MUNICIPALITY of ANCHORAGE ORDINANCE No. 2019-145 AN

Municipal Clerk's Office Approved Date: January 14, 2020

MUNICIPALITY OF ANCHORAGE

ORDINANCE No. 2019-145

AN ORDINANCE PROVIDING FOR THE SUBMISSION TO THE QUALIFIED VOTERS OF ANCHORAGE, ALASKA, THE QUESTION OF THE ISSUANCE OF NOT TO EXCEED $82,833,000 OF GENERAL OBLIGATION BONDS OF THE MUNICIPALITY OF ANCHORAGE TO PAY THE COSTS OF CAPITAL IMPROVEMENTS FOR THE ANCHORAGE SCHOOL DISTRICT AT THE ELECTION TO BE HELD IN THE MUNICIPALITY ON APRIL 7, 2020.

Prepared by

K&L GATES LLP

MUNICIPALITY OF ANCHORAGE ORDINANCE No. 2019-145

TABLE OF CONTENTS* Page

Section 1. Purpose ...... 1 Section 2. Details of Bonds ...... 3 Section 3. Ballot Proposition ...... 3 Section 4. Effective Dates ...... 4

* This Table of Contents and the cover page are for convenience of reference and are not intended to be a part of this ordinance.

502637066 v1

1 Requested by: Chair of the Assembly at 2 the Request of the 3 Anchorage School District 4 Prepared by: Cynthia M. Weed, Bond 5 Counsel 6 K&L Gates LLP 7 For Reading: December 17, 2019 8 9 10 MUNICIPALITY OF ANCHORAGE, ALASKA 11 ORDINANCE No. 2019-145 12 13 AN ORDINANCE PROVIDING FOR THE SUBMISSION TO THE QUALIFIED 14 VOTERS OF ANCHORAGE, ALASKA, THE QUESTION OF THE ISSUANCE OF 15 NOT TO EXCEED $82,833,000 OF GENERAL OBLIGATION BONDS OF THE 16 MUNICIPALITY OF ANCHORAGE TO PAY THE COSTS OF CAPITAL 17 IMPROVEMENTS FOR THE ANCHORAGE SCHOOL DISTRICT AT THE 18 ELECTION TO BE HELD IN THE MUNICIPALITY ON APRIL 7, 2020. 19 20 WHEREAS, the existing educational facilities serving the Municipality of 21 Anchorage, Alaska (the “Municipality”) are in need of building systems renewal, 22 and replacements, planning and design, renovations, earthquake recovery and 23 construction projects; and 24 25 WHEREAS, the Assembly of the Municipality and School Board have identified 26 necessary construction, renovations, replacements, upgrades, planning and 27 design and improvements to school facilities; and 28 29 WHEREAS, in order to provide funds to perform the necessary construction, 30 renovations, replacements, upgrades, planning and design and improvements as 31 further described in Section 1 of this ordinance (the “Projects”), it is deemed 32 necessary and advisable that the Municipality issue and sell its general obligation 33 bonds in the principal amount of not to exceed $82,833,000 (the “Bonds”); now, 34 therefore, 35 36 THE ANCHORAGE ASSEMBLY ORDAINS: 37 38 Section 1. Purpose. The Assembly hereby determines that the education 39 facilities and building systems are in need of construction, renewal, replacement, 40 planning, design, renovation and earthquake recovery (the “Projects”). 41 Specifically, the Projects include design funding to replace Inlet View Elementary 42 School, design and construction funding for infrastructure capital improvements at 43 Aquarian Charter School, design and construction of building wide earthquake 44 damage repairs, seismic upgrades and building improvements at Bartlett, East, 45 King Tech, Chugiak, Eagle River, and Dimond High Schools, Mirror Lake and 46 Central Middle Schools, Fire Lake, Chugiak, and Bear Valley Elementary Schools 47 and Whaley School, design and construction of building wide earthquake damage

AO – 2020 G.O. School Bonds Prop. Page 2 of 4

1 repairs, seismic upgrades, building, security and educational improvements at 2 Gruening Middle School and Eagle River Elementary School, and planning and 3 design projects for 2022 deferred capital requirement projects. 4 5 The Projects are described in more detail in the Assembly Memorandum 6 accompanying this ordinance. The cost of all necessary planning, acquisition of 7 property for, site preparation, construction, installing and equipping of the Projects, 8 architectural, engineering, design, and other consulting services, inspection and 9 testing, administrative and relocation expenses, costs of issuance of the Bonds 10 (hereinafter defined) and other costs incurred in connection with the Projects shall 11 be deemed to be costs of the approved Projects. The approved Projects may be 12 completed with all necessary equipment and appurtenances. The District is 13 currently working with the State of Alaska Division of Homeland Security and 14 Emergency Management and the Federal Emergency Management Agency 15 (FEMA) on potential reimbursement of earthquake damages for the Projects, as 16 well as other District facilities. Any reimbursement is subject to FEMA approval. 17 18 The School District shall determine the application of available money as 19 between the various Projects set forth above so as to accomplish, as nearly as 20 may be, all of the Projects described or provided for in this section. 21 22 If the School District shall determine that it has become impractical to 23 accomplish any portion of the approved Projects by reason of changed conditions 24 or needs, incompatible development or costs substantially in excess of those 25 estimated, the School District shall not be required to accomplish such portions 26 and shall apply Bond proceeds as set forth in this section. 27 28 If the approved Projects have been completed in whole or in part, or their 29 completion duly provided for, or their completion found to be impractical, the 30 School District may apply Bond proceeds or any portion thereof to other School 31 District capital improvements as the School Board in its discretion shall determine 32 and, if otherwise, then solely to payment of principal or interest on the Bonds, as 33 provided in the Home Rule Charter. In the event that the proceeds of sale of the 34 Bonds, plus any other money of the School District legally available, are 35 insufficient to accomplish the approved Projects, the School District shall use the 36 available funds for paying the cost of those portions of the approved Projects for 37 which the Bonds were approved deemed by the School Board most necessary 38 and in the best interest of the School Board. No Bond proceeds shall be used by 39 the Municipality for any purpose other than a capital improvement of the 40 Municipality. 41 42 For the purpose of providing funds for the undertaking of the Projects, which are 43 hereby found to be a public purpose and in the public interest, the Municipality 44 hereby proposes to issue general obligation bonded indebtedness in an amount 45 not to exceed Eighty-Two Million Eight Hundred Thirty-Three Thousand Dollars 46 ($82,833,000) (the “Bonds”).

