West Contra Costa Unified School District. Investor Presentation

Transcription

1 West Contra Costa Unified School District Investor Presentation October 2013

2 Disclaimer This Investor Presentation does not update, amend or otherwise modify any information contained in the Preliminary Official Statement dated September 30, 2013 which can be accessed at This Investor Presentation is provided as of September 30, 2013, for a proposed offering by the West Contra Costa Unified School District (the District ) of General Obligation Bonds, Election of 2012, Series A (the Series A Bonds ) and General Obligation Bonds, Election of 2010, Series B (the Series B Bonds and together with the Series A Bonds, the Bonds ). If you are viewing this presentation after September 30, 2013, there may have been events that occurred subsequent to such date that would have a material adverse effect on the financial and operational information that is presented herein, and any obligation to update this electronic presentation has not been undertaken by the District, Piper Jaffray & Co. ( Piper Jaffray ), or E.J. De La Rosa ( De La Rosa ). All market prices, financial and operational data and other information provided herein are not warranted as to completeness or accuracy and are subject to change without notice. This Investor Presentation is provided for your information and convenience only. Any investment decisions regarding the Bonds should only be made after a careful review of the complete Preliminary Official Statement. By accessing this presentation, you agree not to duplicate, copy, download, screen capture, electronically store or record this Investor Presentation, nor to produce, publish or distribute this Investor Presentation in any form whatsoever. This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of the Bonds, or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made solely by means of the Preliminary Official Statement and Official Statement, which describe the actual terms of such Bonds. In no event shall Piper Jaffray, De La Rosa or the District be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the Bonds. Piper Jaffray and De La Rosa make no representations as to the legal, tax, credit or accounting treatment of the Bonds mentioned herein, or any other effects the Bonds may have on you and your affiliates or any other parties. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of the Bonds. Nothing in these materials constitutes a commitment by Piper Jaffray or De La Rosa or any of their affiliates to enter into any transaction. No assurance can be given that any transaction mentioned herein could in fact be executed. Past performance is not indicative of future returns, which will vary. The Bonds may not be suitable for all investors. You should consult with your own advisors as to the suitability of the Bonds for your particular circumstances. Clients should contact their salesperson at, and execute transactions through, a Piper Jaffray entity or other syndicate member entity qualified in their home jurisdiction unless governing law permits otherwise. 1

3 Bond Terms Par Amount: Approximately $125 million ($40 million from Measure D and $85 million from Measure E) Current Interest Bonds: Approximately $125 million Principal Payment Dates: August 1 st Final Maturity Date: August 1 st, 2043 Interest Payment Dates: February 1 st and August 1 st, starting February 1, 2014 Type of Bonds: General obligation bonds of the District payable solely from ad valorem taxes. The Board of Supervisors of Contra Costa County is empowered and is obligated to levy and collect ad valorem taxes upon all property subject to taxation by the District, without limitation as to rate or amount (except certain personal property which is taxable at limited rates) for the payment of principal of and interest on the Bonds when due. The District s general fund is not a source for repayment of the Bonds. Purpose: to make schools safe, complete essential health and safety repairs, qualify for State matching grants, upgrade schools for earthquake safety and handicap accessibility, remove asbestos, upgrade science labs, restrooms, vocational classrooms, technology and energy systems to reduce costs, install lighting and security systems, and acquire, repair and construct equipment, sites and facilities and to pay costs of issuance of the Bonds. 2

4 2010 Measure D Bond Program Election Date: June 8, 2010 Voter Approval: 62.6% Authorization Amount: $380 million Tax Rate Commitment: The best estimate of the highest and average tax rate is $48.00 per $100,000 of assessed valuation. Bond Projects: Proceeds will be used to make schools safe, complete essential health and safety repairs, qualify for State matching grants, upgrade schools for earthquake safety and handicap accessibility, remove asbestos, upgrade science labs, restrooms, vocational classrooms, technology and energy systems to reduce costs, install lighting and security systems, and acquire, repair and construct equipment, sites and facilities. 3

