Deferred Financing-BOC Presentation Aug 19 2009-FINAL

8/14/2019 Deferred Financing-BOC Presentation Aug 19 2009-FINAL

1/19

Bond Oversight Committee

August 19, 2009


2/19


3/19

Program Status

131 New K-12 Schools By 2012/13 80 New K-12 Schools Completed

65 K-12 Additions By 2012/13 59 Completed

21, 028 Modernization Projects By 2011 18,511 Completed

90 Schools On A Multi-Track Calendar In 2009-2010

u ay n ergar en mp emen e s r c w e

5 MW+ Of Renewable Energy Installed This Fiscal Year


4/19

Assessed Value Forecast

900,000

$ Millions

700,000

800,000

400,000

500,000

,

200,000

300,000

-

100,000

Fiscal Year Ending June 30

Low Forecast Baseline Forecast High Forecast


5/19

General Themes Tax Rate vs. Tax Bill

Tax Rate = Debt Service

When new bonds are issued the amount of Debt Service

Assessed Value

increases

When Debt Service oes u OR

When AV goes down, the Tax Rate Increases

However, the actual tax bill for a parcel owner may either goup or down, depending on that propertys AV change

Tax Bill = Tax Rate x Property Assessed Value


6/19

Debt Service and Tax Rate vs. Tax Bills

Exam le not real data

Effect of Assessed Value decreasing on tax rate(sample data

Year 1 Debt Service $700,000,000 = 0.0015028 Tax RateAssessed Value $465,806,005,470

Each Tax Bill de ends on the AV for an individual ro ert

Year 2 Debt Service $700,000,000 = 0.0017582 Tax Rate

Assessed Value $398,124,791,000

If a Assessed Value of a parcel goes down (sample data):

If arcels Assessed Value remains the same:

. ,

Year 2 Tax Rate 0.00175824 X AV $207,500 = $365 Debt Service




7/19

Process for G.O. Bond Tax Assessments

Voters pass a G.O. bond authorizing District to issue debt

District issues bonds according to requirements of theconstruction program

District reports planned debt issuance to County

Count calculates tax rate each ear based on

Debt Service requirement

Aggregate assessed valuation in LAUSD boundaries

Count calculates tax due on each arcel as Tax Rate x AV


8/19

Debt Service and Tax Rate

Projected Debt Service

$1,112$1,200

$963

$901$859

$1,000

($Mil)

$697

$778 $779$781$786$782$673

$600

$800

Deb

tService

$400

talProjected

$200

T

FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15

Fiscal Year

Previous Forecast Debt Service (with Q) Current Forecast Debt Service


9/19

Economic Impacts On Bond Issuance

Projected Issuance At Time Of Measure Q Election Projected Issuance After Beacon Baseline

$3,500

$4,000

$4,500$Millions

$3,500

$4,000

$4,500

$Millions

$1,500

$2,000

$2,500

$3,000

$1,500

$2,000

$2,500

,

$0

$500

$1,000

$0

$500

$1,000

Fiscal YearMeasure K Bonds Measure R Bonds Measure Y Bonds Measure Q

Fiscal YearMeasure K Measure R Measure Y Measure Q


10/19

Cash Shortfall Status

Planned issue of $3.9 billion In K, R, & Y Bonds In FY 09-10

By Spring 2010, state applications for $800 Million will bepending apportionment for new construction projects

Currently state is not apportioning, but issuing unfunded

approvals

20+ large construction projects remaining to bid

Approximately $1.0 B in construction value

Average size = $50M

Next award anticipated in August 2009

17 between now and June 2010


11/19

Funding Strategy Deferred Payment Plan

$5.0

$ in Billions $800M represents construction

contracts for approximately 17

projects

0.8 0.90.8$4.5

Financed +

$3.5

. Est. Costs

State CashGap

3.9 3.9 3.9$3.0State Bond

Local Bond

$2.0

.

Required

Available

Financing


12/19

Cash Shortfall Approach / Options

Generate $3.9 Billion In K, R, & Y bonds in FY 09-10

Secure $1.1 Billion from State as soon as possible

Interim fundin a roach o tions endin state funds:

1.) Use Certificates of Participation (COPs) financing to

ensure cash availability, OR

2.) Use 3rd party financing for projects to defer payments

until State $ received, OR

3.) Delay project awards until state funds are certain andtiming known


13/19

Option #1-Deferred Financing Details - COPs

COPs issuance backed by future bond issuance

10-year or longer COPs term with ability to pay early

Does not count against 2.5% debt limit on G.O. bonds

Advantages:

Can obtain Board authorization for COPs without issuin

Can issue COPs only AS NEEDED to fund projects

,

the COPs are never issued and there is no additional

financing cost

Issue: District capacity to issue COPS


14/19

Option # 2 3rd Party Financing for Contracts

Third-party financing via 17406 Lease-Leaseback

-year ease erm w pre-paymen op on

17406 entity would include financing component

Contractor to submit proposal with financing component

Security for debt is future bond issuance in 2015

In event state funds are not realized

Mostly future Measure R / Y

Could need Measure Q if ALL awards with deferred

payment

In reality, debt will likely be paid off by receipt of state funds


15/19

Program Impact of Financing

Either financing option comes with financing cost

Award contracts in near-term favorable market conditions

Financin cost ma be miti ated b bid savin s in current

market

issuance

Measure R or Y cash forecast to be available in 2015

Financed approach maintains school opening schedule and

timely completion of program


16/19

Option #3 Delay Contract Awards

Delay contract awards until state match is certain

Could mean 1-2 year (or more) delay in school openings

Cost to children still on multi-track and Concept 6ca en ars

Likely increase in bid prices due to future escalation

Additional cost of program / project management due to

extension of program

Economic / jobs impact of delaying $1 billion of contracts


17/19

Next Steps

Targeted rollout of financing program for Sept/Oct RFPs

Board action on Sept. 22 requesting action to approve

Parallel path / backup plan for third-party financing

Industry forum with contractors and financing entities


18/19

Questions????


19/19

Bond Impact on Tax Bills

LAUSD issued estimates as required by Prop 39 requirements

Indicated increase in debt service resulting in increasing taxrates

Best efforts at estimate made prior to bond election

Global economic crisis and serverit of housin crunch has

exceeded pre-election forecasts

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Deferred Financing-BOC Presentation Aug 19 2009-FINAL

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