west contra costa usd

West Contra Costa USDGeneral Obligation Bond, Election of 2010, Series A

Presentation to the Board of EducationNovember 16, 2011

Sale of Series A Bonds

Presentation to the West Contra Costa Unified School District Board of Education | page

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Last week, the District sold $100 million of Series A Bonds to investors through the underwriting team of Piper Jaffray and De La Rosa & Co.

Bond purchase agreement (BPA) signed last Tuesday.

Transaction included traditional tax-exempt bonds and qualified school construction bonds (QSCBs).

All-in cost of 4.30% (with average life of 20.4 years).

Bond proceeds will be wired to the District on Tuesday, November 22nd.

Re-Envisioned Bond Program

The sale represents the first sale of bonds under a long-term bond program that has been significantly re-envisioned over the past three years.

Unprecedented tax base declines and emerging program constraints.

Interim fixes (down-sizing of bond issues, restructurings, subsidized programs).

2010 Measure D bond election.

Bonding capacity waiver.


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New Strategies

The District implemented a number of new (and relatively new) strategies in conducting this sale of bonds.

Negotiated Sale.

Single co-manager.

Management fee component of underwriter spread.

Investor outreach.


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Primary Objectives

These new strategies and other efforts of the financing team were intended to accomplish a number of key objectives.

Achieve the lowest possible interest rates for District taxpayers (both on an absolute and spread to MMD basis).

Continue to expand the District’s investor base.

Increase the number of bonds sold without insurance.


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Summary of Results

Overall, the financing team can report that the sale met all key objectives.

Absolute yields were very low.

Yields on a spread-to-MMD basis were relatively close to past West Contra Costa USD and recent comparable transactions.

More than $44 million (or 44.2%) of the current transaction were sold without insurance.


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Market Conditions

Although interest rates were generally higher than their mid-September lows, the bonds sold into generally improving market conditions.


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0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

May 2011 Jun 2011 Jul 2011 Aug 2011 Sep 2011 Oct 2011

Treasury Rates

10-Year Treasury 30-Year Treasury

Municipal Rates versus Mid-August On the day of the sale, MMD rates were relatively

close to where they were when the District issued its Refunding Bonds on August 10th.


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0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Year(s)

'AAA' MMD Yield Curves

8/10/2011 11/8/2011

Refunding Opportunity

Because of the widening credit spreads, however, the District was not able to refund any additional bonds authorized for refunding this past summer.

Certain bonds were previously authorized for refunding but not refunded in August.

Financing team was prepared to move ahead if objectives were met.

Rates were not low enough at time of sale.

Bonds may be refundable in the future.


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Rating Movement

One positive factor going into the sale was that Moody’s Investors Service eliminated the negative outlook on the District’s general obligation bonds.


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Rating Agency Current Rating Current Outlook Recent History

Moody’s Investors Service “Aa3” Stable “A2” in June 2008.“Aa3” with negative outlook in August 2011.

Standard & Poor’s “A+” Stable “A-” with positive outlook in June 2008.“A” in August 2009.

Fitch Ratings “A+” Stable “A-” with negative outlook in June 2008.“A+” with negative outlook in June 2010.

Investor Outreach The District reached out to a number of key

investors in preparation for this sale.


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American Century Fund Americo Life Insurance

Columbia Management

Charles Schwab Funds

Neuberger Berman Asset Management

Thornburg Investment Management

Vanguard Wells Capital Management Wells Proprietary Funds

http://www.americo.com/index.html

http://www.thornburginvestments.com/

https://www.wellscap.com/index.html

http://www.wellsfargoadvantagefunds.com/html/welcome/home.htm

Investor Participation

The bond issue attracted a broad base of institutional investors.


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http://www2.blackrock.com/global/index.htm

https://www.franklintempleton.ca/ca/retail/en/jsp_cm/home/public_home.jsp

Comparison to Recent District Bond Sales On an absolute basis, interest rates were lower

than for recent District bond sales.


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Issue Date Issue Average Coupon Average Life

5/17/06 Election of 2005, Series A 4.88% 18.3 years

7/15/08 Election of 2005, Series B 5.75% 19.9 years

9/3/09 Election of 2005, Series C (BABs) 5.50% 24.5 years

9/3/09 Election of 2005, Series C (non-BABs) 7.10% 17.7 years

9/3/09 2009 Refunding Bonds 4.42% 7.2 years

6/24/10 Election of 2005, Series D (including QSCBs) 3.84% 14.5 years

8/16/11 2011 Refunding Bonds 3.41% 7.6 years

11/22/11 Election of 2010, Series A 4.30% 20.4 years

Comparison to Comparable Bond Sales The District continues to pay higher interest rates

than other comparable credits.

The District has a unique history.

Investors perceive not only an increased credit risk, but also a thinner market for District bonds.

Lodi Unified School District and Porterville School District sold bonds recently that we used as comparable sales.

Spreads to comparable school districts have been narrowing in recent years.


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Qualified School Construction Bonds The District also sold $21 million of qualified

school construction bonds. Authorized in connection with LPS-Richmond

project.

Applicable deadlines – issuance and expenditure.

Taxable bonds maturing on 8/1/30.

Net rate of 1.34% (6.25% less than 4.91% subsidy rate).

Required ongoing management.


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QSCB Investors

The District’s QSCBs attracted a high level of buy-and-hold and other institutional investors.


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Costs of Issuance

The District and District taxpayers will incur certain costs in connection with this financing.


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WEST CONTRA COSTA UNIFIED SCHOOL DISTRICT

General Obligation Bonds, Election of 2010, Series A and Series A-1UPDATED Costs Related to Bond Issuance

Costs of Issuance Consultant Total

Bond Counsel (inc expenses) Stradling Yocca Carlson & Rauth 98,000.00$

Disclosure Counsel GCR, LLP 52,000.00

Disclosure Counsel Reimb. GCR, LLP 3,000.00

Rating Moody's Investor Service 38,500.00

Rating Standard & Poor's 31,750.00

Rating Fitch Ratings 30,000.00

Financial Advisor KNN Public Finance 100,000.00

Financial Advisor Reimb. KNN Public Finance 5,000.00

Paying Agent Bank of New York Mellon Trust 3,000.00

Filing Agent Bank of New York Mellon Trust 2,000.00

Printing Imagemaster 4,500.00

Investor Roadshow NetRoadshow, Inc. 7,500.00

Misc. 7,000.00

Total Costs of Issuance 382,250.00$

Moving Ahead

The financing team will continue to address challenges to the bond program in the year ahead.

Existing bond programs are based on the assumption of long-term tax base growth.

Current 2010 Measure D financing plan assumes that bonds will be issued in alternate years of approximately equal amounts through 2019.

Projects continue to straddle bond issuances.

The District should continue to communicate positive stories about the bond program.


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