The following information was released by Los Alamitos Unified School District.
On July 31, 2013, the Los Alamitos Unified School District successfully sold $51.39 million of Series E Bonds from the 2008 Bond Election Authorization (Measure K) to provide $30.8 million for the completion of facilities projects as well as the repayment of the 2011 Bond Anticipation Notes, which were used to fund various stages of the modernization work being done on several school sites including Hopkinson Elementary, Rossmoor Elementary, Los Alamitos High School, Lee Elementary, Oak Middle and Weaver Elementary.
The sale of the bonds was greatly benefitted by the Standard & Poor’s rating upgrade. The District’s bond rating was upgraded by Standard & Poor’s from “AA-” to “AA” and affirmed by Moody’s Investors Service at “Aa2”. The rating agencies cited a stable tax base, strong finances and effective management, which helped to attract a large number of investors, allowing for lower final interest rates.
Facilities projects completed with bond funds
In accordance with voter approval, the District has used $101.29 million in bond funds and $19 million in State Matching Funds to complete several projects over the last five years. School sites that have completed modernization to date include: McGaugh Elementary, McAuliffe Middle School, Los Alamitos Elementary, Hopkinson Elementary, Rossmoor Elementary, and Los Alamitos High School.
This Series E Bond sale will allow the District to complete facilities improvements with the construction and modernization of Lee Elementary, Oak Middle School, Weaver Elementary, and the District Office.
Following the sale of the Series E Bonds, the District has $24.61 million in bond authorization remaining from Measure K. In accordance with the original facilities funding program developed prior to the bond election in 2008, that authorization is expected be sold in 2026 and could be used to either fund additional facilities projects or repay the District’s outstanding 2012 COP.
Bond structure reduced interest cost to taxpayers
At two public Board workshops, several financing options were presented with varying repayment terms and projected tax rates. During these meetings, the Board discussed the structure of the bond, as well as reviewed the merits of increasing the projected tax rate in order to minimize the issuance of Capital Appreciation Bonds (CABs) and thus keep the interest cost as low as possible. Consequently, the Board decided on a structure that would not exceed a 30-year repayment term with a lower total borrowing cost for taxpayers compared to other options. Based on the final interest rates, the projected tax rate to repay the bonds is $54.44 per $100,000 of assessed valuation.
The District Board chose a structure with a higher projected tax rate to lower the interest cost over the life of the bonds. The actual Series E Bond debt service saves approximately $99.6 million in interest cost as compared to the most expensive alternative with 40-year CABs.
The bonds are authorized under Proposition 39, which have a maximum legal tax rate projection of $60.00 per $100,000 of assessed valuation at the time of the bond issuance.
Series E Bond structure
The structure is comprised of 53.35% Current Interest Bonds (CIBs); 39.85% Convertible Capital Appreciation Bonds (C-CABs), which are a hybrid bond that starts as a CAB, then converts to CIBs in 2026; and 6.80% CABs. The bonds were sold with standard call provisions, which provide the District the opportunity to refinance the bonds at lower interest rates in the future. The final maturity of the CABs is in 24 years, with CIBs and C-CABs maturing in years 25 through 30.
The debt repayment ratio (total principal and interest to original principal amount) for the bonds sold is 3.11 to 1. To date, the total repayment ratio for all bonds sold from the 2008 Election is 2.44 to 1. This means that taxpayers will pay $2.44 for every dollar borrowed on the overall bond election.
File photo by C.E.H. Wiedel of Weaver Elementary School.
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