets September 7: Distribute bond measure informational fact sheet to school sites to send home with students on first day of school Finalize talking points for informational talking points for principals for use at Back to School Nights and provide informational fact sheets to be distributed at Back to School Nights Make informational presentations at first meetings of school year for teachers association, CSEA, PTA Council, individual PTAs and any other parent groups or organizations Transition to independent advocacy campaign

Fountain Valley School District Board Workshop: CLICK TO EDITBond MASTER

Measure Financial Plan Government Financial Strategies Presented by Lori

1 Presentation 2016 Government Financial materials provided forstrategies

14 Fountain Valley School District Board Workshop: CLICK TO EDITBond MASTER Feasibility of a Local Measure -TITLE Update on GeneralSTYLE Obligation Bond Measure Financial Plan Government Financial Strategies Presented by Lori Raineri and Keith Weaver July 28, 2016 Fountain Valley School District - Page 1 Presentation 2016 Government Financial materials provided forstrategies distribution at the meeting. Please see meeting record for verbal commentary and discussion.

15 Bond Basics u A bond is a loan. Bond Proceeds Facilities Improvements Bond Repayment Community Benefit u Just like a home mortgage, a bond allows the taxpayers to buy and receive the benefit of the facilities now, and pay for them over time. Fountain Valley School District - Page 2

16 Bond Market Update: Interest Rates ê Interest Rate 28% Until Recently, The Interest Rate On Tax-Exempt 20 Year Municipal Bonds Was Almost Always Lower Than The Rate On Taxable 30 Year U.S. Treasury Bonds Rate Differential 3.0% 26% 24% Market uncertainty led to a dramatically atypical relationship between municipal rates, as represented by the Bond Buyer 20-Bond Index, and 30-year U.S. Treasury rates. The market returned to a more traditional relationship before reverting back to an atypical condition. 2.0% 1.0% 22% 0.0% 20% -1.0% 18% -2.0% 16% 14% Differential Between Bond Buyer and U. S. Treasuries -3.0% -4.0% 12% -5.0% 10% 8% Bond Buyer 20-Year Municipal Index 2.87% as of July 21, % -7.0% 6% -8.0% 4% -9.0% 2% 30-Year U.S. Treasury Rate -10.0% 2.29% as of July 21, % -11.0% Jan Apr Aug Nov Mar Jul Oct Feb May Sep Jan Apr Aug Nov Mar Date The 20-Bond Index consists of 20 general obligation bonds that mature in 20 years. The average rating of the 20 bonds is roughly equivalent to Moody's Investors Service's Aa2 rating and Standard & Poor's Rating Service AA. The 30 Year Treasury bond yield is as quoted by The Bond Buyer. Fountain Valley School District - Page 3

17 Tax Levy Amounts Tested in Survey Tax Levy* $30 $27 $24 *note: tax levy is expressed in terms of $ per $100,000 of assessed value. Fountain Valley School District - Page 4

18 Tax Levy Amounts Tested in Survey Tax Levy* Estimated Bond Amount $30 $59 million $27 $53 million $24 $37 million *note: tax levy is expressed in terms of $ per $100,000 of assessed value. Fountain Valley School District - Page 5

19 Projected Tax Levies $30 / $100,000 AV Total G.O. Bond Tax Levy $35.00 Tax Levies for a New Bond Measure are Projected Just Below the Maximum Allowable Projection of $30 per $100,000 of Assessed Value for a 55% Voter Approval Measure Maximum allowable projected tax levy: $30.00 $30.00 $25.00 $20.00 $15.00 Projected Tax Levies per $100,000 of AV Maximum: $29.99 $10.00 Average: Minimum: $29.90 $29.69 $5.00 $ Fiscal Year Beginning July 1 Fountain Valley School District - Page 6

20 G.O. Bond Tax Rates u Bond tax rate debt service assessed value u Each property in the District pays its pro rata share, based on its individual assessed value (not market value) Fountain Valley School District - Page 7

Historical Assessed Value Local Secured AV $8,000,000,000 $7,000,000,000 $6,000,000,000 $5,000,000,000 Net Local Secured Assessed Value Has Averaged Just Over 5.

