The Visalia Unified School District (VUSD) has $35 million more dollars in its construction fund following the first sale of Measure A bonds, and is ready to move forward with upgrades at Visalia’s high and middle school campuses.
Bond Market Favors Taxpayers
Seven major firms competed to buy the bonds during a June 25 sale, with the investment firm JPMorgan Securities placing the winning bid. Recent turbulence in the bond market following the COVID-19-induced bond market crash earlier this year worked in VUSD’s favor. The district’s financial advisors had originally anticipated offers of just under 5%, which were instead much lower.
“The rates we actually got when we sold the bonds … for the short-term, we got just slightly over a quarter percent,” said Matt Kolker of Government Financial Services, VUSD’s bond broker. “Then for long-term, a little over 2%, so very good results.”
The upshot is property owners will be paying less on their annual tax bill. Initially, the district’s financial advisors predicted a cost of taxing property owners at $36 per $100,000 of value. Now, that number should be between $31 and $32.
Because of the favorable rates, the repayment period will also be shorted by three years. That, combined with the low interest rates, will provide a significant savings compared to what was anticipated during planning for Measure A in 2018.
“We’re looking at $6 million in savings,” said Nathan Hernandez, VUSD’s chief financial officer.
District Get High Bond Rating
Before putting its bonds up for sale, the VUSD was subject to a review by credit rating agencies Moody’s Corporation and S&P Global Ratings. Moody’s gave the VUSD a Aa3 rating, while S&P put them at AA-minus.
“Anything A and above is considered investment grade,” said Kolker. “Overall, pretty good, actually very good.”
How the agencies formulate their rating remains a mystery.
“We have no idea why they have this rating since it’s a general obligation bond,” Kolker said. “It’s just one of the nuances of the rating agencies.”
The ratings are essentially unchanged since the district last offered GO bonds approved by voters under Measure E.
“Basically, we maintained our rating with both those agencies since our last sale,” said Hernandez. “I wanted to share that since I know there are some concerns about the district’s financing and management. These agencies rate us fairly highly.”
No New High School Yet
Originally, Measure A funding was intended to pay for security upgrades at all campuses, along with upgrades of science facilities at the district’s middle and high school campuses, as well as for a fifth high school. Plans for the new high school, however, are on hold in the wake of severe changes and cuts in the state budget in the wake of the COVID-19 pandemic.
While Measure A allowed for the sale of $105 million in bonds, instead just $35 million worth were sold.
“This covers our first two phases of modernization as well as campus security, science classrooms, as well as the (planning of the) high school,” said Hernandez.
The remaining $75 million in voter-approved bonds will only be sold if additional funding is needed to close a gap left by missing state funding or if the state is somehow able to provide funding earmarked for VUSD’s fifth high school but now delayed indefinitely. An additional bond sale would require approval by the VUSD Board of Trustees.
“Because the high school isn’t moving forward, the only reason we would use those bonds is to supplement the missing state funding,” said Nick Macias, president of the Measure A Bond Oversight Committee.
Middle and High Schools First
VUSD’s district-wide modernization plans are divided into six phases, the final four of which are also on hold until matching funds from the state are freed. The first two phases, each a year long, will last through at least 2022.
To determine the priority of upgrades, campuses throughout the state are rated for “eligibility” based on their age and how recently they underwent modernization. That rating determines which VUSD campuses get top priority.
“The ones that have the most eligibility we’ll hit first,” said Garry Lemus, VUSD’s director of facilities.
That means the district’s middle and high school campuses will be included in phases one and two, along with just two of the district’s elementary school campuses, Houston Elementary and Veva Blunt Elementary. The rest will wait until state spending thaws.
Middle School Modernization
The $35 million on hand will be divided between modernizing campuses–at a cost of $23 million–and upgrading security and science laboratories using the remaining funds. Of that $23 million, nearly a third will go toward modernizing the Green Acres, Valley Oak and Divisadero middle school campuses, with Green Acres receiving the bulk of that.
Valley Oak and Divisadero have both used part of their eligibility recently, giving them lower priority than Green Acres. Modernization teams at the district’s campuses have been surveyed about the upgrades they need and are ready to lend a hand in the planning.
“Both those schools are excited,” Lemus said. “They’re ready to start, but we’ve got to get these architects on board.”
The district has pegged the local architectural firms it would like to use for the projects at Green Acres, Valley Oak and Divisadero, but still needs approval from the Board of Trustees. All three firms are Visalia-based.
Small COVID Advantage
Despite there being no students on VUSD’s campus while distance learning is used to combat the spread of COVID-19, officials are not able to use the time to advance their construction table much.
“We won’t be able to do construction in most cases, because we will have people on site,” Lemus said, referring to teachers and other staff.
It does, however, present an opportunity for the architects.
“What we want to do is get these architects online,” Lemus said. “We don’t have students present, so the architects will be able to do a deep dive on that.”
Complete Transparency
Of the $35 million, $10 million is intended for upgraded science labs and enhanced security throughout the district, and the remaining $23 million will cover campus modernization and the planning of the now on-hold fifth high school campus. Yet presentations so far have not made clear exactly how the money will be spent.
Basil Perch, local businessman and politician who sits on the Measure A Bond Oversight Committee, wants a clearer picture of spending presented to both the public and to VUSD’s trustees.
“We need to be transparent with every dollar of the bond we spend,” he said.
Unfamiliarity with the construction industry, Perch said, can make trustees overly cautious when dealing with building projects, a situation he hopes to avoid. Perch owns BJ Perch Construction.
“Most of the board members are ignorant about construction, and the more (information) you can give them, the more comfortable they are making decisions,” he said. “I’m not criticizing.”