San Mateo County Community College District
Minutes--Bond Oversight Committee Meeting
November 6, 2006
Members Present: Coleman Campbell, Stanley Gross, Marion McDowell, Jim Wyatt,
Bill Nack, Patrick Cheng, Marta Bookbinder and Chris Eden
Staff Present: Kathy Blackwood, Ron Galatolo, Barbara Christensen
Guests: Pete Hughes–visitor from Redwood Shores Bond Oversight Committee
Jim Wyatt called the meeting to order at 4PM
To accommodate the schedules of several committee members, Barbara requested that
agenda item 4: Discussion of Bond Acceleration Strategy and Item 5: Discussion of
Program Management for CIP2, be considered after item 2, Approval of minutes from
meeting of September 8, 2006. The agenda items were moved as requested.
Minutes: Marion McDowell moved to approve the minutes from the September 8, 2006
meeting. Stanley Gross seconded and the minutes were unanimously approved as
presented.
Bond Acceleration: Chancellor Galatolo explained the District’s plan to accelerate
issuance of the balance of the General Obligation Bond, election of 2005. He reminded
the committee that the total bond authorization was for $468 Million. Original plans
called for the issuance and spending of bond funds over a period of six to eight years to
coincide with anticipated construction/spending schedules. The first issuance of this
bond took place in April of 2006 in the amount of $135 Million.
The District is planning an accelerated issuance of the remaining $333 Million in GO
Bond Funding for the following reasons:
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In anticipation of construction cost inflation, the construction schedule has been
shortened to five years. Given the shortened construction schedule, it is reasonable to
assume that the issuance would be spent in that period in compliance with regulatory
and legal statutes governing GO Bond spending. An accelerated issuance and
shortened construction schedule would help avoid degradation of funds due to rising
construction costs that could occur with longer construction schedules and multiple
issuances.
The current low interest rate environment will allow the District to lock in interest
rates which are historically low
Allows the District to generate additional interest earnings to hedge project cost
inflation.
Reduces costs of issuance by issuing fewer series of bonds
The Chancellor explained the above points by presenting data illustrating the favorable
characteristics of the municipal market yield curve, and historical data illustrating the low
interest rate environment.
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The Chancellor discussed the pros and cons of an accelerated issuance. He noted that
positive points included the historically low cost of funds and lower costs of issuance.
He said that the main risk would be that future interest rates are not known and could be
higher or lower than current market rates. If interest rates are lower in the future, the
resulting tax rates may have been lower on future issuances.
The Chancellor noted that the accelerated issuance is in the interest of the taxpayers due
to the reduced issuance costs. It is also in the District’s best interest due to the Districts
ability to invest the proceeds over a longer period of time generating interest. He noted
that the issue will be concluded as early as December or January.
Stanley Gross asked if other entities would accelerate their issues as well if they see the
District doing this and if so he wondered if there would be pricing/market implications.
The Chancellor noted that it’s possible that other entities may follow the same model, but
that activity shouldn’t change the price. He reiterated that the current flat yield curve is
good for the District.
Marta Bookbinder asked for a clarification on the meaning of “degradation”. The
chancellor indicated that an entity’s funds would degrade or loose purchasing power if
bonds aren’t issued and construction costs rise.
Discussion of Program Management for CIP2: Jim Keller gave an overview of
proposed project management of CIP 2. He noted that after careful consideration and
analysis, he is recommending that project planning for CIP2 be brought in-house. He
noted that cost savings of 3 to 4 basis points are expected to be realized by utilizing inhouse planning over Swinerton Construction Management. He noted that Swinerton
management had earned high marks for construction management for CIP1 and that they
would continue to be used in CIP2 in that capacity. Swinerton was not as highly
regarded for their project planning activities.
In a related matter, Jim discussed the attorney general’s recent opinion which allows
bond proceeds to be used to pay salaries of district employees who perform
administrative oversight on construction projects authorized by a voter-approved bond
measure. Jim Keller noted that reports to the committee on CIP2 spending will show
costs aligned against projects approved on the ballot statement and that the spending for
Swinerton Construction Management and the District’s internal planning team will be
tracked separately. He also stated that administrative planning positions associated with
CIP 2 will end after 5 years when the bond funds are spent.
Expenditures through September 30th: The discussion then turned to item 3, a review
of the expenditures through September 30th, 2006 for both Measure C and A. Kathy
Blackwood distributed an adjusted report for Measure A expenditures which corrected a
calculation error that had been pointed out by Coleman Campbell.
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Coleman Campbell asked about expenditures on the physical education building at CSM
and on buildings 5 and 6. Jim noted that he would send information to the committee on
the work that has been completed in the physical education building and that funds had
been expended on buildings 5 and 6 related to determining whether a retrofit would be
appropriate.
Marta Bookbinder indicated that if bond fund were to be used for administrative costs
that transparency for the public would be important. Jim Keller indicated that the website
could be updated to include the new planning department and Barbara noted that the
information would also be included in the annual report.
Committee members’ comments/request for future agenda items: Coleman Campbell
noted that he has been impressed with the work that Chancellor Galatolo has done.
Public Comments: None
Next Meeting: Regarding item 8, Barbara noted the next meeting will be on February
14th and will coincide with the ribbon cutting at the new student center at Skyline.
The meeting adjourned at 4:55PM.
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