Countdown to the Bond is a multi-part series of advisories designed specifically for California K-12 school districts and community college districts. These advisories are focused on navigating the course to a successful 2024 local bond measure, election and capital program, beginning about a year ahead. In 2024, there are two opportunities to hold 55% bond elections: March 5 and November 5. A March election must be called by no later than December 8, 2023, and a November election must be called by no later than August 9, 2024. [1]

In Part 1 of Countdown to the Bond, we will focus on identifying and bringing together the necessary team of experts to assess the feasibility of a local bond election for a district. Initial questions a district should assess include:

• What are our facility needs? Have we done a Facility Master Plan or needs assessment? Does the facilities master plan capture all of these needs?
• How do we plan to fund our needs, and what portion of those needs could be funded by general obligation bonds?
• Is a local bond measure feasible, and will our voters support one?
• How are debt structure, bond authorization and tax amounts determined?
• How do we best communicate our needs to the public?

WHO SHOULD YOUR TEAM INCLUDE?
Community expectations for district accountability and transparency have grown as the number of bond measures has increased in California. Before they will support a bond measure, voters want to know that their district elected representatives and staff have done their homework, including formulating a thoughtful construction plan based on needs and stakeholder input. An expert planning team retained early in the process helps districts lay the foundation for a successful bond measure.

Consultants that a district should engage early in the process include an Architect or Master Planning Consultant, an Election Planning Consultant and Pollster, a registered Municipal Advisor, and Bond Counsel.

• Architect/Master Planning Consultant 

The decision whether to pursue a bond measure should be driven by facility needs. An architect or master planning consultant may be retained early in the planning process, to help develop a facilities master plan and/or to help the district distill a bond project list from an existing facilities master plan. This consultant may analyze current facilities, review enrollment projections, develop preliminary project budgets and help draft the initial bond project list that will be part of the bond measure. The architect or master planning consultant may be retained on a fixed fee or hourly basis.

• Election Planning / Communications Consultant & Polling Firm

Election planning and communications consultants, along with polling firms, can help a district determine the feasibility of a bond measure, the likelihood that it will pass, and the parameters for a measure that voters may support. Such consultants typically provide information regarding demographics and voting behavior of registered voters in the district. Election planning firms and polling experts formulate and interpret voter surveys, develop an election plan using the results of the survey and help cultivate community involvement and interest in the election very early in the process. Strategic communications from the district to the public during this planning period lay the foundation for communicating facility needs and plans.

These consultants may be retained on a fixed fee or hourly basis, and, although the expense lawfully may be paid by the district, the expense may not be paid or reimbursed from bond proceeds. Further, a district may not pay an election consultant to advise or assist a campaign committee or campaign-related activities, and election consultants should be retained on a basis that clearly distinguishes election planning services from campaign-related services. The line between permissible communication and impermissible advocacy is frequently not clear, so caution is warranted in structuring the scopes of work. Based on recent legal opinions, many communications firms prefer to provide services of this nature only up to the time the election is called, making early engagement preferable.

• Municipal Advisor

The district retains a municipal advisor to help formulate a debt financing plan that accomplishes the district’s financing goals. At the planning stage, the financial consultant role is typically filled by an independent registered municipal advisory firm that will also assist the district with the bond issuance process if the election is successful. The municipal advisor reviews the financial feasibility of the proposed capital projects, assesses available sources of revenue, reviews the district’s tax base and assessed valuation, recommends a bond authorization amount that can be supported by tax rates within legal limits, and prepares a tax rate statement that meet statutory requirements.

After a successful election, a municipal advisor prepares the bond issue for sale into the municipal bond market. If bonds will be sold by negotiated sale, a bond underwriter will join the team at that time. Other responsibilities of the municipal advisor include coordinating the finance team, structuring the bonds to meet district needs and tax limitations, and preparing rating agency presentations. Unlike a bond underwriter, a municipal advisor has a fiduciary responsibility to the district, and for that reason, regardless of the method of bond sale chosen, a district must retain a municipal advisor to assist with bond issuance.

Municipal advisors are compensated on either a fixed fee or hourly basis for work in connection with the issuance of bonds. Fees for services incurred in planning for an election may not be paid from bond proceeds, per a 2016 California Attorney General opinion; accordingly, we recommend that a municipal advisor’s fee be structured to reflect pre-election services and related compensation distinct from bond issuance services.

• Bond Counsel (Law Firm)

Bond counsel is a law firm specializing in public finance hired to assist the district both before and after a bond election. Before the election, bond counsel identifies and assists the district in complying with legal requirements to prepare and place a measure on the ballot and to ensure that the ballot measure includes appropriate project language to meet anticipated capital needs. During the bond campaign, bond counsel advises the district on permissible and impermissible political communications and activities. Once a bond measure passes, bond counsel drafts the required legal documents to issue bonds. Bond counsel provides its legal opinions confirming that the bonds are valid and that interest on the bonds earned by bondholders is exempt from federal and state income taxes. Bond Counsel can also support a district in formation of a citizen’s bond oversight committee and address legal issues that may arise after the bonds are issued. During the bond issuance phase, a district also needs “Disclosure Counsel” to prepare the required offering documents to investors interested in purchasing the bonds. Bond Counsel often also serves in this role, or occasionally the district may opt to hire a separate firm.

As noted above with regard to other consultants, Bond Counsel services must also be separated into pre-election activities and bond issuance activities, since pre-election services may not be paid from bond proceeds.

SELECTING TEAM MEMBERS

The bond election planning team provides professional services for which competitive bidding or selection is not legally required. The district nevertheless may choose to select its bond planning team members via a competitive selection (RFP) process if desired.

DWK is a full-service education firm with a recognized bond counsel practice. If you need expert advice regarding an upcoming bond election or financing plan, feel free to contact us. [Public Finance].

Watch for Part 2 of Countdown to the Bond, coming in September 2023.

[1] It is always advisable to confirm submission deadlines for ballot measures, as dates may vary by county.