Measure M Board of Trustees Study Session

January 16, 2013

Presented by: Andy Dunn, Vice Chancellor, Finance & Administrative Services and Jerry Marchbank, Facilities Director

Discussion

January 16, 2013 2

• Measure M Vote • Capital Improvement Program Summary • “Surf Report” • Cash Flow • Operational Structure • Project Delivery Models • Measure C • Overview of Bond Issuance Process • Next Steps

M - Coast Community College District Bond Measure Completed Precincts: 483 of 483

Vote Count Percentage

Bonds - Yes 134,619 57.2%

Bonds - No 100,843 42.8%

January 16, 2013 3

Measure M Vote

Source: Orange County Registrar of Voters

January 16, 2013 4

Capital Improvement Program Summary • Total program Cost (est.): $957.4M

• Local Funding: $770.7M • State Funding: $186.7M

• The Bond provides the District with $698M or 90.56% of the local funding required to complete the Vision 2020 Master Plan

January 16, 2013 5

Capital Improvement Program Summary Continued Additional Buildings

1.92%

Building Replacement

54.50% Renovation/ Modernization

18.63%

Building Infrastructure

11.31%

Technology Upgrade/Refresh

8.15%

Other 5.49%

Target Bond Allocation

Site Master Plan Estimate Allocation %

OCC $435,830,111 56.55%

GWC $239,801,605 31.11%

Coastline $78,395,193 10.17%

District Office $16,720,954 2.17%

Total $770,747,864 100.00%

*Allocation per the Board-approved Vision 2020 Facilities Master Plan (June 18, 2011)

Program Target:

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7

Issuance Scenarios Par Amount (per $100,000 A.V)

Series Date $17 $17.97 $19

A 8/1/2013 $180,000,000 $200,000,000 $225,000,000 B 8/1/2016 $180,000,000 $190,000,000 $190,000,000 C 8/1/2019 $127,500,000 $122,500,000 $123,000,000 D 8/1/2022 $175,000,000 $185,500,000 $195,500,000

$662,500,000 $698,000,000 $733,500,000

Assumed AV Growth Rate:

2012-13 2013-14 2014-15 Thereafter 2.00% 2.50% 3.00% 3.50%

Bond Issuance Targets

January 16, 2013

Issuance schedule is based on four series issued three years apart:

What is the “Surf Report?” • A set of long-range planning tools developed

to monitor overall program budget and schedule.

Can be viewed at: http://www.cccd.edu/measurem/docs/Measure%20M%20Budget%20Summary.pdf

January 16, 2013 8

Preliminary Series A Budget Summary

January 16, 2013 9

Series A Summary:# Project Cost

CCC14.2 CCC NBLC Lease Revenue Bond

18.1.S Le-Jao Student Resource Ctr RenovationD/W14.1 Photovoltaic Installation15.7 Technology Upgrades28.1 Series A Endowment

DISTNone $0

GWC15.3 Elevator Repairs/Replacement15.4 Security, Access, Surveillance Infrastructure15.5 Classroom Improvements15.6 Campus Safety Building16.4 Student Services Center

18.3.S Science & Math18.4.S Criminal Justice Training CenterOCC15.1 Recycling Center15.2 Business, Math, Computing Building15.8 Student Services Improvements16.1 Maritime Academy Expansion16.2 Planetarium16.3 Parking Structure18.2 Adaptive P/E, Gym, Pool Renovation

18.5.S Language/Social Science Building18.6.S Chemistry Expansion/Renovation

Program Contingency $11,529,668Series A Total Issuance $203,690,803

$20,921,126

$30,857,912

$110,213,322

$30,168,775

January 16, 2013 10

Measure M Operational Structure • How will we manage and deliver Measure M?