502637066 v1 AO – 2020 G.O. School Bonds Prop. Page 3 of 4

1 2 Section 2. Details of Bonds. The Bonds shall be sold in such amounts and at 3 such time or times as deemed necessary and advisable by the Assembly and as 4 permitted by law and shall mature over a period of not to exceed 20 years from 5 date of issue. The Bonds shall be issued in an aggregate principal amount of not 6 to exceed $82,833,000. The Bonds shall bear interest to be fixed at the time of 7 sale or sales thereof. The exact form, terms, conditions, contents, security, 8 options of redemption, and such other matters relating to the issuance and sale of 9 said Bonds as are deemed necessary and advisable by the Assembly shall be as 10 hereinafter determined and/or delegated by ordinance and/or resolution of the 11 Assembly. 12 13 The full faith and credit of the Municipality is pledged for the payment of the 14 principal of and interest on the Bonds, and ad valorem taxes upon all taxable 15 property in the Municipality shall be levied without limitation as to rate or amount to 16 pay the principal and interest on the Bonds when due. 17 18 Section 3. Ballot Proposition. The Assembly hereby submits to the qualified 19 voters of the Municipality the proposition of whether or not the Municipality should 20 issue the Bonds for the purpose of financing the costs of the approved Projects at 21 the regular municipal election to be held on April 7, 2020. 22 23 The Clerk shall prepare the ballot proposition to be submitted to the voters 24 as provided by this ordinance and the Municipal Code and shall perform all 25 necessary steps in accordance with law to place this proposition before the voters 26 at the regular election. The proposition must receive a majority vote of those in 27 the Municipality voting on the question to be approved. The proposition shall be 28 substantially in the following form: 29 30 PROPOSITION NO. _____

31 CAPITAL IMPROVEMENTS FOR THE ANCHORAGE 32 SCHOOL DISTRICT BONDS 33 34 For the purpose of providing educational capital 35 improvements, construction, upgrades, design, planning, 36 renovation and earthquake recovery of school facilities and 37 educational facility building life extension projects within 38 Anchorage, as provided in AO 2019-145, shall Anchorage 39 borrow money and issue up to $82,833,000 in principal 40 amount of general obligation bonds? 41 42 The general obligation bond proceeds will be used to pay 43 costs of constructing, renovating, installing, designing, 44 planning, acquiring and equipping educational capital 45 improvement projects including, but not limited to, design

502637066 v1 AO - 2020 G.O. School Bonds Prop. Page 4 of 4

I funding to replace Inlet View Elementary School, design and 2 construction funding for infrastructure capital improvements at 3 Aquarian Charter School, designing and constructing building 4 wide earthquake damage repairs, seismic upgrades and 5 building improvements at Bartlett, East, King Tech, Chugiak, 6 Eagle River, and Dimond High Schools, Mirror Lake and 7 Central Middle Schools, Fire Lake, Chugiak, and Bear Valley 8 Elementary Schools and Whaley School, designing and 9 constructing building wide earthquake damage repairs, 10 seismic upgrades, building, security and educational 11 improvements at Gruening Middle School and Eagle River 12 Elementary School, and planning and design projects for 2022 13 deferred capital requirement projects. 14 15 Voter approval of this bond proposition authorizes for each 16 $100,000 of assessed taxable property value (based on the 17 estimated 2020 assessed valuation) an annual increase in 18 taxes of approximately $18.45 to retire the proposed bonds. 19 20 The debt will be paid from real and personal property taxes 21 levied and collected areawide in Anchorage. Anchorage will 22 also pledge its full faith and credit for payment of the bonds. 23 24 c 1 YES c__ 1 NO 25 26 Section 4. Effective Dates. Section 2 of this ordinance shall become effective 27 only if the proposition described in Section 3 is approved by a majority of the 28 qualified voters voting on the proposition at the regular election held on April 7, 29 2020. The remaining sections of this ordinance shall become effective upon 30 passage and approval by the Assembly. 31 32 PASSED AND APPROVED by the Assembly of the Municipality of Anchorage, this 33 141h day of January, 2020. 34 35 36 By d ~ lli 37 Chair of the Assembly 38 ATTEST: 39 40 41 Municipa

