NEWS RELEASE: "San Diego Unified School District receives highest-ever ratings for its capital improvement bonds"

NEWS RELEASE from San Diego Unified School District -- Nov. 10, 2015

San Diego Unified School District receives highest-ever ratings for its capital improvement bonds

The San Diego Unified School District has received extremely favorable credit ratings for its 2016 General Obligation (GO) bonds and green bonds totaling nearly $550 million; either the highest or near-highest ratings available.

The district received "AAA" from Fitch Ratings, Inc., the highest issued by the agency. It also received a rating of "AA+" from Kroll Bond Rating Agency and "Aa2" from Moody's Investor Service, Inc. The Moody's rating is an upgrade from their prior rating of "Aa3," while the two others represent inaugural ratings for the district's credit. All three rating agencies also assigned a "stable" outlook to the district, a standard assignment that signals change is likely to their ratings over the next two years.

The district's finance team, led by Chief Financial Officer Jenny Salkeld, and the district's bond consultants-Orrick, Herrington & Sutcliffe, KNN, Citigroup and Goldman Sachs-pursued these high ratings and made its case to all three agencies over the course of the last few months. The district-sponsored legislation, California Senate Bill 222 (Block), approved in July 2015, effectively clarified the statutory lien for these bonds. Along with various Constitutional and statutory protections, the district's team emphasized the substantial and diverse tax base responsible for repayment of the district's GO bonds. The team also explained the strong state and county oversight mechanisms which help bolster and complement the district's experienced management team. The final part of the analysis included legal opinions regarding the treatment of the ad valorem property taxes as special revenues in the unlikely event of a Chapter 9. These collective credit and legal strengths were comprehensively reviewed by three major rating agencies resulting in very high or highest ratings that should help increase investor demand for the district bonds and thereby lower borrowing costs and costs to the local taxpayers.

"Achieving such high investment grade ratings from the rating agencies helps to generate confidence from a variety of buyers, which will ultimately lead to a lower cost of borrowing for the school district, and potentially save taxpayers millions of dollars over the life of our bond program," said Cindy Marten, superintendent of San Diego Unified School District.

"Thanks to San Diego voters, we continue to make a significant investment in the future of educational facilities in San Diego," Marten added. "The bond funds are used to repair, renovate and revitalize neighborhood schools by providing classroom technology; new and renovated facilities for College, Career and Technical Education to support our industry sector pathways; heating, ventilation, and air conditioning; safety and security upgrades; turf fields, and other capital improvements at traditional and charter schools throughout the district."

By law, the funds cannot be used for teacher or school administrator salaries.

Proposition Z is a $2.8 billion in general obligation bond measure approved by nearly 62 percent of the San Diego voters on Nov. 6, 2012. Proposition S is a $2.1 billion general obligation bond measure approved by nearly 69 percent of the voters on November 4, 2008.

The following San Diego Unified bonds that were rated are listed below. The "ad valorem" is Latin for "according to value." An ad valorem tax is one in which the amount is based on the assessed value of a transaction or property.

* $350 million 2016 general obligation (GO) bonds (dedicated unlimited ad valorem property tax bonds) (Proposition Z, 2012 election, series F);
* $100 million 2016 GO bonds (dedicated unlimited ad valorem property tax bonds) (Proposition Z, 2012 election, series G) (green bonds);
* $100 million 2016 GO bonds (dedicated unlimited ad valorem property tax bonds) (Proposition S, 2008 election, series I).

The Series F and G bonds are expected to be sold via negotiation on or around Nov. 18. Series I bonds are expected to sell on Dec. 2. Proceeds will be used to construct and improve neighborhood schools, including energy and water efficiency projects.

The district does not receive all of its approximately $5.1 billion in Propositions S and Z GO bond proceeds at once. It receives them incrementally based on the frequency of bond sales, which are conducted during the life of the capital improvement bond program.

The bond sales are structured so that the useful life of assets matched the maturity of bonds. Technology projects have shorter term bonds, while construction projects have longer term bonds.

San Diego Unified's capital improvement bond program, which has had successful financial and performance audits, has expended $1.05 billion of its $5.1 billion budget to date. Of its major construction projects, the district has 47 in the design and bid phase, 17 in construction and 100 completed. The bond revenues also funded a five-year phased plan to provide interactive classroom technology and infrastructure. Now complete, it provided all K-12 students with access to computing devices, including 5,477 i21 classrooms with interactive Promethean boards and other technology.

At its Dec. 1 meeting, the Board of Education will review the plan for the Propositions S and Z capital improvement program that will utilize the bond proceeds.

To learn more about the bond program, please visit https://www.sandiegounified.org/facilities-bond-program-propositions-s-z or contact Facilities Communications Supervisor Cynthia Reed-Porter, at 619-546-3378 or creed-porter@sandi.net.


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