• A combination: • Consulting Services (“Staff Augmentation”) • “Soft Money” Employees

Measure M Operational Structure

January 16, 2013 11

January 16, 2013 12

Initial Conversation to Land Development Committee:

Continuing Discussion January 16, 2013:

Looking Back 1. September 2011: Introduction – Presentation to

Land Development Committee

2. October 2011: Legal Framework

3. Spring-Fall 2012: Outreach to Practitioners

History 11/8/2012

6 20 3 13

Today’s Agenda • Review Delivery Models

1. Design-Bid-Build 2. Design-Build 3. Lease-Leaseback

• Recommendation to Land Development Committee

Agenda 11/8/2012

14

Factors that may Influence Delivery Model Choice

1. Time considerations 2. Level of acceptable legal and financial risk 3. Complexity and size of project 4. Best Value vs. Lowest Price 5. Legal and/or scope Constraints 6. Appropriate community and business participation

Delivery Methods Overview 11/8/2012

15

• Design-Bid-Build

– Traditional (“Public Bid General Contractor”) – Multiple Prime – Construction Management (CM) At-Risk

• Design-Build

• Lease-Leaseback

Delivery Methods Overview 11/8/2012 January 16, 2013

16

Owner

General Contractor

Subcontractor Subcontractor Subcontractor

Architect Construction Manager

Subcontractor

Design-Bid-Build: Public Bid General Contractor

- Qualifications Based Selection

- Lowest “Responsible” Bidder

11/8/2012

17

Benefits • Defined Project Scope

before bid • Competitive bid process • Familiar and established • Clear statutory framework

Considerations • No constructability input

from contractor before bid • Stuck with low bidder • Significant time/cost impact

if GC defaults • Adversarial relationship

with contractor over change orders

Design-Bid-Build: Public Bid General Contractor 11/8/2012 January 16, 2013

18

Owner

Contractor Contractor Contractor

Architect Construction Manager

Contractor

(19-23 Prime Contractors)

Design-Bid-Build: Multiple Prime

- Qualifications Based Selection

- Lowest “Responsible” Bidder

11/8/2012

19

Design-Bid-Build: Multiple Prime

Benefits • District can choose CM • CM involved in pre-

construction phase • Competitive bid process

(trade contracts) • General Contractor mark-up

is saved

Considerations • Highest Risk: District holds

numerous low bid contracts • Creates greatest

administrative burden • Scope “gaps” • Total price not known until

all bids in. • Lack of single bonded

guaranteed price

20

11/8/2012

Owner

Design-Build Entity (A/E & Builder)

Contractor Contractor Contractor

Criteria/Bridging Architect

Contractor

Design-Build

- Qualifications Based Selection

- Lowest “Responsible” Bidder

11/8/2012

21

Benefits • Promotes collaboration • Guaranteed Maximum Price • All errors, omissions and

coordination risk placed on DBE

• One contract and single point of responsibility

• One RFQ/RFP solicitation

Considerations • Less control of design &

design details • Architect alliance with builder

instead of owner • Least cost/lowest quality

materials unless stipulated in bridging documents

• Must choose A/E & Builder as a team

• Scope minimum = $2.5M Design-Build 11/8/2012

22

Owner

Contractor

Architect L-LB Entity (Builder)

Contractor

Lease-Leaseback

- Qualifications Based Selection

- Lowest “Responsible” Bidder

11/8/2012

23

Benefits • District can choose Architect

and Contractor • Contractor can be part of

design process • Architect is aligned with

District interests

Considerations • Not single source

responsibility • This delivery method is not

available for State-funded projects.

• Dependent on tightly developed contractual details (up front contract negotiations)

• Statutory language not clear for CCC’s

Lease-Leaseback 24

11/8/2012

Measure C • Closeout Strategy

• Spend down all Measure C Funds by June 30, 2013 • Refinance/Refunding Opportunities

• Complete Minor OCC Projects • Pay down NBLC Lease Revenue Bond debt • Reconcile allocation with initial Measure M

issuance

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January 16, 2013 26

Overview of Bond Issuance Process

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2013 Market Outlook

Similar to refinancing a home mortgage (High Interest Rates to Lower Interest Rates)