502637066 v1 MUNICIPALITY OF ANCHORAGE

ASSEMBLY MEMORANDUM

No. AM 778-2019

Meeting Date: December 17, 2019

1 From: ANCHORAGE SCHOOL DISTRICT 2 3 Subject: AO 2019-145 One Ballot Proposition to Provide 4 For the Issuance of General 5 Obligation Bonds for Educational 6 Capital Improvements 7 8 The ordinance will place a general obligation bond proposition for the Anchorage School 9 Dish·ict on the ballot for the regular Municipal election to be held on April 7, 2020. 10 11 The Anchorage School Board approved one ballot proposition to provide for the issuance of 12 general obligation bonds for education-related capital projects on November 19, 2019: ASD 13 Memorandum #039 (2019-2020) AMENDED, Approval of April 2020 Bond Proposal. This 14 recommendation includes proposed Capital Improvement Projects in the amount of 15 $82,833,000. 16 17 The School Board requests the Anchorage Assembly place one proposition, as stated on 18 AO 2019-145 on the April 7, 2020 balJot for consideration by qualified voters of the 19 Municipality of Anchorage. The proposition will pay the cost of capital improvement 20 projects for the Anchorage School District, including, but not limited to, the following: 21 22 Proposition: $82,833,000 Estimated Arn1ual 23 Estimated Operating and 24 Projects Cost Maintenance 25 26 Inlet View Elementary School Replacement Design $3,346,000 27 28 Aquarian Charter School Capital improvements $ 6,800,000 29 30 12 School Earthquake Recovery Projects $26,926,000 31 32 Gruening Middle School and Eagle River Elementary 33 Earthquake Recovery & Capital Improvements $42,510,000 34 35 Plarn1ing & Design Projects for 36 2020 Deferred Requirements Projects $3,251,000 37 38 Proposition Total $82.833,000 39 40 This proposal provides for capital improvement earthquake recovery, security 41 improvements, seisrnic resilience and mitigation, and planning and design projects. The 42 approximate aiu1ual amount of taxes on $100,000 of assessed real and personal property 1 value (based on the estimated 2019 assessed valuation) to reti.re the proposed debt is $18.45. 2 Voters will not be asked to approve an increase in annual operating costs. 3 4 The Dish"ict is currently working with the State of Alaska Division of Homeland Security 5 and Emergency Management and the Federal Emergency Management Agency (FEMA) on 6 potential reimbursement of earthquake damages for the schools identified in the AO, as well 7 as other Dish"ict facilities. Any reimbursement is subject to FEMA approval, and potentially 8 could reduce project costs to the taxpayers. 9 10 The projects are described in more detail per ASD Memorandum #039 (2019-2020), 11 Attachment A. 12 13 DOCUMENTATION OF NEED: 14 The Dish·ict operates and maintains the largest physical plant of any public entity in the 15 state, with approximately 7.8 million square feet of facilities. The replacement value of 16 Dish·ict buildings exceeds $2 billion. The Dish·ict is responsible for 91 facilities, housing 17 approximately 46,200 students (more students than the total of the next four largest Alaska 18 dish·icts), and over 6,000 staff members. Anchorage educates nearly 36 percent of the State's 19 total student population. Not only is the facility inventory large, it is aging. The average age 20 of dish·ict facilities is 35 years. Approximately 28% of the facilities are over 50 years old, 21 including 9 facilities that are 60 years or older. 22 23 On November 30, 2018, a 7.1 magnitude earthquake caused extensive damage to Anchorage, 24 Eagle River and Chugiak area schools and DislTict facilities. Specifically, Eagle River 25 Elementary and Gruening Middle Schools were closed and the students moved to other 26 buildings in preparation for damage repair and renewal. All schools and facilities were 27 assessed for damage. This proposition includes damage repair for Eagle River Elementary, 28 Gruening Middle and 12 additional schools that require damage repair, mitigation, and 29 recovery work as a result of the earthquake. 30 31 Facility systems have an expected life span and the extreme conditions of Alaska only 32 shorten their life expectancy. Roofs (20-25 years) deteriorate and leak; boilers (25-30 years), 33 plumbing and venti.lation systems wear out; and other systems like fire alarms, security 34 systems, intercoms, etc., (10-15 years) age to the point where they are no longer supported. 35 Various code changes over the years and in some situations, legal compliance requires 36 facilities to be updated. Moreover, roof replacements and other upgrades often require 37 seismic structural upgrades to meet more stringent building codes. 38 39 Functional obsolescence is another challenge facing older schools. LED lighti.ng is quickly 40 replacin g florescent lighting to capture energy savings. Over the life of a school, 41 programmatic changes take p lace that require updating the facility. For example, there is 42 continual need to update electrical dish·ibution systems in schools to accommodate current 43 teclmology. Additionally, current educational delivery methods require physical layouts 44 that are often different and more flexible than those of 30 to 40 years ago. 45 46 Capital Plamting Managemen t 47 Since 2009, the DislTict has implemented a Facility Condition Assessment Program (FCAP) 48 in order to identify and prioritize faci li ty capital requirements more sh·ategically based on 49 quantitative data. The District has integrated the use of VFA sofh,vare to assist in assessing

