Measure M. Board of Trustees Study Session. January 16, 2013

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1 January 16, 2013 Measure M Board of Trustees Study Session Presented by: Andy Dunn, Vice Chancellor, Finance & Administrative Services and Jerry Marchbank, Facilities Director

2 Discussion Measure M Vote Capital Improvement Program Summary Surf Report Cash Flow Operational Structure Project Delivery Models Measure C Overview of Bond Issuance Process Next Steps January 16,

3 Measure M Vote M - Coast Community College District Bond Measure Completed Precincts: 483 of 483 Vote Count Percentage Bonds - Yes 134, % Bonds - No 100, % Source: Orange County Registrar of Voters January 16,

4 Capital Improvement Program Summary Total program Cost (est.): $957.4M Local Funding: $770.7M State Funding: $186.7M The Bond provides the District with $698M or 90.56% of the local funding required to complete the Vision 2020 Master Plan January 16,

5 Capital Improvement Program Summary Continued Technology Upgrade/Refresh 8.15% Other 5.49% Additional Buildings 1.92% Building Infrastructure 11.31% Renovation/ Modernization 18.63% Building Replacement 54.50% January 16,

6 Target Bond Allocation Program Target: Site Master Plan Estimate Allocation % OCC $435,830, % GWC $239,801, % Coastline $78,395, % District Office $16,720, % Total $770,747, % *Allocation per the Board-approved Vision 2020 Facilities Master Plan (June 18, 2011) January 16,

7 Bond Issuance Targets Issuance schedule is based on four series issued three years apart: Issuance Scenarios Par Amount (per $100,000 A.V) Series Date $17 $17.97 $19 A 8/1/2013 $180,000,000 $200,000,000 $225,000,000 B 8/1/2016 $180,000,000 $190,000,000 $190,000,000 C 8/1/2019 $127,500,000 $122,500,000 $123,000,000 D 8/1/2022 $175,000,000 $185,500,000 $195,500,000 $662,500,000 $698,000,000 $733,500,000 Assumed AV Growth Rate: Thereafter 2.00% 2.50% 3.00% 3.50% January 16,

8 What is the Surf Report? A set of long-range planning tools developed to monitor overall program budget and schedule. Can be viewed at: %20Budget%20Summary.pdf January 16,

9 Preliminary Series A Budget Summary Series A Summary: # Project Cost CCC 14.2 CCC NBLC Lease Revenue Bond 18.1.S Le-Jao Student Resource Ctr Renovation D/W 14.1 Photovoltaic Installation 15.7 Technology Upgrades 28.1 Series A Endowment DIST $20,921,126 $30,168,775 None $0 GWC 15.3 Elevator Repairs/Replacement 15.4 Security, Access, Surveillance Infrastructure 15.5 Classroom Improvements 15.6 Campus Safety Building 16.4 Student Services Center 18.3.S Science & Math 18.4.S Criminal Justice Training Center $30,857,912 OCC 15.1 Recycling Center 15.2 Business, Math, Computing Building 15.8 Student Services Improvements 16.1 Maritime Academy Expansion 16.2 Planetarium 16.3 Parking Structure 18.2 Adaptive P/E, Gym, Pool Renovation 18.5.S Language/Social Science Building 18.6.S Chemistry Expansion/Renovation $110,213,322 Program Contingency $11,529,668 Series A Total Issuance $203,690,803 January 16,

10 Measure M Operational Structure How will we manage and deliver Measure M? A combination: Consulting Services ( Staff Augmentation ) Soft Money Employees January 16,

11 Measure M Operational Structure January 16,

12 Initial Conversation to Land Development Committee: Continuing Discussion January 16, 2013: January 16,

13 Looking Back 1. September 2011: Introduction Presentation to Land Development Committee 2. October 2011: Legal Framework 3. Spring-Fall 2012: Outreach to Practitioners 11/8/2012 History 13

14 Review Delivery Models 1. Design-Bid-Build 2. Design-Build 3. Lease-Leaseback Today s Agenda Recommendation to Land Development Committee 11/8/2012 Agenda 14

15 1. Time considerations Factors that may Influence Delivery Model Choice 2. Level of acceptable legal and financial risk 3. Complexity and size of project 4. Best Value vs. Lowest Price 5. Legal and/or scope Constraints 6. Appropriate community and business participation 11/8/2012 Delivery Methods Overview 15

16 Design-Bid-Build Traditional ( Public Bid General Contractor ) Multiple Prime Construction Management (CM) At-Risk Design-Build Lease-Leaseback 11/8/2012 January 16, 2013 Delivery Methods Overview 16

17 - Qualifications Based Selection - Lowest Responsible Bidder Owner Construction Manager Architect General Contractor Subcontractor Subcontractor Subcontractor Subcontractor 11/8/2012 Design-Bid-Build: Public Bid General Contractor 17

18 Benefits Defined Project Scope before bid Competitive bid process Familiar and established Clear statutory framework Considerations No constructability input from contractor before bid Stuck with low bidder Significant time/cost impact if GC defaults Adversarial relationship with contractor over change orders 11/8/2012 Design-Bid-Build: Public Bid General Contractor January 16,

19 - Qualifications Based Selection - Lowest Responsible Bidder Owner Construction Manager Architect Contractor Contractor Contractor Contractor (19-23 Prime Contractors) 11/8/2012 Design-Bid-Build: Multiple Prime 19

20 Benefits District can choose CM CM involved in preconstruction phase Competitive bid process (trade contracts) General Contractor mark-up is saved Considerations Highest Risk: District holds numerous low bid contracts Creates greatest administrative burden Scope gaps Total price not known until all bids in. Lack of single bonded guaranteed price 11/8/2012 Design-Bid-Build: Multiple Prime 20