5 2012 Measure E Bond Program Election Date: November 6, 2012 Voter Approval: 64.4% Authorization Amount: $360 million Tax Rate Commitment: The best estimate of the highest and average tax rate is $48.00 per $100,000 of assessed valuation. Bond Projects: Proceeds will be used to make schools safe, complete essential health and safety repairs, qualify for State matching grants, upgrade schools for earthquake safety and handicap accessibility, remove asbestos, upgrade science labs, restrooms, vocational classrooms, technology and energy systems to reduce costs, install lighting and security systems, and acquire, repair and construct equipment, sites and facilities. 4

6 District Highlights Since , the District has a history of maintaining strong fund balances in its general fund and special reserve funds. The District has negotiated long-term reductions in its current and retiree health benefit costs in recent years. The District has reduced its ongoing general fund liabilities (State emergency and IBM loans were repaid recently). The District has currently a number of local revenue sources including an assessment district and a parcel tax that generates nearly $5.6 million and $9.8 million annually, respectively, in revenues. (See Appendix A Parcel Tax in POS, page A-5) The Local Control Funding Formula (LCFF) is expected to increase available funding for the District moving forward. The District has implemented an Investor Relations policy and a Refunding policy in connection with its bond program within the past year. The District s current general obligation bond ratings are: A+ (Standard and Poor s)/ A+ (Fitch Ratings) Moody s rating expected to be received shortly. 5

7 Introductions and District Overview West Contra Costa Unified School District District Business Administration Sheri Gamba, Associate Superintendent, Business Services Martin Coyne, Executive Director of Business Services West Contra Costa Unified School District is a K-12 school district located in Contra Costa County (the County ), approximately 15 miles northeast of San Francisco. The District provides educational services to the residents of the cities of El Cerrito, Hercules, Pinole, Richmond and San Pablo, the unincorporated communities of El Sobrante and Kensington and certain other unincorporated areas within the County. The District currently maintains and operates 37 elementary schools, two K-8 schools, six middle / junior high schools, six high schools and six alternative / continuation programs, 60 adult education sites, nine operation sites and 17 Statefunded preschools. 6

8 District Board The District is governed by a five-member Board of Education, each member of which is elected by voters in the community for a term of four years. Madeline Kronenberg, President (Elected in 2006) Charles T. Ramsey, Clerk (Elected in 1993) Randall Enos (Elected in 2012) Todd A. Groves (Elected in 2012) Elaine R. Merriweather (Elected in 2010) 7

9 Average Daily Attendance (ADA) - Second Period Average Daily Attendance Average daily attendance (ADA) in the District has stabilized in recent years and is projected to increase in the future. 35,000 30,000 32,390 31,417 30,239 29,293 28,413 28,178 28,094 27,614 27,589 27,598 28,037 27,971 28,401 29,018 25,000 20,000 15,000 10,000 5, Source: Figures through are actuals from Audited Financial Statements and Unaudited Actuals through figures are projections from Adopted Budget. 8

10 Salary and Benefits The District works with the following bargaining groups. Labor Organization # of Employees Expiration Date United Teachers of Richmond 1,454 full- and part-time June 30, 2015 Public Employees Union, Local 1 1,311 full- and part-time December 31, 2016 School Supervisors Association 82 full- and part-time June 30, 2015 Administrators Association 83 full- and part-time June 30, 2015 Historically, salary increases have generally been in line with funded COLA. Years COLA Deficit Factor Salary Increases % 0.000% 0.00% % 0.000% 4.64% % 7.844% 0.00% % % 0.00% % % 0.00% % % 0.00% % % 1.00% During the school year, all groups both represented and unrepresented were placed on a tiered cap program for health benefits. Source: District. 9