2 I facility conditions, maintain the facility condition database and analyze the in.formation to 2 determine and forecast capital pla1ming needs. 3 4 The FCAP cenh·alizes information on faciJities' component and system conditions as ,vell as 5 remaining life expectancy. This information is collected during facility condition 6 assessments utilizing a systematic and consistent methodology. The collected in.formation 7 serves as a basis for identifying, prioritizing and estimating costs of the Dish·ict' s capital 8 needs and is used for both short term and long term pla1ming purposes. 9 10 Facilitv Condition Assessments 11 The Dish·ict conh·acts amrnally with VFA (a nationally recognized firm) to maintain the 12 FCAP. From 2009 to 2013, all Dish'ict-ovmed facilities were assessed by a team of engineers 13 and architects. Currently, the Dish·ict performs facility condition assessments internally 14 tlu·oughout the year. 15 16 The facility condition assessment process is a field assessment where building system 17 components are evaluated based on condition and age of the system. Results of the initial 18 assessment identified aging system requirements, in addition to reconm1ended replacement 19 year and estimated cost. This data is maintained in the FCAP database and validated 20 arn1Ually by District staff that provides quality conb·ol and incorporates institutional 21 knowledge on the collected information. 22 23 Based on the facility condition assessment, a Facility Condition Index (FCI) is calculated to 24 determine its relative condition and estimated i.nvesb11ent cost versus like replacement cost. 25 All Dish·ict facilities have an individual FCI and a Dish·ich-vide FCI can also be determined 26 to measure the condition of the physical plant. According to the national standard, an FCI 27 less than .05 is considered Excellent, .05-.10 is considered Good and .10-1.0 ranges from Fair 28 to Poor. With an estimated ~$2 billion Current Replacement Value (CRV) and a ~$667 M 29 deferred requirements backlog, the DislTict' s current FCI is ~0.32. 30 31 According to the National Council of School Facilities "2016 Stnte of Our Sc/Jools Report", best 32 practice within the facility management indush·y is to re-invest 3% of the CRV annually for 33 Minor Repair/Preventive Maintenance. This amount covers annual maintenance and 34 operations, typically funded through the General Ftmd. Additionally, 4% of the CRV is 35 recommended to include renewals, alterations and reduce deferred capital requirements, 36 normally fw1ded through Capital Funds. Capital funding includes 2% for key component 37 renewals (roofs, boilers, etc. .. ); 1 % for alterations to meet programmatic changes and 38 technological developments, and 1 % for the systematic reduction of deferred requirements. 39 For the Dish·ict, this would equate to ~$60M/year for Minor Repair/Preventive 40 Maintenance, $40M for key component renewals (roofs, boilers, etc ... ), $20M for alterations 41 to meet progranunatic changes and technological developments, and $20M for systematic 42 reduction of deferred requirements. 43 44 Educational Adequacv Assessments 45 Educational program requiTements are defined by dish·ictwide educational specifications 46 for elementary, middle and high school levels, which ,.,,ere approved by the School Board 47 on September 6, 2012. The Educational Adequacy Index (EAI) reflects the ability of a school 48 to meet their educational program requirements by evaluating the quantity, configuration, 49 size, and existence of spaces defined by educational specifications. For example, a school 50 would have a higher EAI if they did not have enough classrooms to offer health classes, or a 3 1 gymnasium in addition to a multi-purpose room in order to allow for concurrent lunches 2 and physical activity. 3 4 To date, all dish·ict-owned school sites have been assessed for educational adequacy except 5 for the King Teclmical High School. ln 2010-11, sixteen locations were assessed, nineteen 6 sites were assessed in 2011, 50 sites were assessed in 2012, and Aquarian Charter School was 7 assessed in 2015. 8 9 Much like the FCI, an EAI is the ratio of the cost to correct educational specification 10 deficiencies divided the replacement cost of the facility. Un.like the FCI, an indush·y 11 standard does not exist for an EAL However, a high EAi reflects greater challenges with 12 education program delivery compared to a school with a smaller EAL Addressing EAI 13 deficiencies often requires extensive renovations. 14 15 CITIZEN'S REVIEW PROCESS 16 Capital Improvement Advisory Committee 17 The CIAC held meetings in June and July 2019 to review options and develop 18 reconm1endations for the 2020-2025 Capital Improvement Plan and 2020 bond proposal. 19 The CIAC co-chair prepared a sununary of the conmuttee's recommendation (ASD 20 Memorandum #039 (2019-2020) AMENDED, Attachment B). The comnuttee generally 21 supports the Capital Improvement Plan and recognizes the significant advantages in going 22 to a multi-year bond cycle. The CIAC support the April 2020 bond proposal devoted to 23 earthquake recovery projects eligible for reimbursement by the Federal Emergency 24 Management Agency (FEMA), and roughly matched to anticipated debt retirement. 25 26 On November 19, the School Board approved a revised, total bond amount of $82.833 27 million. Tlus represents an 8.94% increase from the $76.033 nullion recommended by the 28 Admi.nish·ation. The School Board amended the Dish·ict's reconu11endation by adding $6.8 29 nullion for Aquarian Charter School Capital Improvements. 30 31 OVERALL DEBT SERVICE 32 As of June 30, 2019, the Dish'ict had $509.2 nullion of outstanding bonds, down $249 million 33 from the same time 10 years ago. In the last five fiscal years, ASD has paid off $286.3 million 34 of debt. During that time, the Disb·ict received voter authorization to incur approximately 35 $227.5 nullion of new debt to fund capital improvements; an overall debt reduction of $58.8 36 million. 37 38 The District works closely with the municipal adnunish·ators and financial advisors to 39 engage the market to reduce the debt and interest rates regularly. Over the past four years, 40 the Dish·ict refunded $205.3 nullion in existing debt at an improved rate, reducing the 41 overall debt service by nearly $15.1 nullion. This includes $11.5 nullion that was refunded in 42 October 2019, which resulted in an additional $1.2 nullion in savings. 43 44 In the next five years, the District anticipates paying off approximately $243.3 million in 45 principal, averaging about $48.66 nullion each year. 46 47 STATE DEBT REIMBURSEMENT 48 Since 1970, the State of Alaska has provided school dish·icts up to 70 percent debt 49 reimbursement for qualified, voter-approved capital improvement school bonds. Senate Bill 50 237, passed by the Legislature in July 2010, provided 60 percent or 70 percent debt 4 1 reimbursement on school cons truction projects that have received local voter approval after 2 October 1, 2006. School consh·uction projects that do not include additional square footage 3 are typically eligible for 70 percen t reimbursement. 4 5 Of the $509.2 million bonds outstanding as of June 30, 2019, the State debt reimbursement 6 program is expected to cover 48.2 percent. This, however, is subject to appropriation and is 7 susceptible to governor's vetoes or legislative action. 8 9 Senate Bill 64, approved into law in April 2015, enacted a stmset of Alaska statutes related to 10 the state debt reimbursement program effective January 1, 2015 through July 1, 2020. After 11 five years, if the legislature does not take further action on these statutes, reimbursement 12 rates of 50% for major rnaintenance and 40% for school construction would be reinstated for 13 eligible projects under AS 14.11.100. 14 15 It is the District's hope that the information provided in this memorandum assists the 16 Assembly in making a decision regarding the placement of the Dish·ict' s recommended 17 bond proposition on the ballot for the April 7, 2020 Municipal Election. 18 19 20 21 22 Dr. Deena Bi op 23 Superintenden t 24 Attachments

5 12/6/2019 BoardDocs® Pro

Agenda Item Details

Meeting Nov 19, 2019 - School Board Meeting - AMENDED

Category G. Action Items

Subject 4. ASD Memorandum #039 - Approval of April 2020 Bond Proposal AS AMENDED

Type Action

Recommended Action To approve the following bond proposal: Proposition I – Districtwide Earthquake Recovery, Security Improvements, and Planning & Design, including seismic resilience and mitigation, and planning and design in the amount of $82.833 million.

