1. West Contra Costa USD Funding Technology Equipment through General Obligation Bonds Presentation to the Facilities Subcommittee October 8, 2013

2. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 1 Technology in the Classroom  In recent years, more and more school districts, including the District, have funded the purchase of technology equipment with general obligation bonds.  Renovation and modernization plans have long included updates related to technology.  Proposition 39 specifically expanded the use of general obligation bond programs for the “equipping” of school facilities for “information technology needs.”  There has been a growing appreciation for the utility and desirability of these devices in the classroom by educators and voters.  There are many new ways that technology is embedded in the common core standards.

3. A Bit of a Mismatch  While there are a number of reasons that general obligation bonds are the right financing vehicle for technology purchases, they are certainly not a perfect fit.  Right fit:  The law promotes/allows their use,  Operating budgets continue to be constrained,  The public is willing to pay extra for these type of projects.  Wrong fit:  Bonds have traditionally been used to spread the costs of projects with a long useful life,  Technology equipment needs to be replaced on an ongoing basis,  There are a variety of ways in which these projects seem like operating expenses. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 2

4. Making it Fit  As a result, technology purchases have been made from bond proceeds under a variety of structures.  When technology or other equipment projects are incidental to a single construction and/or modernization project, a single repayment structure is typically developed under the “blended project theory.”  The “blended project theory” is often similarly applied to unconnected projects provided that the lion’s share of the costs are for long-term facility projects.  It is not uncommon for bond issuers to separate a single bond issue into multiple series which match repayment term to useful life.  Some school districts have used bond proceeds to fund a “technology endowment.” Such financings have their utility, but are subject to criticism from a variety of standpoints. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 3

5. Technology Bonds  In recent weeks, there has been a significant industry discussion surrounding the idea of funding technology equipment through a dedicated bond measure or a dedicated portion of a bond measure.  The basic proposal is to identify the amount of money that will be spent on technology equipment at the time of the election, and to make a commitment to repay these bonds over a short repayment period.  In most cases, the needs are projected over a relatively long time horizon (perhaps a dozen years).  New bonds are issued as the old bonds expire to produce a steady funding stream.  There are clear advantages to this approach, both in terms of transparency and in terms of funding stability.  From an economics and policy perspective, this seems to be an improvement on the “technology endowment” concept. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 4

6. Repayment Structure  For the District, a dedicated bond measure funding technology needs over the next fifteen years might be repaid as shown below. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 5

7. Comparison to Traditional Facilities Bonds  Because of the short maturity required for each series, a program like the one described will have a higher initial tax rate impact and a lower proceeds amount when compared to the traditional facilities programs that the District has been pursuing.  The tax rate required to support a similarly sized technology bond would be 1.5x to 2.0x the tax rate required to repay a traditional facilities bond.  The amount of the bond, however, is likely to be significantly smaller.  For school districts pursuing a more traditional program, consideration should be given to how much flexibility is being traded off in such a structure and how the program is expected to sustain itself after the initial round of funding. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 6

8. Current Program  At this point in its program, the District seems well served by continuing to issue under the blended project theory.  Technology equipment continues to be a relatively small part of the District’s larger bond program.  The District has secured funding for technology in an entirely flexible amount (particularly through 2012 Measure E).  Current structures repay a significant amount of bond principal within the first two years of issuance.  To the extent the District is concerned about transparency, a more formal accounting of what projects are expected to be funded with proceeds from each series would be a logical next step. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 7