21 Historical Assessed Value Local Secured AV $8,000,000,000 $7,000,000,000 $6,000,000,000 $5,000,000,000 Net Local Secured Assessed Value Has Averaged Just Over 5.0% Annual Growth Over the Last 13 Years Annual AV Inflation Factor 7.00% 6.19% 8.23% 8.63% 8.19% 9.22% 8.46% 1.01% 1.19% 3.70% 1.46% 2.03% Local secured AV 2.85% 6.00% 5.00% 4.00% $4,000,000, % 3.00% $3,000,000, % $2,000,000,000 Annual CA AV Inflation Factor - CCPI Annual CA AV Inflation Factor - 2% 1.00% $1,000,000, % $ % Fiscal Year Beg. July 1 Note: Assessed values provided by Orange County Auditor-Controller's Department. Local secured AV represents 97% of total AV and has the lowest volatiility and therefore most predicability amongst AV categories. Prop 13 inflation adjustment per State Board of Equalization. Fountain Valley School District - Page 8

Tax Base that Increases Over Time Bond Debt Service $6,000,000 $18,000,000,000 $15,000,000,000 Local secured AV is assumed to grow 3% annually

Repayment Current Interest Bonds $3,000,000 $2,000,000 $3,000,000,000 Series 2017 Repayment Current Interest Bonds $1,000,000 $0 $0 2016 2019 2022

22 Stable Tax Rate à Payments Grow w/proj. AV Total AV $21,000,000,000 5 Year Plan: Bonds are Issued in 3 Series Over 5 Years, Debt Service has 25 Year Terms, and Expected to be Repaid by a Tax Base that Increases Over Time Bond Debt Service $6,000,000 $18,000,000,000 $15,000,000,000 Local secured AV is assumed to grow 3% annually beginning in FY $5,000,000 $12,000,000,000 Series 2021 Repayment Current Interest Bonds $4,000,000 $9,000,000,000 $6,000,000,000 Series 2019 Repayment Current Interest Bonds $3,000,000 $2,000,000 $3,000,000,000 Series 2017 Repayment Current Interest Bonds $1,000,000 $0 $ Fiscal Year Beginning July 1 Note: Local secured AV is assumed to grow 3% annually beginning in FY while all other types of AV are assumed to remain unchanged from the FY level. Fountain Valley School District - Page 9

23 $59.3 Mil. Nets $57.9 Mil. For Projects G.O. Bonds Proceeds $80,000,000 $70,000,000 $60,000,000 Over 5 Years, it's Estimated the District can Issue $59.3 Million of Bonds, and Receive $57.9 Million for Facilities Projects Bond Proceeds Analysis Using Conservative Assumptions Series 2017 Series 2019 Series 2021 Total Bond Issuance Amount $19,800,000 $19,800,000 $19,700,000 $59,300,000 Underwriter's Discount ($350,000) ($350,000) ($340,000) ($1,040,000) Bond Insurance $0 $0 $0 $0 Other Costs ($125,000) ($125,000) ($125,000) ($375,000) Cash for Projects $19,325,000 $19,325,000 $19,235,000 $57,885,000 $50,000,000 $40,000,000 $30,000,000 $59,300,000 $20,000,000 $10,000,000 $19,800,000 $19,800,000 $19,700,000 $0 Series 2017 Series 2019 Series 2021 Total Year Beginning July 1 Note: upfront costs include underwriter's discount and costs of issuance (financial advisor, bond counsel, credit rating agency, etc.). Fountain Valley School District - Page 10

24 Potential $63 Million Bond Measure u The survey tested a bond amount of up to $63 million because our facilities need are greater than what a conservative plan can attain: If the tax base grows faster than assumed (3% annually), we could sell more than $59 million of bonds (up to $63 million). The bond plan is conservative so that the community can have confidence in what can be accomplished. This provides the opportunity to take advance of any upside that a better-reality-than-assumed can give us. Fountain Valley School District - Page 11