11 History of General Fund Balances The District has maintained general fund balances over the last five years while creating a sizable special reserve in the same time period. Audit Audit Audit Audit Unaudited Actuals (a) (a) (b) Revenues Revenue Limit $ 161,899,365 $ 142,320,077 $ 147,914,626 $ 147,846,255 $ 149,957,871 Other Revenues 121,311, ,238, ,638, ,273, ,598,046 Total Revenues $ 283,211,040 $ 257,558,730 $ 266,553,246 $ 267,119,539 $ 258,555,917 Expenditures Salaries and Benefits $ 230,784,127 $ 208,717,972 $ 203,136,405 $ 209,142,120 $ 208,270,509 Other Expenditures 50,041,524 56,940,517 56,569,069 60,392,520 56,338,114 Total Expenditures $ 280,825,651 $ 265,658,489 $ 259,705,474 $ 269,534,640 $ 264,608,623 Other Financing Sources / (Uses) $ 121,592 $ 804,959 $ 2,700,512 $ 8,446,212 $ 1,981,165 Net Increase (Decrease) in Fund Bal (c) $ 2,506,981 ($ 7,294,800) $ 9,548,284 $ 6,031,111 ($ 5,904,643) Beginning General Fund Balance $ 45,839,766 $ 48,346,747 $ 47,354,945 $ 56,903,229 $ 62,934,340 Ending General Fund Balance $ 48,346,747 $ 41,051,947 $ 56,903,229 $ 62,934,340 $ 57,029,697 Ending General Fund Bal as % of Exp 17.22% 15.45% 21.91% 23.35% 21.55% Restricted Fund Balance $ 28,297,086 $ 25,612,527 $ 27,130,317 $ 26,055,436 $ 21,983,898 Unrestricted Fund Balance $ 20,049,661 $ 15,439,420 $ 18,438,898 $ 23,376,077 $ 23,376,074 Special Reserve Fund Balance N/A $ 6,302,998 $ 11,334,014 $ 13,502,827 $ 11,669,725 Unrestricted + Special Reserve as % of Exp 7.14% 8.18% 11.46% 13.68% 13.24% Source: Audited Financial Statements; Unaudited actuals for Special Reserve fund balance. (a) The Special Reserve Fund for Other Than Capital Outlay was reported as part of the general fund to conform to GASB No. 54 in fiscal year (b) Beginning fund balance adjusted to include Special Reserve fund balance to conform with audited figures. (c) Decrease in fund balance includes authorized interfund transfer out of the Special Reserve Fund of $1,874,235 minus interest earnings of $41,

12 Special Reserve Fund The District has built up its special reserve fund by setting aside Tier III funding and excess general fund balance reserves in the last three fiscal years. Audit Audit Audit Unaudited Actuals Beginning Fund Balance $294,459 $6,302,998 $11,334,014 $13,502,827 Transfer from General Fund $0 $3,000,000 $3,500,000 $0 Transfer from Adult Education Fund (for Tier III Flexibility) $2,000,000 $1,000,000 $0 $0 Transfer from Deferred Maintenance Fund (for Tier III flexibility) $4,000,000 $1,000,000 $0 $0 Authorized Interfund Transfer Out $0 $0 -$1,372,000 -$1,874,235 Other Revenues $8,539 $31,016 $40,813 $41,132 Ending Fund Balance $6,302,998 $11,334,014 $13,502,827 $11,669,725 Source: Audited Financial Statements Funds in the special reserve fund are legally available to be transferred back to the general fund without the requirement of repayment. 11

13 Proactive Financial Management The District has preserved its general fund balance despite approximately $28 million in state reductions in funding over the last several years. The District has eliminated much of the general fund backed long term debt which originated in the 1990 s. Both the state emergency loan and the IBM loan were repaid in 2012, six years and three years before maturity, respectively. The general fund backed debt that remains is a COP financing that matures in The District has also reduced its long term OPEB liability by proactively working with its employee groups. The District has also implemented a formal refunding policy and investor relations policy. 12