12/6/19: There was an administrative change to this memo, reflecting a $.03 change to estimated cost per $100,000, due to updated assessed property values from the Municipality of Anchorage. The MOA’s updated information was received after this memo was approved by the school board.

ANCHORAGE SCHOOL DISTRICT ANCHORAGE, ALASKA

ASD MEMORANDUM #039 (2019-2020) AMENDED November 19, 2019

TO: SCHOOL BOARD

FROM: DR. DEENA BISHOP, SUPERINTENDENT

SUBJECT: APPROVAL OF APRIL 2020 BOND PROPOSAL

ASD Core Value: The District will be open, transparent & accountable to the public.

RECOMMENDATION:

It is the Administration’s recommendation that the Anchorage School Board approve the following bond proposal:

Proposition I – Districtwide Earthquake Recovery, Security Improvements, and Planning & Design, including seismic resilience and mitigation, and planning and design in the amount of $82.833 million.

The bond proposition is summarized below:

Inlet View Elementary School Replacement School Design $3,346,000

Aquarian Charter School Capital Improvements $6,800,000 Earthquake Recovery Projects: Bartlett, East, King Tech, Fire Lake, Chugiak Elementary, Bear Valley, Chugiak High, Eagle River High, $26,926,000 Mirror Lake, Dimond, Central, and Whaley. Earthquake Recovery and Educational Improvement Projects: $42,510,000 Gruening and Eagle River Elementary Planning & Design Projects – 2022 Deferred Requirements $3,251,000 Projects Proposition I Total $82,833,000

Individual project descriptions are provided in Attachment A. https://go.boarddocs.com/ak/asdk12/board.nsf/Public 1/5 12/6/2019 BoardDocs® Pro

PERTINENT FACTS:

The Capital Planning & Construction (CP&C) staff prepared a prioritized list of unfunded, emergent requirements utilizing the District’s Facility Condition Assessment Program. This consolidated list was prioritized into one, two and three-five year requirements by CP&C and Maintenance & Operations staff.

The District’s Capital Planning Committee (CPC) met to discuss unfunded facility requirements, proposed Courses of Action, and discuss strategies for a recommendation for a 2020 bond proposal. The CPC supported a single bond proposal.

The Capital Improvement Advisory Committee (CIAC) supports the 2020 bond primarily to earthquake recovery projects. The CIAC met on several occasions to discuss unfunded facility requirements and develop a recommendation for a 2020 bond proposal (Attachment B). The projects identified are the highest priority and focus on safety and protection of district facilities. The CIAC supports the Capital Improvement Plan and multi-year bond cycle.

On October 15, and November 5, the Administration briefed the Superintendent who approved the aforementioned recommendation to the Anchorage School Board.

On November 19, the School Board approved a revised, total bond amount of $82.833 million by including $6.8 million for Aquarian Charter School Capital Improvements. This represents an approximate increase of 8.94% increase from the $76.033 million recommended by the Administration.

Overall Debt Service

As of June 30, 2019, the District had $509.2 million of outstanding bonds, down $249 million from the same time 10 years ago. In the last five fiscal years, ASD has paid off $286.3 million of debt. During that time, the District received voter authorization to incur approximately $227.5 million of new debt to fund capital improvements; an overall debt reduction of $58.8 million.

The District works closely with the municipal administrators and financial advisors to engage the market to reduce the debt and interest rates regularly. Over the past four years, the District refunded $205.3 million in existing debt at an improved rate, reducing the overall debt service by nearly $15.1 million. This includes $11.5 million that was refunded in October 2019, which resulted in an additional $1.2 million in savings.

In the next five years, the District anticipates paying off approximately $243.3 million in principal, averaging about $48.66 million each year.

In October of 2019, the District sold voter-approved bonds for $41 million to cover cash flow requirements as described below:

$300,000 for projects approved by the 2013 ballot proposition $1 million for projects approved by the 2014 ballot proposition $1.1 million for projects approved by the 2015 ballot proposition:

Mountain View Renewal Rabbit Creek BLE Turnagain Renewal Gladys Wood Addition/Renovation East Bus Driveway

$16.8 million for projects approved by the 2017 ballot proposition:

Student Nutrition Roof Muldoon Roof Northwood ABC Roof Nunaka Valley Roof https://go.boarddocs.com/ak/asdk12/board.nsf/Public 2/5 12/6/2019 BoardDocs® Pro King Career Center Roof West Roof Rogers Park Roof & HVAC Willow Crest Roof & HVAC West Gym/Auditorium HVAC West/Romig IMC $14.1 million for projects approved by the 2018 ballot proposition:

Birchwood Roof Bowman Roof Improvements Homestead Roof Kasuun Roof Improvements North Star Partial Roof Ptarmigan Partial Roof Russian Jack Roof Improvement Mears Roof Replacement East Gym Safety Improvements Service Fire Suppression $7.7 Million for projects approved by the 2019 ballot proposition

Orion Elementary Roof Replacement Eagle River Elementary School Roof Replacement Government Hill Elementary School Roof Replacement Bear Valley Elementary School Domestic Water Improvements O’Malley Elementary School Safety Improvements Homestead Elementary School Safety Improvements Taku Elementary School Roof Replacement & Restoration Chugiak High School Planning & Design Roof Replacement Bayshore Elementary School Boiler Replacement Prioritized Elementary Schools Security Projects Earthquake Recovery Eagle River and Chugiak Area

State Debt Reimbursement

Of the $509.2 million bonds outstanding as of June 30, 2019, the State debt reimbursement program is expected to cover 48.2 percent. This, however, is subject to appropriation and is susceptible to governor’s vetoes or legislative action.