Local Property Tax WHERE THE TYPICAL COUNTY OF ORANGE PROPERTY TAX DOLLAR WENT IN FY 2015/2016* u School districts levy: No income tax No sales tax No hotel tax No gas tax And receive less than half

25 Local Property Tax WHERE THE TYPICAL COUNTY OF ORANGE PROPERTY TAX DOLLAR WENT IN FY 2015/2016* u School districts levy: No income tax No sales tax No hotel tax No gas tax And receive less than half of the general property tax. *The above dollar takes into account the swaps the State has done for property tax, such as Triple Flip and VLF. Source: Orange County Treasurer-Tax Collector Shari L. Friedenrich Fountain Valley School District - Page 12

26 Ad Valorem Taxes $1.06 Per $100 of Assessed Value u Sample Tax Bill at approximately the median single family residential assessed value ($326,215) u Ad Valorem Taxes = $ per $100 of Assessed Value In this case, ad valorem taxes of $3, assessments of $ for a total of $3, Fountain Valley School District - Page 13

Properties are Mostly SF Residential 96% of District Parcels are SFR MFR; 174 parcels; 1% 79% of AV in District is SFR

Mobile Homes; 12 parcels; 0% Exempt; 142 parcels; 1% Rural; 3 parcels; 0% SFR, $5,822,423,736, 79% Commercial,

$57,824, 0% Note: 2015-16 secured assessment roll as provided by Orange County Assessor's office. Percentages rounded.

27 Properties are Mostly SF Residential 96% of District Parcels are SFR MFR; 174 parcels; 1% 79% of AV in District is SFR Commercial; 271 parcels; 2% MFR, $297,436,251, 4% SFR; parcels; 96% Industrial; 85 parcels; 0% Misc; 3 parcels; 0% Mobile Homes; 12 parcels; 0% Exempt; 142 parcels; 1% Rural; 3 parcels; 0% SFR, $5,822,423,736, 79% Commercial, $1,097,768,922, 15% Industrial, $186,337,458, 2% Misc, $6,701,268, 0% Exempt, $0, 0% Mobile Homes, $71,441, 0% Rural, $57,824, 0% Note: secured assessment roll as provided by Orange County Assessor's office. Percentages rounded. Note: secured assessment roll as provided by Orange County Assessor's office. Percentages rounded. Fountain Valley School District - Page 14

Top 20 Taxpaying Properties % of # of Owner/Mailing Net Value Owners District's AV Parcels Location $188,098,303 HYUNDAI MOTOR AMERICA 2.5% 1 Orange Co $107,651,615 BEXAEW THE HAVENS LP 1.

8% 8 California $35,577,916 FOUNTAIN VALLEY MHP ASSOC 0.5% 1 Orange Co $33,079,829 SHEA CENTER CORTE BELLA 0.4% 2 California $29,432,231 MTSC-LAKE ELSINORE 0.

28 Top 20 Taxpaying Properties % of # of Owner/Mailing Net Value Owners District's AV Parcels Location $188,098,303 HYUNDAI MOTOR AMERICA 2.5% 1 Orange Co $107,651,615 BEXAEW THE HAVENS LP 1.5% 2 California $77,967,313 ORANGE COAST MEMORIAL 1.1% 1 California $68,332,285 MEMORIAL HEALTH SERVICES 0.9% 1 Orange Co $61,513,559 VERMEULEN PROPERTIES 6 0.8% 8 California $35,577,916 FOUNTAIN VALLEY MHP ASSOC 0.5% 1 Orange Co $33,079,829 SHEA CENTER CORTE BELLA 0.4% 2 California $29,432,231 MTSC-LAKE ELSINORE 0.4% 1 Out of State $28,489,234 SHEA CENTER CRYSTAL 0.4% 1 Orange Co $24,446,136 CARMEL VILLAGE PARTNERS 0.3% 1 California $23,405,583 ADVANCED GROUP % 79 Orange Co $22,666,128 GLUCKSTEIN FOUNTAIN 0.3% 1 Out of State $22,187,778 TRI POINTE HOMES INC 0.3% 2 Orange Co $21,779,138 TOWNE HOUSE PLAZA 0.3% 1 Orange Co $17,695,681 GRANDE APARTMENTS LP 0.2% 1 Orange Co $17,074,869 FV SHOWROOM PARTNERS I 0.2% 5 Orange Co $16,613,510 BROOKHURST & ADAMS LLC 0.2% 1 California $16,531,913 SUKUT REAL PROPERTIES 0.2% 7 Orange Co $15,557,773 TRI POINTE HOMES INC 0.2% 38 Orange Co $15,492,518 ORANGE COAST MEMORIAL 0.2% 2 Orange Co $843,593, % 156 Top 20 Taxpayers Comprise 11% of Total District AV Top 20 Parcels; $843,593,312 ; 11% Excluding Top 20 Parcels; $6,567,203,588 ; 89% Note: secured assessment roll as provided by Orange County Assessor's office. Percentages rounded. Fountain Valley School District - Page 15