21 - Qualifications Based Selection - Lowest Responsible Bidder Owner Criteria/Bridging Architect Design-Build Entity (A/E & Builder) Contractor Contractor Contractor Contractor 11/8/2012 Design-Build 21

22 Benefits Promotes collaboration Guaranteed Maximum Price All errors, omissions and coordination risk placed on DBE One contract and single point of responsibility One RFQ/RFP solicitation 11/8/2012 Considerations Less control of design & design details Architect alliance with builder instead of owner Least cost/lowest quality materials unless stipulated in bridging documents Must choose A/E & Builder as a team Scope minimum = $2.5M Design-Build 22

23 - Qualifications Based Selection - Lowest Responsible Bidder Owner Architect L-LB Entity (Builder) Contractor Contractor 11/8/2012 Lease-Leaseback 23

24 Benefits District can choose Architect and Contractor Contractor can be part of design process Architect is aligned with District interests 11/8/2012 Considerations Not single source responsibility This delivery method is not available for State-funded projects. Dependent on tightly developed contractual details (up front contract negotiations) Statutory language not clear for CCC s Lease-Leaseback 24

25 Measure C Closeout Strategy Spend down all Measure C Funds by June 30, 2013 Refinance/Refunding Opportunities Complete Minor OCC Projects Pay down NBLC Lease Revenue Bond debt Reconcile allocation with initial Measure M issuance January 16,

26 Overview of Bond Issuance Process January 16,

27 2013 Market Outlook Potential Opportunities and Challenges in the Year Ahead Interest rates are near all-time lows although most forecasts predict interest rates to rise later this year and into 2014 Federal Reserve suggesting they may end quantitative easing prior to 2015; this program is intended to increase money supply and keep interest rates low Potential legislation on the horizon could negatively affect the taxexemption benefit of municipal bonds Yields Year MMD* January January 2013 Refunding Opportunity Similar to refinancing a home mortgage (High Interest Rates to Lower Interest Rates) Refunding Candidate: 2005 G.O. Refunding Bonds issued on 04/05/05 in the amount of $74,893,867 Amount of Bonds Being Refunded: Approximately $31,705,000 Estimate Savings to Local Taxpayers: Approximately $1.3 million or $177,000 per year /3/2011 3/3/2011 5/3/2011 7/3/2011 9/3/ /3/2011 Debt Service Comparision Based on Current Rates Year Prior Net Cash Flow Proposed Debt Service Gross Savings 2013 $792,625 $736,636 $55, $1,585,250 $1,407,550 $177, $1,585,250 $1,407,454 $177, $7,785,250 $7,610,736 $174, $7,775,250 $7,596,789 $178, $7,785,250 $7,608,219 $177, $7,778,500 $7,599,187 $179, $5,250,000 $5,071,489 $178,511 $40,337,375 $39,038,061 $1,299,314 1/3/2012 3/3/2012 5/3/2012 7/3/2012 9/3/ /3/2012 1/3/2013 *Represents the daily consensus AAA G.O. Bond municipal market scale January 16,

28 January 16,

Local Participation Target Local Constituents The underwriting team will use it s retail distribution network to target local buyers Advertise in

29 Local Participation Target Local Constituents The underwriting team will use it s retail distribution network to target local buyers Advertise in local newspapers prior to the sale of the bonds Preference will be given to retail investors during sale Sample ad shown to the right January 16,

30 Bonded Endowment Funds Recognizing that districts would benefit from a long-term source of funding for both technology upgrades and scheduled maintenance/capital projects, the district may choose to establish a technology or scheduled repair endowment fund Endowment Fund Overview In order to create and fund a technology or facility repair endowment, a district must dedicate all of the proceeds of a series of bonds for this purpose Proceeds are deposited into an Investment Fund held by the County Tax Collector-Treasurer or other entity designated by the County The Investment Fund must be invested in tax-exempt municipal bonds which are not subject to the alternative minimum tax (AMT) Bond structuring is impacted by the tax rule that limits the bonds maturity to 120% of the useful life of the projects Subject to all of the Proposition 39 requirements Endowment Fund Process Bond Proceeds County Tax Collector- Treasurer Endowment Fund Investment Portfolio Returns Municipal Bond Portfolio 30

31 Other Development Activities Asset Development Spring 2012 Board approved consultant to examine the feasibility of certain asset development applications Held several meetings with Land Development Committee Result is a Feasibility Study Student Survey More to follow January 16,

32 Next Steps (1) OCC Business, Math, Computing Project Status DSA approved plans Expire August 2013 Must be under construction August 2013 Action Plan Select Construction Manager February Bid June/July Break ground August January 16,

33 Next Steps (2) Develop and Issue RFQ s 1) Pre-qualify Pool Project Control Services Estimating Design Management 2) Environmental Impact Report Develop legal instruments/processes for alternative delivery methods Develop job specifications for soft money Measure M team members January 16,

34 Next Steps (3) Continue Design Work 1) OCC Planetarium 2) OCC Recycling Center Begin Design Work 3) Photovoltaic Installation Retire CCC Debt January 16,

35 Next Steps (4) Recommended Board Actions Accept Results of Election Adopt Amended By Laws January 16,

Presentation to the District Budget Advisory Committee December 8, Presented by: Andy Dunn Vice Chancellor Finance & Administrative Services

Presentation to the District Budget Advisory Committee December 8, 2011 Presented by: Andy Dunn Vice Chancellor Finance & Administrative Services Areas of Discussion What Informs Coast s Institutional