Senate Bill 64, approved into law in April 2015, enacted a sunset of Alaska statutes related to the state debt reimbursement program effective January 1, 2015 through July 1, 2020. After five years, if the legislature does not take further action on these statutes, reimbursement rates of 50% for major maintenance and 40% for school construction would be reinstated for eligible projects under AS 14.11.100.

Cost of $82.833 Million Bond Proposal to the Local Taxpayers

The approximate amount of annual taxes on $100,000 of assessed property valuation to retire the proposed debt of $82.833 million is $18.45. The calculation of estimated taxes is based on an estimated 4.5 percent weighted interest rate for twenty years, as shown in attachment C.

The amount of annual taxes on $100,000 of assessed property valuation reduced due to bond debt retirement in FY 2019-20 of $55.745 million is $5.79. The difference between what is proposed and what will be retired is $12.65 per $100,000 of assessed valuation, or an increase of about 11.85%, if this proposition was sold at one time. However, most bond authorizations are sold over a three to five year period.

DB/JA/TR/TF/AR/EK/RML/DM/

Attachments:

A. April 2020 Proposed Bond Projects https://go.boarddocs.com/ak/asdk12/board.nsf/Public 3/5 12/6/2019 BoardDocs® Pro B. CIAC Recommendation C. 2020 Bond Reimbursement Rate and Taxes

Prepared by: Dana Menendez, Facilities Planner Rachel Molina Lodoen, Project Support Manager Edie Knapp, Construction Supervisor Andy Ratliff, Senior Director of Management & Budget Thomas Fenoseff, Senior Director, Capital Planning & Construction

Approved by: Thomas J. Roth, Chief Operating Officer Jim Anderson, Chief Financial Officer

M039_AttachA_Apr 2020 Proposed Bond 11-22-2019.pdf (49 KB)

M039_AttachB_CIAC Recommendation.pdf (104 KB)

M039_AttachC_ Bond Rates and Taxes-12-04-2019.pdf (58 KB)

Motion & Voting Substitute motion: 1. All earthquake related projects EXCEPT NON-EARTHQUAKE RELATED UPGRADES TO GRUENING in a separate bond. / 2. Separate bond for non-earthquake related projects totaling: [$57,900,000] REPLACE WITH AMOUNT INCREASDED BY GRUENING NON-EARTHQUAKE RELATED PROJECTS. (NOTE: This is the amount of debt to be retired in 2020 and 2021 less the earthquake projects total of $54,036,000.) / 3. Place Gruening non-earthquake related projects into second non-earthquake projects bond./ 4. Prioritized Security Projects $9,326,000 from Year 3 2022 to Year 1 2020 in the separate non-earthquake bond. / 5. Prioritized Security Projects $340,000 from Year 5 2022 to Year 1 2020 in the non-earthquake bond./ 6. Add to non-earthquake bond: $6.5 million for Aquarian Roof and building preservation projects. / 8. Amend language for Inlet View Elementary School project to replace: “Replacement Design” with “Remodel Design” AND replace project description with: “Design funding to remodel Inlet View Elementary School on the existing site.” / 9. Add balance of non-earthquake bond for Planning, Design and Construction of Deferred Requirement Projects as on current deferred maintenance priority list.

Motion by Dave Donley, second by Deena Mitchell. Final Resolution: Motion Fails Yea: Andy Holleman, Dave Donley, Deena Mitchell Nay: Starr Marsett, Elisa Vakalis, Alisha Hilde, Margo Bellamy

Substitution to amendment #1:Allocate $2.8 million dollars for the Aquarian roof replacement from reserve funds to replace amendment #1 to include $6.8 million for Aquarian capital improvements on the bond.

Motion by Dave Donley, second by Alisha Hilde. Motion Fails Yea: Elisa Vakalis, Dave Donley, Alisha Hilde Nay: Andy Holleman, Starr Marsett, Deena Mitchell, Margo Bellamy

Amendment #1: I move to add up to $6.8 million dollars for Aquarian capital improvements.

Motion by Andy Holleman, second by Margo Bellamy. Motion Passes Yea: Andy Holleman, Dave Donley, Deena Mitchell, Margo Bellamy Nay: Starr Marsett, Elisa Vakalis, Alisha Hilde

Amendment#2: I move to add Abbott Loop Elementary School design for replacement to the bond for an amount up to $4.3 million dollars.

Motion by Starr Marsett, second by Margo Bellamy. Motion Fails Yea: Starr Marsett, Deena Mitchell, Margo Bellamy Nay: Andy Holleman, Elisa Vakalis, Dave Donley, Alisha Hilde https://go.boarddocs.com/ak/asdk12/board.nsf/Public 4/5 12/6/2019 BoardDocs® Pro Amendment #3: I move to Amend language for Inlet View Elementary School project to replace: “Replacement Design” with “Remodel Design” AND replace project description with: “Design funding to remodel Inlet View Elementary School on the existing site.”

Motion by Dave Donley, second by Deena Mitchell. Motion Fails Yea: Dave Donley, Margo Bellamy Nay: Andy Holleman, Starr Marsett, Elisa Vakalis, Alisha Hilde, Deena Mitchell

Amendment #4: I move to add Language to whatever Bond has earthquake projects:

With the exception of replacing funds used from District savings for earthquake related expenses; all and any reimbursement from the Federal Government to the Anchorage School District for Earthquake Recovery capital projects funded by bonds authorized by this bond package shall be applied to reduce outstanding Anchorage School District bond debt.

Motion by Dave Donley, second by Alisha Hilde. Motion Fails Yea: Dave Donley Nay: Andy Holleman, Starr Marsett, Elisa Vakalis, Alisha Hilde, Deena Mitchell, Margo Bellamy

Main motion, as amended: To approve the following bond proposal: Proposition I – Districtwide Earthquake Recovery, Security Improvements, and Planning & Design, including seismic resilience and mitigation, and planning and design in the amount of $82.833 million.