Return on Investment THE VALUE OF SCHOOL FACILITY INVESTMENTS: EVIDENCE FROM A DYNAMIC REGRESSION DISCONTINUITY DESIGN STEPHANIE RIEGG CELLINI FERNANDO FERREIRA JESSE ROTHSTEIN Despite extensive

29 Return on Investment THE VALUE OF SCHOOL FACILITY INVESTMENTS: EVIDENCE FROM A DYNAMIC REGRESSION DISCONTINUITY DESIGN STEPHANIE RIEGG CELLINI FERNANDO FERREIRA JESSE ROTHSTEIN Despite extensive public infrastructure spending, surprisingly little is known about its economic return. In this paper, we estimate the value of school facility investments using housing markets: standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices. Our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins. We extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices, student achievement, and district composition. Our results indicate that California school districts underinvest in school facilities: passing a referendum causes immediate, sizable increases in home prices, implying a willingness to pay on the part of marginal homebuyers of $1.50 or more for each $1 of capital spending. These effects do not appear to be driven by changes in the income or racial composition of homeowners, and the impact on test scores appears to explain only a small portion of the total housing price effect. I. INTRODUCTION Federal, state, and local governments invest more than $420 billion in infrastructure projects every year, and the American Recovery and Reinvestment Act of 2009 is funding substantial temporary increases in capital spending. 1 School facilities may be among the most important public infrastructure investments: $50 billion is spent on public school construction and repairs each year We thank Janet Currie, Joseph Gyourko, Larry Katz, David Lee, Chris Mayer, Tom Romer, Cecilia Rouse, Tony Yezer, and anonymous referees, as well as seminar participants at Brown; Chicago GSB; Duke; George Washington; Haas School of Public Policy; IIES; University of Oslo; NHH; Penn; Princeton; UMBC; Wharton; Yale; and conferences of the American Education Finance Association, National Tax Association, NBER (Labor Economics and Public Economics), and Southern Economic Association for helpful comments and suggestions. We are also grateful to Eric Brunner for providing data on California educational foundations. Fernando Ferreira would like to thank the Research Sponsor Program of the Zell/Lurie Real Estate Center at Wharton for financial support. Jesse Rothstein thanks the Princeton University Industrial Relations Section and Center for Economic Policy Studies. We also thank Igar Fuki, Scott Mildrum, Francisco Perez Arce, Michela Tincani, and Moises Yi for excellent research assistance. scellini@gwu.edu, fferreir@wharton.upenn.edu, rothstein@berkeley.edu. 1. Council of Economic Advisers (2009, Table B-20). The annual total includes gross investment in structures, equipment, and software for both military and nonmilitary uses. C 2010 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. The Quarterly Journal of Economics, February Fountain Valley School District - Page 16

30 For Reference re: Assumptions u A.V. Assumptions Historical Tests Reasons Assessed Value Can Change u Interest Rate Assumptions Fountain Valley School District - Page 17

