[Editor’s Note: Mr. Bauer is vice president of the Culver Crest Neighborhood Assn.]
Those who attended Tuesday evening’s Culver Crest Neighborhood Assn. meeting witnessed a terrific discussion about Measure CC, which is very important to the future of Culver City and its School District. Many great questions were raised, and Mike Reynolds, Assistant Superintendent of Business Services for CCUSD, promised to respond to them. His responses are below.
The CCNA wants to thank all those who participated in the discussion, both pro and con.
Mr. Bauer may be contacted at culvercity99@aol.com
To the Culver Crest Neighborhood Assn. Board – from Mike Reynolds
Thank you for providing us the opportunity to speak about Measure CC at your meeting last night. We very much appreciate the professional manner in which the meeting was conducted, as well as the warm reception given to us.
As I mentioned last night, there are often questions that come up in community forums that look at Measure CC and GO (general obligation) Bonds from a slightly different perspective than in previous meetings. I prefer to consult the experts in that field for clarification and the correct answer in each case. I have taken the initiative to speak with our District’s bond financial advisors (Keygent Advisors) to obtain precise answers to each of the stated questions. If you could be so kind as to share these answers with the rest of the attendees at last night’s event, I would be very much in your debt.
Here are our financial advisor’s responses to the questions that were posed last night:
1. Are there any circumstances under which the stated $48/$100K of Assessed Valuation could rise higher than that amount during the life of the bond issuances?
a. The $48 tax rate is a projection dependent on AV. (Recall that the annual bond tax rate is approximately equal to annual bond debt service divided by that fiscal year’s AV). Once all the bonds are issued, if AV happened to decline by 50% (unlikely), then a tax rate of $96 would be levied to pay bond debt service. Conversely, if AV doubled, then a tax rate of $24 will be set by the County. (Please note: Your School Board has no ability to adjust the tax rate after the bond is passed by the voters, only the County can do so – Mike.)
2. If so, could the $48/$100K of AV Tax Rate ever rise to $60?
a. This is possible. The County is legally obligated to set a tax rate sufficient to pay bond debt service. The $60 legal requirement is a projection we cannot exceed at the time of the issuance of bonds. This is why we try to use reasonable growth projections in setting up the repayment schedule.
3. If Culver City’s Assessed Valuation as a community crashes, due to a calamity, etc., what could happen to the annual bond payments?
a. While annual bond payments would stay the same as they are fixed, if a crash occurred, the tax rate would be adjusted to ensure bond payment. Conversely, if AV increased above projections, a lower tax rate would be set for homeowners.
4. Recognizing that we are not tax advisors, are the payments (or any portion) that the homeowners make on a general obligation bond tax deductible?
a. Understanding that we cannot provide tax advice, we found this on the internet: “Individuals can deduct the cost of property taxes assessed on the properties they own. Property taxes are reported as an itemized deduction.”
Mr. Reynolds says:
You may find the news story below on two topics that I brought up last night interesting.
I shared a story last night about a single new building at Lincoln Middle School in Santa Monica that cost $15 million to build and pointed out that we were only seeking $106 million for our entire School District.
I also spoke, in response to a question about whether we should use public bidding, that we preferred to use lease lease-back agreements. They have a guaranteed maximum price that the contractor cannot exceed, and that is provided to us at the start of the project.
As you can tell from the following article, the cost of the one building has now risen to $21.59 million (or approximately one-fifth of our entire bond amount). This cost increase has been due to change orders that resulted from not having a guaranteed maximum price from the contractor.
Thanks again for the opportunity to speak to your group.
Here is a story about the Santa Monica school:
http://santamonica.patch.com/groups/schools/p/lincoln-school-construction-budget-blown-by-4-million
Budget Blown on Lincoln School Construction
The Santa Monica-Malibu Unified School Board approved another $4 million to be spent on the project, bringing the total cost to $21.59 million.
Construction hiccups at will cost an extra $4 million as the Santa Monica-Malibu Unified School District works to complete a series of improvements at the Santa Monica campus.
“We had a budget bust,” said Director of Facilities Improvement Stuart Sam.
The Board of Education approved the new budget, now at $21.59 million, at its most recent meeting, singing praises for staffers who have kept the project on track despite growing costs.
Sam attributed the “bust” to conditions of the buildings which weren't known until the crews began their work, such as finding concrete where planners had predicted there would be wood framing and finding hazardous materials that needed to be disposed of.
“You just don’t know what to expect [until] you open up the walls,” Sam said.
The project includes three construction phases: the addition of movable classrooms and utilities; the modernization of science labs, classrooms and fire sprinklers; and the replacement of Building C with a two-story library and classrooms building, consisting of a new chorus room, two science labs, a shared prep room, storage and restrooms.
The added $4 million will help pay for the third and final phase of construction.
District staffers initially set the Lincoln budget at $17.59 million. It is funded by Measure BB, a bond measure passed by voters in 2006 to pay for repairs and renovations at campuses across the district.
The budget change on the Lincoln project is “incredibly high” compared to other Measure BB projects, said the Board of Education chairman.
The average request to increase a project's budget is about three percent. By comparison, the budget change approved July 18 for the Lincoln project is 22.7 percent.
“Lincoln was really our first big modernization project,” said chief financial officer Jan Maez, who added that other projects were either newer or smaller and thus required less sizable change-orders.
Mr. Reynolds added:
I truly hope that this information fully addresses each of the questions posed last night. If any other questions about Measure CC come to your attention, or if any concern or curiosity remains about how general obligation bonds work, I would be very pleased if you would kindly forward them to me so that I can research and provide further answers as well. Thanks again for your interest in Measure CC.