Motion by Alisha Hilde, second by Andy Holleman. Motion Passes Yea: Andy Holleman, Starr Marsett, Deena Mitchell, Margo Bellamy Nay: Elisa Vakalis, Dave Donley, Alisha Hilde

https://go.boarddocs.com/ak/asdk12/board.nsf/Public 5/5 ASD 2020 School Bond Proposal ATTACHMENT A - AMENDED

Estimated Project Cumulative Projected Life School Name Project Description Amount Project Amount Expectancy PROPOSITION I

Capital Improvement Projects Design funding to replace Inlet View Elementary School including the Inlet View Elementary School Replacement demolition of the existing building and the construction of a new building on $3,346,000 $3,346,000 50 + years Design the existing site. This work will include new building, site circulation, and site improvements.

Design and Construction funding for capital improvements to address Aquarian Charter School Capital Improvements $6,800,000 $10,146,000 25+ years infrastructure deficiencies throughout the building.

Earthquake Recovery Projects (Planning, Design & Construction)

Design and Construction funding for building wide earthquake damage Bartlett High School Earthquake Recovery $2,813,000 $12,959,000 25+ years repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage East High School Earthquake Recovery $11,266,000 $24,225,000 25+ years repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage King Tech High School Earthquake Recovery $380,000 $24,605,000 25+ years repairs, seismic upgrades and building improvements.

Fire Lake Elementary School Earthquake Design and Construction funding for building wide earthquake damage $435,000 $25,040,000 25+ years Recovery repairs, seismic upgrades and building improvements.

Chugiak Elementary School Earthquake Design and Construction funding for building wide earthquake damage $832,000 $25,872,000 25+ years Recovery repairs, seismic upgrades and building improvements.

Bear Valley Elementary School Earthquake Design and Construction funding for building wide earthquake damage $685,000 $26,557,000 25+ years Recovery repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage Chugiak High School Earthquake Recovery $1,097,000 $27,654,000 25+ years repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage Eagle River High School Earthquake Recovery $4,501,000 $32,155,000 25+ years repairs, seismic upgrades and building improvements.

Mirror Lake Middle School Earthquake Design and Construction funding for building wide earthquake damage $725,000 $32,880,000 25+ years Recovery repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage Dimond High School Earthquake Recovery $3,352,000 $36,232,000 25+ years repairs, seismic upgrades and building improvements.

Design and Construction funding for building wide earthquake damage Central Middle School Earthquake Recovery $632,000 $36,864,000 25+ years repairs, seismic upgrades and building improvements.

1 ASD 2020 School Bond Proposal ATTACHMENT A - AMENDED

Estimated Project Cumulative Projected Life School Name Project Description Amount Project Amount Expectancy Design and Construction funding for building wide earthquake damage Whaley School Earthquake Recovery $208,000 $37,072,000 25+ years repairs, seismic upgrades and building improvements. Subtotal -Earthquake Recovery Projects $26,926,000

Earthquake Recovery and Educational Improvement Projects (Planning, Design & Construction)

Design and construction funding for building wide earthquake damage Gruening Middle School Earthquake Recovery repairs, seismic upgrades, building improvements, security improvements, $39,300,000 $76,372,000 25+ years and Educational Improvements and educational improvements.

Design and construction funding for building wide earthquake damage Eagle River Elementary School Earthquake repairs, seismic upgrades, building improvements, security improvements, $3,210,000 $79,582,000 25+ years Recovery and Program and educational improvements. Subtotal - Earthquake Recover & Education Improvement Projects $42,510,000

Planning & Design for 2022 Deferred Requirement Projects

Planning & Design for 2022 Deferred TBD; based on Funding for planning and design for deferred requirement projects in 2022. $3,251,000 $82,833,000 Requirement Projects planning effort Subtotal - Safety & Code Upgrades $3,251,000

Total Proposition I $82,833,000

2 Date: July 30, 2019

To: Dr. Deena Bishop, Superintendent

Thru: Tom Roth, Chief Operating Officer

From: John Bulkow, Co‐chair, Capital Improvement Advisory Committee Lisa (Prince) Lansdale, Co‐chair, Capital Improvement Advisory Committee

Subject: CIAC Recommendation for 2020‐2024 School Bond/CIP

The Capital Improvement Advisory Committee (CIAC) met in June and July to discuss the upcoming Bond/CIP for the District. Much discussion was also conducted via email. With the understanding that there are still ongoing legislative considerations at the time of this memo, the Committee makes the following recommendations:

 The CIAC supports the proposal to devote the upcoming 2020 bond primarily to earthquake recovery projects, with the expectation that most of the funds will eventually be reimbursed by FEMA. The need for immediate funding of these essential repairs necessitates the unfortunate delay of all upcoming planned projects by a year in the proposed CIP.

 ASD staff prepared a second CIP proposing a $ 120 million 2020 bond to upgrade the earthquake preparedness of the schools in question beyond the amount eligible for FEMA reimbursement. In an ideal world, the CIAC would support this second option. We live in earthquake country, and it would be money well spent. In the real world, with the current political climate, the CIAC recommends sticking with the bond mostly eligible for FEMA reimbursement and roughly matched to the anticipated debt retirement. The CIAC encourages the ASD to maximize use of FEMA mitigation grants to get as much additional seismic improvements to our schools as possible and lauds the efforts ASD staff has already done toward this end.

 Last year’s CIP envisioned bonding for more than anticipated retired debt in 2023, with the hope of state debt reimbursement returning. The proposed CIP abandons this hope, and returns to only bonding for the anticipated debt retirement. Given the current political climate in the state, the CIAC agrees with this plan to keep future bonds close to anticipated debt retirement.

 The proposed CIP continues with the plan to move to a two‐year bond cycle starting in 2021. The CIAC continues to support this plan.