31 Historical AV Analysis - 3 Year Periods Compound Annual Growth Rate 10.00% AV Assumption is a Reasonable Annual Growth Rate over 3 Years 9.00% Over 3 year periods since FY , the AV assumption was exceeded just over half the time (6 out of 11 periods). 8.00% 7.00% 6.00% 5.00% 4.00% 8.41% 8.71% 8.84% 7.21% 3.00% 5.50% 2.00% 1.00% 4.67% 2.44% 2.57% 1.74% 2.44% 3.00% 1.10% 0.00% Date Range Historical data from Orange County Auditor-Controller's office. Local secured AV is assumed to increase 3% annually, while all other AV types are assumed to remain unchanged. Fountain Valley School District - Page 18

32 Historical AV Analysis - 5 Year Periods Compound Annual Growth Rate 10.00% AV Assumption is a More Conservative Annual Growth Rate over 5 Years 9.00% 8.00% Over 5 year periods since FY , the AV assumption was exceeded two-thirds of the time (6 out of 9 periods). 7.00% 6.00% 5.00% 4.00% 8.63% 3.00% 6.67% 2.00% 4.90% 3.61% 4.79% 1.00% 3.55% 1.84% 2.09% 2.50% 3.00% 0.00% Date Range Historical data from Orange County Auditor-Controller's office. Local secured AV is assumed to increase 3% annually, while all other AV types are assumed to remain unchanged. Fountain Valley School District - Page 19

33 Historical AV Analysis - 10 Year Periods Compound Annual Growth Rate 10.00% AV Assumption is a Conservative Annual Growth Rate over 10 Years 9.00% Over 10 year periods since FY , the AV assumption was exceeded all of the time (4 out of 4 periods). 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 4.82% 4.19% 4.19% 3.87% 3.00% 0.00% Date Range Historical data from Orange County Auditor-Controller's office. Local secured AV is assumed to increase 3% annually, while all other AV types are assumed to remain unchanged. Fountain Valley School District - Page 20

34 Reasons Assessed Value Can Change u Pursuant to Proposition 13 (and embodied in Article 13A of the California Constitution), a school district s property tax base can change for four reasons: Properties are sold (and reassessed at the sale price). Properties are improved (and reassessed with the value of the improvement). A year passes (each property s assessed value increases by the lesser of 2% or the change in the California Consumer Price Index). Market value of one or more properties declines below assessed value - assessed value can be adjusted downward to the market value. If market value subsequently increases, assessed value can catch up to pre-decline AV plus allowable adjustments (e.g. 2% annual increase). Fountain Valley School District - Page 21

35 Plan Assumes that Interest Rates é Interest Rate 6.00% 5.00% 4.00% Interest Rate Assumptions are Based on a Market Index, Adjusted for the District's Credit Rating and for the Planned Timing of the Bond Issuances Interest rate adjustments for the timing of bond issuances based on historical volatility exceeding 90% (where at least 90% of the time, interest rate volatility was within the stated assumption). Historical Volatility 94.6% 94.2% 93.4% 3.00% Timing Adjustment for 1 Year: % 2.00% 1.00% Market Index for "AAA" Credit Credit Adjustment for an Assumed "AA-" Credit Rating: % Series 2021 CIBs Series 2019 CIBs Series 2017 CIBs Credit Adjusted Rates MMM "AAA" Rate Index 0.00% Bond Term to Maturity Notes: market index for "AAA" credit based on the Municipal Market Data (MMD) scale as of April 29, Assumed "AA-" credit rating based on most recent District rating of "A+" on 2004 COPs (most recently affirmed in 2006). Credit adjustment based on review of GO bonds with same "AA-" credit rating. The 20-Bond Index is the average yield on the 20th year maturity for 20 general obligation bonds with average rating equivalent to Moody's Investors Service's "Aa2" and Standard & Poor's Rating Service "AA". The Index is weekly as of each Thursday. Historical volatility based on 20-Bond Index over same timeframe, January 1, 1984 until May 5, Fountain Valley School District - Page 22

General Shafter School District STYLE. General Obligation. Government Financial. for Strategies. Presented by Lori Raineri September 3, 2015

General Shafter School District CLICKFacilities TO EDIT MASTER Funding Needs with STYLE General Obligation Bonds TITLE Government Financial Strategies Presented by Lori Raineri September 3, 2015 2015 Government