14 Unaudited Actuals The unaudited actuals indicate that the District has maintained its unrestricted fund balances in Revenues Unrestricted Restricted Total Revenue Limit $ 142,740,063 $ 7,217,808 $ 149,957,871 Other Revenues 30,914,857 77,683, ,598,046 Total Revenues $ 173,654,920 $ 84,900,997 $ 258,555,917 Expenditures Salaries and Benefits $ 133,180,889 $ 77,089,620 $ 210,270,509 Other Expenditures 11,565,303 42,772,811 54,338,114 Total Expenditures $ 144,746,192 $ 119,862,431 $ 264,608,623 Other Financing Sources / (Uses) ($ 28,908,727) $ 30,889,893 $ 1,981,165 Net Increase (Decrease) in Fund Bal $ 0 ($ 4,071,541) ($ 4,071,540) Beginning Fund Balance (a) $ 23,376,077 $ 26,055,436 $ 49,431,513 Ending Fund Balance $ 23,376,078 $ 21,983,895 $ 45,359,973 Ending Fund Bal as % of Expenditure N/A N/A 17.14% Source: Unaudited Actuals. (a): Special reserve fund accounted for separately from the general fund in the Unaudited Actuals and is projected to have an ending fund balance of $11,669,

15 Adopted Budget At the time the budget was adopted, the District projected a modest decline of its unrestricted fund balance Revenues Unrestricted Restricted Total Revenue Limit $ 149,229,705 $ 7,896,026 $ 157,125,731 Other Revenues 25,999,537 72,292,736 98,292,273 Total Revenues $ 175,229,242 $ 80,188,762 $ 255,418,004 Expenditures Salaries and Benefits $ 137,244,823 $ 72,868,478 $ 210,113,301 Other Expenditures 15,025,452 44,577,533 59,602,985 Total Expenditures $ 152,270,275 $ 117,446,011 $ 269,716,286 Other Financing Sources / (Uses) ($ 24,879,677) $ 30,679,677 $ 5,800,000 Net Increase (Decrease) in Fund Bal ($ 1,920,710) ($ 6,577,572) ($ 8,498,282) Beginning Fund Balance (a) $ 23,189,129 $ 13,889,085 $ 37,078,214 Ending Fund Balance $ 21,268,419 $ 7,311,513 $ 28,579,932 Ending Fund Bal as % of Expenditure 13.97% 6.23% 10.60% Source: Budget Report. (a) (a): Special Special reserve reserve fund fund accounted for for separately from from the the general fund in the Budget Report and and is is projected projected to to have have an an ending ending fund fund balance balance of $11,669, of $6,888,143 14

16 Millions Day Budget Revision The 45-day budget revision implements, to the best of the District s knowledge, the LCFF. It eliminates all previous Revenue Limit funding, Tier III programs and Economic Impact Aid which were all included in the previously adopted budget. The Local Control Funding Formula (LCFF) is expected to increase available funding for the District moving forward. Under current projections, it is expected that revenues will increase by close to $6.5 million in alone. $285 LCFF Impact $280 $275 $270 $265 $260 $255 $ Revenue Limit LCFF Source: Revenue limit data from Form MYP in Adopted Budget. LCFF data from County Office of Education. 15

17 Parcel Taxes The District has a parcel tax that generates approximately $9.8 million in annual revenues. District voters first approved the parcel tax in 2004, and renewed it in 2008 and The District annually collects 7.2 cents ($0.072) per square foot of total building area of buildings within the District s geographic boundaries, or $7.20 per vacant parcel, with an exemption for qualified seniors. The parcel tax supports a variety of services to students of the District including class size reductions in K-3, library and athletic programs, teachers and counselors, textbooks and teaching material and custodial support. (See Appendix A Parcel Tax in POS, page A-5) The renewal in 2012 extended the current rate until There is currently a lawsuit which seeks to invalidate the imposition of the District s Parcel Tax for Fiscal Years The lawsuit alleges that by imposing (i) an annual tax of 7.2 cents per square foot of total building area or (ii) a tax of $7.20 per unimproved parcels, it violates the Government Code section by not applying the Parcel Tax uniformly to all parcels in the District. The lawsuit also alleges that by requiring tax payers to own and occupy the parcel in order to qualify for exemptions, it violates Government Code section as these requirements are not set forth in the code. The District is not currently able to predict the outcome of the lawsuit or the collection of the Parcel Tax or its possible impact on the District s financial condition. 16

18 Other Local Revenue In addition to the parcel tax, the District has other sources of local revenue. In 1994, the District s Maintenance and Recreation Assessment District (MRAD) was formed to raise and sustain funding for the District. MRAD budgeted revenue for in the amount of $5.6 million which pays for fields and outdoor capital projects. There is no sunset on the MRAD assessment. Founded in 1983, the West Contra Costa Public Education Fund supports local schools and encourages commitment to education and learning. The Fund has contributed over $2.5 million to WCCUSD through grants and programs directly to schools. 17