While the CIAC supports the proposed Bond/CIP under the current conditions, members of the committee are very concerned about the continuing growth of deferred maintenance backlog. As has been mentioned in the CIP over the last couple of years, the ASD should be investing around $80 million every year in deferred maintenance projects to keep from falling behind. With the policy of keeping bond proposals below retired debt, even if we plow every bond dollar into deferred maintenance we’ll continue to fall behind. As a result, we have schools that are beginning to have alarming FCI numbers. According to the FCI figures, we are projected to have schools in such bad shape in 4 to 6 years that just repairing them would cost three fourths as much as replacing them. The CIAC offers the following observations and suggestions:

 The Alaska constitution requires the state government to fund public schools. In the past, the state has done this through transportation funding, a per student funding formula for operating schools, and school bond debt reimbursement for capital projects like new schools and large‐ scale deferred maintenance.

 A quick bit of internet spelunking shows the ASD operates well within the cost per student range of a sampling of comparably sized school districts:

School District # of Students Budget $/student (rounded) (millions) (rounded) Brownsville (TX) Independent School Dist. 45,600 $ 511 $ 11,200 Sacramento City Unified Schools 47,900 $ 548 $ 11,400 Jordan School District (UT) 52,300 $ 607 $ 11,600 Tucson Unified 47,300 $ 566 $ 12,000 Anchorage School District 46,800 $ 565 $ 12,100 Columbus (OH) City Schools 49,200 $ 648 $ 13,200 Portland Public Schools 49,500 $ 655 $ 13,200 Seattle Public Schools 53,900 $ 753 $ 14,000

 Since the ASD operates well within the expected cost range, it will not be possible to find cost reductions on the scale needed to fund deferred maintenance through the regular operating budget.

 The hiatus in state school bond debt reimbursement that began in 2015 was damaging but not catastrophic to school facilities. Permanently eliminating school bond debt reimbursement leaves ASD, and the other districts in the state, with no viable means of funding deferred maintenance capital projects. The FCI figures demonstrate how catastrophic this will be.

 The State of Alaska limits the amount Anchorage (and other communities) can supplement the state‐provided school funds through local taxes. Anchorage is currently up against that limit.

 Past bond debt reimbursement from the state for deferred maintenance projects was 70%. Perhaps this crisis in bond debt reimbursement would be a good time to stop funding deferred maintenance through bonds. 70% of $ 80 million is $ 56 million. If the state government funded $ 56 million per year and allowed Anchorage to increase local school taxes by $ 24 million per year, we can correct the slow‐moving disaster happening to our school facilities. This proposal has several selling points: o The public has never liked funding deferred maintenance through bonds. It’s a known recurring expense that seems like it should just be budgeted for. It was only the state’s bond reimbursement program that locked ASD, and all the other districts, into this method of funding. o It makes the amount actually spent on deferred maintenance a known yearly cost. Both the state and ASD will be able to plan without having to guess how much the voters will approve in bond funding. o In the long run, this could be the least expensive option because it takes care of the existing facilities. The current trend will leave no logical option other than replacing schools as they develop too many major system failures. o It eliminates the interest expense paid out on bonds.

 ASD could help its position with the public and state administration by showing it is doing everything it can to reduce capital costs. Some members of the CIAC, and many from the community at large, believe it would be good to take a hard look at possibly closing or repurposing another school. From the Western Demographics report, it looks like Central Middle School might be the most likely candidate for closure or repurposing. All of us recognize that until the state changes the funding formula, however, there is a financial incentive for districts to preserve smaller school communities which could deter ASD from re‐zoning or closing schools. With this in mind, the efforts of ASD combining PAIDEA and Central Middle School, in example, are applauded as it saves rent for PAIDEA, increases the capacity of a school with extra room and still qualifies for additional funding from the state due to small school size. Are there any additional opportunities for the district to move more charter schools into under‐ utilized neighborhood schools?

In summary, the CIAC Membership overwhelmingly believes that in failing to meet the capital project needs for public schools, the State of Alaska is failing to meet its constitutional obligations. If the governor’s administration feels the state does not have enough revenue to meet its constitutional obligations, then the administration needs to find additional revenue. The CIAC encourages ASD to pursue every avenue to make the State of Alaska fulfill its obligations to public schools.

John Bulkow & Lisa (Prince) Lansdale Capital Improvement Advisory Committee Co‐Chairs

Attachment C - REVISED ANCHORAGE SCHOOL DISTRICT APRIL 2020 SCHOOL BOND PROPOSAL CALCULATION OF ESTIMATED TAXES FOR DEBT SERVICE ON $100,000 ASSESSED VALUATION

[1] [2] Bond Est. State Annual Debt Per $100,000 State Debt Property Proposition Debt Reimb. Prin. & Int. Assessed Val. Reimb. Per Taxes Per Term Amount By Project 4.50% $ 34,520,498,880 $100,000 $100,000

Proposition I - Districtwide Building Life Extension Projects

Inlet View Elementary School Replacement 20 $3,346,000 0% $ 257,228 $ 0.75 $ - $ 0.75

Aquarian Charter School Capital Improvements 20 $6,800,000 0% $ 522,758 $ 1.51 $ - $ 1.51

Earthquake Recovery Projects: Bartlett, King Tech, Fire Lake, Chugiak Elementary, Bear Valley, 20 0% $ 2,069,967 $ 6.00 $ - $ 6.00 Chugiak High, Eagle River High, Mirror Lake, Dimond, Central, and Whaley. $26,926,000

Earthquake Recovery and Educational Improvement 20 0% $ 3,268,005 $ 9.47 $ - $ 9.47 Projects: Gruening and Eagle River Elementary $42,510,000

Planning & Design Projects – 2022 Deferred 20 0% $ 249,924 $ 0.72 $ - $ 0.72 Requirements Projects $3,251,000

Proposition 1 Total $ 82,833,000 0% $ 6,367,882 $ 18.45 $ - $ 18.45

[1] Estimate of Bond Sale [2] Estimate as of December 2019