|WCCUSD Saves Taxpayers $50 Million on Measure J Bond Sale
December 12, 2011
Bond consultants estimate the taxpayers saved $50 million in the recent Measure J Bond sale.
Investor Participation. Investor participation with regard to the bond sale was relatively strong given the District’s unique history in the credit market and the District’s experience on recent transactions. Investor participation in the District’s bond sales has been an important concern of the financing team dating back to the September 2009 bond sale when the lack of credit approval from key institutional investors resulted in higher than anticipated interest rates on the bonds. Investor participation has improved considerably since that time with both the August 2011 refunding bond sale and the November 2011 bond sale attracting two or three times the number of major institutional investors. Although the availability of more traditionally structured bonds, generally improving market conditions, and improving credit characteristics were certainly a factor in this regard, we believe that the District’s investor outreach efforts and the special efforts of the underwriting team to expand investor participation were important factors as well.
Ongoing Investor Contact. The financing team believes that the investor outreach was a major success and that continued investor outreach should be an important component of the District’s bond program strategy moving forward. The District should maintain a list of its major investors as well as a list of targeted investors, and develop a strategy for ongoing investor outreach. Among other strategies, the District might consider sending a notification to targeted investors upon the publication of the adopted budget, the first and second interim reports, and the unaudited actuals.
Conclusion. The 2011 general obligation bond sale was a success from a variety of perspectives. The District achieved interest rates that were remarkably low on an absolute basis. The District lowered both up-front costs of issuance and underwriter spread considerably versus its most recent new money transaction in September 2009. The District’s ratings continue to improve. Once again, we can say that the District’s bonds are more highly rated at the time of this sale as they have been since the early 1990s.
Look very closely at the deal in Bold Blue below. It shows that in 2009 on a 100 Million Dollar Deal, WCCUSD had a yield of 7.10 (incredibly high and expensive). At the time, member Ramsey asked why and was told it was the market. In hindsight, Ramsey wishes he had, along with the rest of the school board, been more vigilant. Ramsey says he would have would have waited to sell those Measure J bonds because as it turns out the WCCUSD could have waited. With construction prices going down, WCCUSD did not need the money until last year. Ramsey notes he could have saved a lot of interest on those bonds, but that is water under the bridge.
Ramsey says he is thrilled with progress in the bond finance program. In the last two recent transactions, one in August which was a refunding, WCCUSD saved 7.9 Million, and in the November transaction, if compared to the 2009 deal WCCUSD saved 280 Basis points. For every ten basis points it is 1.4 Million Dollars. Do the math. This works out to $40 Million Dollars improved on this deal over 2009 for the taxpayers! This is huge and represents a total of close to 50 Million in savings for our work on bond sales for this year in comparison to 2009.
Moreover, unlike the 2009 deal that had no going away accounts on the day of sale, in this transaction, there were many more investors
For more information, contact:
Charles T. Ramsey, Esq.