19 General Fund Supported Long-Term Liabilities The District s general fund backed liabilities over the past fiscal year have decreased. The District paid the State Emergency Apportionment in full on May 3, 2012 The District paid the IBM Computer Acquisition Loan in full on February 8, 2012 Voluntary Integration Plan has been paid in full and matured as of June 2012 Child Care Facilities Loan has been paid in full and matured as of June 2013 Type Issuance Date Final Maturity Long-term Liabilities Total Payment Remaining (June 30th, 2012) (June 30th, 2013) State Emergency Apportionment N/A Source: District 2010/11 Audited Financial Statements and adjusted for State Emergency Apportionment pay off. Voluntary Integration Plan N/A Child Care Facilities Loan 2/7/ ,823 0 IBM Computer Acquisition Loan N/A Certificates of Participation 8/27/ $8,415,000 $7,915,000 Total $8,443,823 $7,915,000 Source: District 2011/12 Audited Financial Statements 18

20 Other Post-Employment Benefits (OPEBs) The District has reduced the long term liability associated with its post-employment health care. Effective July 1, 2010, the District placed certain upper limits on its contribution amount toward the cost of postemployment healthcare benefits. With the implementation of these new retiree benefit provisions the 2012 actuarial study indicates the GASB 45 liability is now $369 million. The annual required contribution (ARC) was valued at $23,367,100. The District is paying for its OPEB liability on a pay-as-you-go basis. 19

21 General Obligation Bond Program The District has received voter support for six separate general obligation bond authorizations since Authorization Authorization Amount Total Issued Under Authorization Total Remaining Authorization Target Tax Rate 1998 Measure E $40 million $40 million $0 $26.40 per $100K AV 2000 Measure M $150 million $150 million $0 $55.60 per $100K AV 2002 Measure D $300 million $300 million $0 $60.00 per $100K AV 2005 Measure J $400 million $322.4 million $77.6 million $60.00 per $100K AV 2010 Measure D * $380 million $100 million $280 million $48.00 per $100K AV ** 2012 Measure E $360 million $0 $360 million $48.00 per $100K AV * Total Issued Under Authorization expected to increase for Measure D by $40 million ** Total Issued Under Authorization expected to increase for Measure E by $85 million 20

22 Outstanding General Obligation Bonds The District has $776,677,930 million in general obligation bonds outstanding Authorization 1998 Measure E $40 million $23,630, Measure M $150 million $100,140, Measure D $300 million $246,248, Measure J $400 million $318,814,708 (2) 2010 Measure D $380 million $87,845,000 (3) Authorization Amount Total Outstanding Par Amount as of October 1, 2013 (1) 2012 Measure E $360 million $0 Total $776,677,930 (1) Approximate amount of Outstanding Denominational Amount of Capital Appreciation Bonds; does not include accreted interest. (2) Total Outstanding Par Amount expected to increase for Measure D by $40 million. (3) Total Outstanding Par Amount expected to increase for Measure E by $85 million 21

23 Assessed Valuation (in $ Billions) History of Assessed Valuation The District s tax base unexpectedly declined by 5.96% in , largely due to the Chevron refinery fire. $ % $ % $ % $ % 11.18% 11.67% 10.43% 0.34% % -7.66% 1.11% 6.60% -5.96% 0.00% $ % $ % $ Source: California Municipal Statistics % 22

24 AV By Jurisdiction The District is comprised of five separate cities and the Kensington Community Services District and other unincorporated areas in Contra Costa County, with Richmond having the highest concentration by AV at 49%. Unincorporated 9% Kensington CSD 4% City of San Pablo 5% City of El Cerrito 14% Town of Hercules 11% City of Pinole 8% City of El Cerrito Town of Hercules City of Pinole City of Richmond City of San Pablo Kensington CSD Unincorporated City of Richmond 49% 23

