1. School District Bonds and Citizens' Oversight Committees
Novato Unified School District
Meredith Johnson, Bond Counsel

2. What is a General Obligation Bond?
a constitutionally authorized debt or obligation;
voter approved;
secured by a pledge of property taxes;
subject to constraints in Education Code on borrowing.

3. How are G.O. Bonds Repaid?
Ad Valorem property taxes- “according to value”
Unlimited – no exemptions
Assessed Value $$$
x 1% = Regular Property Taxes
x .00?? = Debt Service on Bonds 3

4. Historical Framework
Cal. Const. Permits Bonds with 2/3 Approval
Only Issues Authorized Prior to Nov. 1978
Back to 2/3 Approval (Prop. 46)
2000-Present Additional 55% Authorization for Schools & CCD’s Only (Prop. 39) 4

5. $ Costs of Borrowing Your Car Loan Your Mortgage Small Co.
Your Credit Card
Your Car Loan
Your Mortgage $
Small Co.
General Electric
Districts
Federal Gov’t
Bill Gates 5

6. Procedural Steps District Calls Election Voters Pass at 2/3 or 55%
District Appoints C.O.C.
Issue Series A Bonds
Prioritize and Build Projects
C.O.C. Reports to Taxpayers 6

7. Prop 39 v. Traditional 2/3rds-Considerations
Voter approval threshold (2/3 or 55%)
Use of proceeds/Prop 39
Construction, reconstruction, rehabilitation, replacement of facilities
Acquisition or lease of real property
Furnishing or equipping of school facilities
Accountability provisions/Prop 39
Bond Project List
Citizens’ Oversight Committee
Annual Audits
Tax Rate Limits/Prop 39

8. Bonds for Technology
Average maturity of bonds may not exceed 120% of useful life of asset financed
IRC contains schedule of relevant useful lives

9. Bond Proceeds are Segregated in Special Building Fund with County Treasurer9

10. Education Code Limitations on Issuance
Bonding capacity:
2.5% of taxable property in District
May be waived by SBE
Tax rate maximum:
$60 per $100,000 of assessed valuation
(Ed. Code 15270(a))
Per Prop. 39 election
Both tests performed at time of issuance

11. A.B. 182 Limits repayment ratio of any bond series to 4:1
Maximum 8% interest rate
Capital Appreciation Bonds
must be presented to Board as info item prior to meeting at which approved
may not exceed 25 years in maturity
must be callable after 10 years

12. Forming and Managing a Bond Oversight Committee

13. Citizens’ Oversight Committee (Ed. Code Sections 15278-82)
60 days after Election CERTIFIED
Minimum 7 Members, WITH ONE EACH:
Senior Citizen
Taxpayer Ass’n Representative
Local Business Representative
PTA Member
Parent of Student 13

14. Conflicts of Interest COC may not include as Members:
Employees of the District
Vendors of the District
Contractors of the District
Members’ immediate family should also be independent 14

15. Citizens’ Oversight Committee
Brown Act (no closed sessions)
Annual Report
Oversight & Comment Only; No Control Over Bond Proceeds/Projects/Program 15

16. Purpose of Committee
“To inform the public concerning expenditure of bond revenues.”
§ 15278(b), Ed. Code 16

17. How to “Inform Public?” Understand Voter Approved Project List
Project List not MFP
2. Get Data from District re: Construction
3. Ask Questions
4. Discuss, Agree at Committee
5. Report 17

18. 18

19. 19

20. COC’s Scope of Authority
Ensuring bond revenues are expended only for construction, reconstruction, rehabilitation, or replacement of school facilities.
(Article XIIIA, Section 1(b)(3) of the California Constitution.)
Ensuring no funds are used for any teacher and administrative salaries or other school operating expenses.
(Article XIIIA, Section 1(b)(3)(A) of the California Constitution.)

21. Bond Proceeds May be Spent Only:
On Qualified (Approved) Projects and NOT on Salaries or Other Operating Expenses
§ 15278(b)
But see A.G. Opin 21

22. COC Activities
Review annual, independent financial and performance audits performed by an independent consultant.
Inspect school facilities and grounds to ensure that bond revenues are expended in compliance with law.
Review any deferred maintenance proposals or plans.

23. COC Activities (continued)
Review District efforts to maximize bond revenues through implementation of cost-saving measures:
Professional fees
Site preparation
Joint use of facilities
School site design efficiencies
Reusable facility plans

24. Committee Will Be Supported Administratively by District
(But Not With Bond Proceeds) 24

25. Administrative Assistance to COC
District’s Board to provide technical and administrative assistance to COC, such as:
Website information posting.
Brown Act agendas and minutes.
Financial and progress reports.
Submit independent financial and performance audits at same time as to District, no later than March 31st.
Respond to findings, recommendations and concerns addressed in audits within 3 months.

26. Debt Management Policy
New requirement of all CA public agencies prior to issuing any debt, e.g. G.O. Bonds
Policy must include:
The purposes for which the proceeds may be used;
The types of debt that may be issued;
The relationship with the issuer’s capital improvement program;
Policy goals;
The internal control procedures to ensure that the proceeds are spent for intended use.

27. From Successful Election to Construction – Bond Issuance
Bond Team determines timeline for bond issuance
County officials notified
Documents drafted, reviewed, redrafted
Legal documents brought to Board
Offering document printed/circulated
Bond rating obtained
Bonds are bid or priced
Bond closing occurs (2-3 month process)
Seek advice of counsel if you incur expenses prior to issuance of bonds

28. Questions??? 28