Refunding Candidate: 2005 G.O. Refunding Bonds issued on 04/05/05 in the amount of $74,893,867

Amount of Bonds Being Refunded: Approximately $31,705,000

Estimate Savings to Local Taxpayers: Approximately $1.3 million or $177,000 per year

YearPrior Net Cash

FlowProposed

Debt Service Gross Savings2013 $792,625 $736,636 $55,9892014 $1,585,250 $1,407,550 $177,7002015 $1,585,250 $1,407,454 $177,7962016 $7,785,250 $7,610,736 $174,5142017 $7,775,250 $7,596,789 $178,4612018 $7,785,250 $7,608,219 $177,0312019 $7,778,500 $7,599,187 $179,3132020 $5,250,000 $5,071,489 $178,511

$40,337,375 $39,038,061 $1,299,314

Debt Service Comparision Based on Current Rates

*Represents the daily consensus “AAA” G.O. Bond municipal market scale

10-Year MMD*January 2011 - January 2013

1.20

1.70

2.20

2.70

3.20

3.70

1/3/

2011

3/3/

2011

5/3/

2011

7/3/

2011

9/3/

2011

11/3

/201

1

1/3/

2012

3/3/

2012

5/3/

2012

7/3/

2012

9/3/

2012

11/3

/201

2

1/3/

2013

Yie

lds

Potential Opportunities and Challenges in the Year Ahead Interest rates are near all-time lows although most forecasts predict

interest rates to rise later this year and into 2014

Federal Reserve suggesting they may end quantitative easing prior to 2015; this program is intended to increase money supply and keep interest rates low

Potential legislation on the horizon could negatively affect the tax-exemption benefit of municipal bonds

Refunding Opportunity

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• The underwriting team will use it’s retail distribution network to target local buyers

• Advertise in local newspapers prior to the sale of the bonds

• Preference will be given to retail investors during sale

• Sample ad shown to the right

29

Target Local Constituents

Local Participation

January 16, 2013

30

Bonded Endowment Funds

In order to create and fund a technology or facility repair endowment, a district must dedicate all of the proceeds of a series of bonds for this purpose

Proceeds are deposited into an Investment Fund held by the County Tax Collector-Treasurer or other entity designated by the County

The Investment Fund must be invested in tax-exempt municipal bonds which are not subject to the alternative minimum tax (AMT)

Bond structuring is impacted by the tax rule that limits the bonds maturity to 120% of the useful life of the projects

Subject to all of the Proposition 39 requirements

Bond Proceeds

Endowment Fund

County Tax Collector-

Treasurer

Municipal Bond

Portfolio

Investment

Portfolio Returns

Endowment Fund Process

Endowment Fund Overview

Recognizing that districts would benefit from a long-term source of funding for both technology upgrades and scheduled maintenance/capital projects, the district may choose to establish a technology or scheduled repair endowment fund

Other Development Activities • Asset Development

• Spring 2012 – Board approved consultant to examine the feasibility of certain asset development applications

• Held several meetings with Land Development Committee

• Result is a Feasibility Study • Student Survey • More to follow

January 16, 2013 31

Next Steps (1) • OCC Business, Math, Computing Project

• Status • DSA approved plans • Expire August 2013 • Must be under construction August 2013

• Action Plan • Select Construction Manager February • Bid June/July • Break ground August

January 16, 2013 32

Next Steps (2) • Develop and Issue RFQ’s

1) Pre-qualify Pool • Project Control Services • Estimating • Design Management

2) Environmental Impact Report • Develop legal instruments/processes for alternative

delivery methods • Develop job specifications for “soft money” Measure

M team members

January 16, 2013 33

Next Steps (3) • Continue Design Work

1) OCC Planetarium 2) OCC Recycling Center

• Begin Design Work 3) Photovoltaic Installation

• Retire CCC Debt

January 16, 2013 34

• Recommended Board Actions • Accept Results of Election • Adopt Amended By Laws

January 16, 2013 35

Next Steps (4)