May 11, 2018
KNN Public Finance
On April 18, 2018, the Santa Monica Community College District sold $249 million of General Obligation bonds summarized in the table below:
The financing plan for the 2018 GO Bonds focused on two primary goals: 1) issue the first series of bonds from the District’s 2016 Election (Measure V); and 2) refund outstanding Build America Bonds (Election of 2008, Series A-1).
The District issued the first series of bonds from the 2016 election (Measure V), as tax-exempt, current interest bonds having a total par amount of $180 million. The repayment ratio for the District’s new money bonds was 1.77 to 1 (total net debt service/par amount) with the final maturity on 8/1/2047. The bonds were structured to remain below the maximum tax rate of $18 per $100,000 of assessed value for FY 2019/20 and $25 per $100,000 thereafter as promised to District voters.
The 2018 Refunding Bonds will refund the District’s 2010 Build America Bonds resulting in taxpayer savings of $1.96 million over the life of the bonds.This equates to present value savings of over $1.43 million, or 2.14% based on the par amount of bonds refunded. The District’s 2010 Build America Bonds were initially issued as “tax advantaged” bonds receiving a federal subsidy to offset interest cost. Sequestration has reduced the subsidy benefit over the last 5 years and there has continued to be uncertainty regarding the Federal government’s position in providing the subsidy moving forward. To eliminate this uncertainty, the District determined it would be prudent to take advantage of the low interest rate environment and refund the outstanding Build America Bonds.
The sale of the 2018 GO Bonds was successful from a variety of perspectives. The District was able to generate proceeds to fund capital improvements while staying below the statutory tax rate for its 2016 election. Additionally, the District’s outstanding credit profile with a credit rating upgrade generated substantial investor interest for the District’s bonds and resulted in taxpayer savings.
KNN has served as the Municipal Advisor to the District since 2016 and continues to work closely with District staff and the financing team. The KNN team would like to congratulate the District on the successful sale of its General Obligation Bonds.