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SJUSD Measure C
Citizens Bond Oversight Committee
MINUTES
(Unapproved)
June 11, 2007
District Office
855 Lenzen Avenue, San Jose

1. Call to Order
Chairman Ginsborg called the meeting to order at 6:08 p.m.

2. Roll Call: The requirements for a quorum were met.
Committee Members Present: David Ginsborg, Chris Henriques, Amy Huddleston, Diane Hughes, Michael Palmaffy, David Persselin, Jim Kateley, and Clark Williams.
Committee Members Absent: John Cesare and Kathryn Rolland.
Former Measure C Bond Oversight Committee Chair: Steve Wincor
Board of Education Representative to the Committee: Veronica Lewis
SJUSD Staff Representatives Present: Steve Adamo, Florence Eng, David Kessner, Karen Fuqua, Chris Hernandez, Don Iglesias (arrived late), Ann Jones, Ada Poon, Sue Angevine, and Ty Williams.
Program Management: Susan Davenport and Jennifer Scott of Kitchell CEM.

3. Adopt Agenda
It was moved (Kateley) and seconded (Palmaffy) to adopt the agenda. Motion passed unanimously.

4. Public Comment
Allen Rice, former CBOC member/chair raised his concern about the Measure F Committee accepting responsibility of Measure C Oversight due to the different requirements of the two
bonds (Measure C and Measure F). He felt that the committee should vote to confirm that they wanted to take responsibility.
5. Consent Calendar – Items marked (*) (Item 6)
No consent items.
6. Approval of Minutes – Part of consent calendar
No minutes to be approved. July 11, 2007, is the first meeting of the new Measure C Citizens Bond Oversight Committee. The first Measure C Bond Oversight Committee was disbanded in November 2004.

7. New Business
7.1 Expectations of the Committee by the Board of Education (Exhibit7.1, Exhibit7.1.2, Exhibit7.1.3)
Ann Jones, San Jose Unified Chief Business Official, provided an overview of the Board of Education’s expectations of the Citizen’s Bond Oversight Committee with regard to the Measure C Bond:

Although the Measure C Bond did not require a Citizen’s Oversight Committee, the District had committed to the tax payers that one would be formed. The original Committee operated from September 1997 to November 2004.

The Board of Education is requesting that the CBOC operate under their current Measure F By-Laws and review the projects utilizing the Measure C Refunding with the same process as used for Measure F.

The District further requested that an Annual Report for the Measure C Refunding projects be provided by the Committee.

A question was raised by Chair Ginsborg regarding Measure C audits. Ms. Jones informed the Committee that the Measure C Bond Funds have been audited yearly as part of the District’s Financial Audits, but that no Performance Audit has been completed, because it was not required. The Committee requested that the potential of doing an audit from 2004 to the present on Measure C Funds be considered by the District. Ms. Jones said that she would discuss the issue with the BOE, but did confirm that the Measure C Refunding proceeds would be part of the District’s Performance and Financial Audits. It was moved (Huddleston) and seconded (Henriques) to accept the report. Motion passed unanimously.

7.2 Measure C History and Project Overview and Status (Exhibit7.2-7.2C)
Susan Davenport provided an overview of the Scope D projects that were completed after the last Measure C Bond Oversight Committee meeting. Also provided was an overview of the projects being completed with the State Bond Funds and as part of the Measure C Refunding. Ms. Davenport provided a clarification that the Stadium Lighting Project was actually being completed with State Bond Funds (Fund 211), but would not be changed on the report until it could be done as part of the District’s Fiscal Services report.
In Addition to Ms Davenport’s report, Steve Wincor, former Chair of the Measure C Bond Oversight Committee provided an overview of the Committees activities during the majority of the Measure C Bond. The original Measure C Committee met for the first time in 1997. Mr. Wincor was on the Committee during the entire life of the Committee. It was moved (Henriques) and seconded (Huddleston) to accept the report.
Motion passedunanimously.

Five minute break.

7.3 Bond Refunding Report and Overview (Exhibit7.3)
Florence Eng, District Internal Auditor, presented a report on the two bond issues in 2001 and 2005 that refunded the original Measure C Bonds.  The 2001 Bonds refunded the $19.9M Series C Bonds, saving taxpayers $1.5M.  The 2005 Bonds refunded the $143.8M Series A, B and D Bonds, saving taxpayers $2.1M, shortening the repayment schedule by seven years, and generating $20.4M of cash-out savings to be used for capital projects.  Ms. Eng reviewed the differences in interest rates and total savings.

David Casnocha of the bond counsel firm Stradling, Yocca, Carlson & Rauth provided a historical review of cash out refunding, noted that it is a widespread practice among school districts in California, and gave his firm’s opinion that such refundings are legal.  Mr. Casnocha acknowledged that the State Attorney General’s Office is preparing an opinion on the legality of cash-out refundings, but noted that an adverse opinion would have no effect on the 2005 Measure C Refunding Bonds as too much time had passed.

CBOC members asked if Mr. Casnocha was aware of any lawsuits and whether the District’s refunding would be past the statute of limitiations.  Mr. Casnocha replied that he is not aware of any lawsuits and that he believes the District’s refunding is beyond the statute of limitations.  He also said that, although they continue to assist with similar refundings, his firm is advising current clients to place refunding proceeds in escrow until the Attorney General’s opinion is made public.  Since he does not believe that an Attorney General opinion would affect the District’s refunding, he encourages the District to go forward and spend its refunding proceeds.

CBOC members asked Mr. Casnocha to clarify if the $20.4M savings is money being borrowed and if the debt burden has increased from $165M to $185M.  Mr. Casnocha replied that the refunding proceeds are considered part of the price the investors are paying for the bonds, a “bond premium,” and not legally considered as additional borrowing, and that the result of the refunding was a reduction in the debt burden rather than an increase.  The controversial aspect of the refunding is how the savings were allocated between the taxpayers and the District’s capital projects, not whether it produced savings overall.  Ms. Huddleston noted that this explanation is important as many people were wondering where this “extra” money was coming from, and understands why it is being shown as an alternate funding source.

In response to the question of why some California county officials have challenged the use of cash-out refundings by school districts, Mr. Casnocha replied that county boards of supervisors are generally required to approve school district financings, but not in the case of refundings.  In Mr. Casnocha’s opinion, those county officials believe they need to protect taxpayers from unsophisticated school boards.

District staff were asked if the District would consider doing another cash-out refunding, and staff replied that they would if it appeared to be the best course of action.

It was moved (Kateley) and seconded (Palmaffy) to accept the report.  Motion passed unanimously.

7.4 Measure C Financial Report (Exhibit7.4)
Ada Poon presented Measure C and F financial report together and reviewed information included in the CBOC packet. It was moved (Kateley) and seconded (Huddleston) to accept the report. Motion passed unanimously.

8. Items for Future Agendas

Adoption of By-Laws

Separate or combined meetings for Measure C and F

Consider past audit

9. Adjournment
Meeting adjourned at 9:05 p.m. Next meeting is 6:00 PM, July 9, 2007 at District Office, 855 Lenzen Avenue, Room 337.