25 Top Ten Taxpayers The District s top ten taxpayers make up 16.76% of the total tax base. Property Owner Primary Land Use Assessed Valuation Percent of Total (1) Chevron USA Inc. Industrial $2,747,070, % Guardian & KW Hilltop LLC Apartments 146,283, % Bio-Rad Laboratories Inc. Industrial 143,169, % MCD-RCCA-El Cerrito LLC Shopping Center 88,710, % Lennar Emerald Marina Bay LLC Residential Development 82,848, % Richmond Essex LP Apartments 72,582, % Richmond Associates LLC Shopping Center 67,052, % Kaiser Foundation Health Plan Medical Building 61,865, % TKG Pinole LLC Shopping Center 61,678, % Safeway Inc. Shopping Center 52,239, % $3,523,499, % Source: California Municipal Statistics. 24

26 Tax Rates The District has been able to maintain their tax rate target in connection with each of their bond programs Measure E 2000 Measure M 2002 Measure D 2005 Measure J 2010 Measure D 2012 Measure E 1998/99 $6.10 N/A N/A N/A N/A N/A 1999/ N/A N/A N/A N/A N/A 2000/ N/A N/A N/A N/A N/A 2001/ $6.90 N/A N/A N/A N/A 2002/ $11.50 N/A N/A N/A 2003/ N/A N/A N/A 2004/ N/A N/A N/A 2005/ N/A N/A N/A 2006/ $16.50 N/A N/A 2007/ N/A N/A 2008/ N/A N/A 2009/ N/A N/A 2010/ N/A N/A 2011/ $48.00 N/A 2012/ N/A 2013/ $48.00 Target $26.40 $55.60 $60.00 $60.00 $48.00 $

27 Chevron Refinery Assessment Appeal The Contra Costa County Assessment Appeals Board recently reached a settlement agreement with Chevron on their appeals for the tax years Chevron has appealed the County s calculated assessed value of Chevron s Richmond refinery from Under the terms of the settlement agreement, Chevron and the Assessor s Office will request the Appeals Board (i) approve the assessed values of the Chevron refinery for and (ii) reduce the 2012 taxable value of the refinery from $3.87 billion to $3.28 billion. The 2012 reduction in taxable value will result in an overpayment of $8 million by Chevron. One condition of the settlement is that Chevron relinquishes its right to receive a refund of those property taxes, such that the County and its agencies will not lose additional property tax money to pay a refund to Chevron. In the future, Chevron and the Assessor s Office will meet annually and confer regarding the value of the Chevron refinery and mediate the claims in the event of any disagreement. The District cannot predict the effect of the Chevron/County Settlement on the total assessed valuation in the District. 26

28 Top Employers The District, with nearly 3,000 employees, is the largest employer District wide. Chevron is the largest employer in the City of Richmond, the largest city served by the District. Employer Number of Employees Chevron Refinery 1,950 West Contra Costa Unified School District* 1,580 Social Security Administration 1,259 U.S. Postal Service 1,047 Contra Costa County 844 City of Richmond 771 Kaiser Permanente 677 Bio-RAD Laboratories 473 Michael Stead Auto Depot & Sales 472 Walmart 400 Dicon Fiberoptics 400 Total 9,873 In addition, Bio-Rad employs 1,294 people in the neighboring City of Hercules (according to the City of Hercules 2010 CAFR, the most recent available). Source: City of Richmond, 2012 CAFR. * Only for the city of Richmond. 27

29 Transparency and Communication The District believes that it operates the most transparent bond program in the state. The District has a monthly facilities and financing subcommittee of the board to discuss capital projects and bond financing issues. Two members of the District s board, District superintendent and other key District staff members regularly attend these meetings. The financing team also regularly makes presentations at these meetings on a range of topics including market updates, structure of new money bonds and refunding bonds. The District has adopted an investor relations policy to provide for the orderly dissemination of material information to the marketplace and establish a means for responding to requests for information from investors. Board Policy The District has adopted a general obligation bond refunding policy to identify refunding objectives and set minimum guidelines. Board Policy

30 Sample of Completed Bond Projects 29

31 Sample of Completed Bond Projects (Continued) 30