NORTHERN CALIFORNIA – The Yuba Community College District reported that it has undertaken the sale of refunding bonds to save taxpayers $14.2 million.
The district said the refunding bonds sale will convert noncallable capital appreciation bonds, or CABs, into lower-cost current interest bonds.
“This is a win-win for our students and taxpayers,” said Yuba Community College District Board President Gary Sandy. “This was the fiscally prudent move to make; it will reduce the financial burden on local taxpayers for years to come.”
The district has a presence in eight counties – primarily across the northern Sacramento Valley – with two colleges in Yolo County and Yuba County and the campuses in Clearlake, Colusa and Sutter counties that serve 13,000 students.
The high-interest bonds that are being restructured are from Measure J, district Chancellor Dr. Douglas Houston told Lake County News.
In November 2006 voters passed Measure J, which authorized up to $190 million in bond sales to fund improvements across the district's campuses and facilities, including the Clear Lake Campus, Houston said.
The next year, the bond sales began. “We're refinancing almost all of the Series A bonds that were sold in 2007,” said Houston.
In doing so, the district was able to buy back some of the noncallable Series C bonds issued in 2011, which had relied on capital appreciation bonds that required balloon interest payments. Houston said the Measure J Series B bonds have not been refinanced.
The high-interest bonds were converted through Dale Scott & Co. CAB Restructuring Bonds program, which engages with investors to buy capital appreciation bonds back at their fair-market price, according to a report from the district.
The district said it is replacing the CABs with lower-cost current interest bonds to save taxpayers money over the long term.
Dale Scott & Co. converted nearly $40 million of capital appreciation bonds for the district, reducing the total amount of outstanding CABs by more than 30 percent.
“In some cases, CABs were the only viable option for a district at the time they were issued,” said Dale Scott & Co. President Dale Scott. “But many of these bond deals were put together in a way that made a traditional refinancing impossible. In response to this problem, we’ve developed a program that can restructure these non-callable CABs, allowing districts to provide substantial long-term benefits to their taxpayers.”
Houston said the Yuba Community College District is the first community college in California to implement the restructuring bonds program. “We are very pleased with the results.”
While the district had authorization to issue up to $190 million under Measure J, it has sold only $130 million as of June 2011, Houston explained.
“We can't issue the remaining $60 million,” which Houston said is a result of the recession.
The district can only issue bonds if it can certify the tax burden is $25 per $100,000 value on property, Houston said.
The collapse of the property market during the recession meant the district couldn't meet that requirement, said Houston.
While property values are coming back up, they still have a ways to go, he said. As a result, the bond sales have stopped.
The Measure J Citizen's Bond Oversight Committee decided to suspend operations at its meeting last month until the next projects take place, with Houston noting that it may be several more years before the district takes on more projects.
In the mean time, he said the district turned its efforts toward reducing the tax burden on its property owners. While the district could have sold another series of bonds to refinance the Series A bonds, instead it decided to refinance the capital appreciation bonds.
“We really thought that was the best thing we could do for property owners,” Houston said.
As for the projects the bonds funded, Houston said most of them were completed as of the last academic year.
The Clear Lake Campus has three new state-of-the-art buildings thanks to Measure J.
Campus officials said the buildings house the library, media center and student services; culinary arts and the multipurpose room; and biology and chemistry rooms. The total cost was reported at $9 million.
“We're really proud of those,” Houston said, adding the buildings are beautiful.
“The students love them,” he said, and students have indicated that the new buildings have made the campus feel like a real college.
With the exception of removing some older buildings and completing minor curb appeal work at the entrance to the campus on Dam Road Extension, Houston said the main projects at the Clear Lake Campus are complete.
“We've built all the buildings we intended to build there,” he said, noting the campus is starting to see some modest growth in its student body.
In terms of projects across all of its campuses, the district may look for new opportunities to sell the remaining bonds in the future to fund some two buildings at the Woodland campus and a new building at the new campus north of Yuba City, Houston said.
He said there also are some renovations that are needed at Yuba College's Marysville campus.
Yuba Community College District’s conversion of capital appreciation bonds follows similar moves by K-12 school districts in Alameda, San Diego, San Joaquin, San Mateo and Stanislaus counties, according to the district's report.
More than 200 school districts and community college districts in California issued approximately $3 billion of high-interest capital appreciation bonds between 2001 and 2013, when Gov. Jerry Brown signed AB 182 into law, prohibiting K-12 and community college districts from issuing capital appreciation bonds with debt ratios of 4-to-1 or greater, the district said.
Visit the college district online at www.yccd.edu .
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