- What is a general obligation bond?
- What will the Seismic Safety Bond funds pay for?
- Are there limits on what the bond funds can be used for?
- When will the bonds be issued?
- When will the bonds be fully repaid?
- Is the District eligible for State funds to help pay for the seismic strengthening and modernization of the school facilities?
- Does eligibility for State funds necessarily mean the funds are available?
- What is the total budget for the Seismic Safety Bond Program?
- How has the State budget crisis affected the Seismic Safety Bond Program?
- What kind of oversight is in place to ensure that the bond program funds are used properly?
What is a general obligation bond?
A school district may raise money to pay for capital projects, including seismic retrofit work, by issuing general obligation bonds.The money is repaid over a period of years with property tax revenue.Property tax revenue is determined by the assessed value of real property (not market value), and the total cost to taxpayers depends on the interest rate and the repayment period. If the total amount authorized by the voters is not needed to complete the project, the full amount authorized need not and will not be issued.
What will the Seismic Safety Bond funds pay for?
The Seismic Safety Bond Program funds will pay for the following:
- professional fees for program management, architectural services, structural engineering, environmental consulting, construction management, testing and inspection, inspector of record, and Division of the State Architect services;
- detailed schematic drawings for each project;
- actual construction costs of repairing, upgrading, and/or rebuilding the identified buildings;
- accessibility work necessary based on the Division of the State Architect requirements;
- interim student housing costs; and
- contingencies and allowances for cost increases for labor, materials, and other unknowns that may be identified during the course of the multi-year construction program.
Are there limits on what the bond funds can be used for?
Yes. Bond funds may be used only for the reconstruction, rehabilitation, or replacement of certain of the District’s existing school buildings and facilities as authorized by the voters and as summarized below.Bond funds may be used to furnish and equip identified school facilities.Bond funds may not be used to pay for teacher and administrator salaries and other school operating expenses.
|Havens Elementary School Buildings||Rehabilitation, reconstruction, or replacement|
|Piedmont High School/30’s Library Buildings||Rehabilitation, reconstruction, or replacement|
|Piedmont High School Student Center||Rehabilitation, reconstruction, or replacement|
|Beach Elementary Auditorium & 30’s Vintage Rooms||Rehabilitation or reconstruction|
|Wildwood Elementary Auditorium & 30’s Vintage Rooms||Rehabilitation or reconstruction|
|Piedmont High School Alan Harvey Theatre||Rehabilitation, reconstruction, or replacement|
|Ellen Driscoll Auditorium||Rehabilitation, reconstruction, or replacement|
|Piedmont Middle School||Accessibility compliance|
|Piedmont High School Buildings & Campus||Accessibility compliance|
|Maintenance Facility||Rehabilitation, reconstruction, or replacement|
When will the bonds be issued?
The District will issue bonds as needed to fund the various projects. The first $15 million of general obligation bonds was issued in July 2006, including $10 million of current interest bonds and $5 million of zero coupon bonds.Moody’s Investor Services gave the District a rating of Aa3, which is a relatively high rating for a school district in California.
The District plans to sell an additional $19 million in bonds in August 2009, an additional $14 million in August 2010, and the final $8 million in 2012-2013. The precise timing of the bond sales, however, will depend on a variety of factors, such as the timing and amount of State matching funds and changes in the assessed value of real property in Piedmont. Changes in property values are an important factor because assessed property values determine the amount of property taxes available to repay the bonds.
When will the bonds be fully repaid?
Based in part on the projected growth in assessed real property values in Piedmont, the District expects the bonds to be fully paid off around the year 2045.
Is the District eligible for State funds to help pay for the seismic strengthening and modernization of the school facilities?
Yes.The District must apply to the Office of Public School Construction for State matching funds.Eligibility is based on the age of buildings, student population, and past receipt of State modernization funds.Based on these criteria, it is conservatively estimated that the District is be eligible for $11 million in State modernization funds.
Does eligibility for State funds necessarily mean the funds are available?
No. No State funds are currently available for public school modernization.If voters of California authorize the sale of additional general obligation bond funds, more money will be become available for school modernization projects, including seismic safety projects. As more funds become available, school districts that have been identified as eligible to receive State matching funds will receive these funds.Access to the funds is on a first-come, first-serve basis.
What is the total budget for the Seismic Safety Bond Program?
The total budget for the School District’s Seismic Safety Bond Program projects is $70,732,000. The project costs will be paid through a combination of bond revenue (up to the maximum amount of $56 million), State matching funds for facility modernization (conservatively estimated to be $11 million) and City funds (at least $710,000 and possibly up to $1.2 million).
How has the State budget crisis affected the Seismic Safety Bond Program?
Due to the State budget crisis, there is now great uncertainty about when State matching funds for facility modernization will be available. Although State staff have indicated that the State will pay the matching funds eventually, there is no way to predict when such payments will be received by the District. For this reason, the District has prepared a contingency schedule and cash flow analysis based on the assumption that no State funds will be available in the near term.
Under the contingency schedule, the District would proceed with the “near-term” projects only. These projects are: Havens; Piedmont High School; Piedmont Middle School; Ellen Driscoll Auditorium; the Maintenance Building; and development and completion of the design materials for both the Wildwood and Beach projects (although construction of these projects would occur in a later phase). The District would suspend work on the Wildwood and Beach projects after the design phase for each of the schools is completed. However, please note that work on both Wildwood and Beach would be completed when State matching funds do become available and when the final tranche of the Seismic Safety bonds are sold.
What kind of oversight is in place to ensure that the bond program funds are used properly?
The Program Manager provides financial reports to the District, including budget information and actual costs incurred to date for the overall construction program and each of the major projects. On an annual basis, independent auditors conduct a review and examination of the bond program and its financial reports.
In addition, as provided in Education Code Section 15278, a Citizens’ Oversight Committee reviews and reports to the public concerning the expenditure of bond program funds.The 12-member Oversight Committee is comprised of individuals from local businesses, senior citizen organizations, organizations involved with schools, a tax payers’ organization, legal, technical, and financial advisors, as well as involved parents of children residing in the Piedmont Unified School District.The Oversight Committee issues an annual report to the community about the management and expenditures bond program funds and inspects the bond program projects during construction.