1. West Contra Costa USD General Obligation Bonds, Election of 2010, Series B General Obligation Bonds, Election of 2012, Series A Review of Costs of Issuance Presentation to the Facilities Subcommittee December 10, 2013

2. Primary Goals Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 1  The financing team has three primary goals.  To develop a financing plan that meets the District’s needs in a reasonable, equitable, and cost effective way.  To implement such financing plan effectively and efficiently, and in a way that retains flexibility for plan adjustment to the extent possible.  To effect transactions in a manner that reflects best practices and at the lowest possible cost given the goals of the program.

3. Reducing Financing Costs  In terms of providing low financing costs, we want to stay focused on the areas that provide the highest benefit.  Program Structure. Assuming interest at 5% and a 30-year term, a $125 million bond issue structured with level debt service will be $80 million less expensive than a $125 million bond issue structured with 4% escalation over the same term.  Interest Rates. Assuming a $125 million bond issue structured with 4% escalation and a 30-year term, achieving a 4.90% interest rate will save nearly $4 million in interest versus the 5% interest rate transaction described above.  UW Spread. Reducing underwriter’s spread by $2 per bond can save up to $250,000 on a $125 million transaction.  Direct COI. To the extent the District were able to reduce “controllable” direct costs of issuance by half, the District would have saved $150,000. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 2

4. Costs of Issuance  That being said, costs of issuance (both underwriter’s spread and direct costs of issuance) are significant and require active management.  Combined, the two components totaled more than $1 million on Series 2013 Bonds, $450,000 of which was paid from the District’s Building Fund.  This is an amount that has increased significantly since the early 2000s (for some legitimate reasons).  Additional money in the building fund can go directly to much needed facility projects.  The District has a fiduciary duty to its taxpayers to keep costs low. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 3

5. West Contra Costa USD Strategy  In West Contra Costa USD, our strategy tries to achieve the best of both worlds with regard to service and costs. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 4 ServiceFees  We want to have a full team in place at all times.  Long term contracts provide broad parameters for fee discussions.  By convention, a number of team members serve under long term contracts.  Actual fees are negotiated after structure is developed based on fees for comparable transactions.  All financing team members provide services between financings.  Target is to have final fees negotiated before documents are drafted.

6. Comparable Transactions – Underwriter Spread  In terms of underwriter’s spread, we looked at large number of similarly sized new money transactions priced since the beginning of the year.  We develop different comparables for different purposes.  Underwriter’s spread will vary with market conditions, and with transaction size, term, and credit characteristics.  Underwriter’s spread should reflect the level of banking support provided during the process.  The level of underwriter’s spread can have an impact on pricing. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 5

7. Underwriter Spread Comparison  Based on these comparables and other factors, the District negotiated a fee of $5 per bond. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 6 [1] General obligation bonds sold by California K-14 education issuers in amounts ranging from $70 million and $200 million between 1/1/13 and 6/30/13. [2] Figures for tax-exempt, new money, current interest bond component only.

8. Factors Impacting Costs of Issuance  There are three primary factors that drive direct costs of issuance on comparable transactions.  Aggregate size of the offering.  Complexity of the transaction structure.  Number of separate series involved. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 7

9. Comparable Transactions – Direct Costs of Issuance  In terms of direct costs of issuance, KNN identified six reasonably comparable transactions. Again we develop different comparables for different purposes. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 8 [1] General obligation bonds sold by California K-14 education issuers in multiple series between 7/1/12 and 6/30/13. [2] Figures for combined financing, all series.

10. Costs of Issuance Table  For the Series 2013 Bonds, direct costs of issuance totaled approximately $450,000. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 9 [1] Listed costs include billable expenses charged at cost.

11. Comparison to Recent Transactions  In aggregate, such costs are higher than they have been for most of the District’s recent transactions, largely due to the larger size and increased number of series. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 10

12. Costs of Issuance Components  In terms of the selected comparable transactions fees were the primary “controllable” cost components for the 2013 bonds were relatively high but not outside of reasonable bounds. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 11 (1) Pricing Consultant. (2) Disclosure Counsel fee not reported, may be included in Bond Counsel fee. (3) Data not provided to CDIAC. (4) Both the Financial Advisor fee and Bond Counsel fee were negotiated down from the originally contracted maximums.

13. Strategies for Reducing Fees  To the extent the District wishes to reduce fees on future transactions, the District might consider any number of alternatives.  Maintain alternate year issuance schedule.  Utilize “vanilla” transaction structures.  Institute a more formal process for fee approval.  Re-negotiate current consultant contracts or conduct a new selection process.  Reduce use of consultants between transactions. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 12

14. Longer Objectives  Reducing costs, however, is not always the best way to achieve the District’s broader objectives.  The District’s communications infrastructure is as strong as any in the State.  There are many cases where such open communication has been responsible for the development of good ideas that have improved the program and saved taxpayers money.  We believe the quality of the District’s bond program is an essential component of its success. Presentation to the West Contra Costa Unified School District Facilities Subcommittee | page 13