STATE BOARD OF EDUCATION – TOPIC SUMMARY Topic: 2008 Fall Bond Sale for Tillamook Bay Community College Capital Project Date: May 16, 2008 Staff/Office: Camille Preus Action Requested: Information only Policy Adoption Policy Adoption/Consent Calendar

ISSUE BEFORE THE BOARD: Approval of the resolution to sell Article XI-G Bonds for a capital project at Tillamook Bay Community College.

BACKGROUND: Article XI-G bonds are issued to construct, improve, repair, equip and furnish those buildings, structures and projects or parts thereof, and to purchase or improve sites thereof. The projects are designated by the Legislative Assembly for community colleges authorized by law to receive state aid. These bonds are matched by an appropriation from the state General Fund and are general obligations of the state; the debt service is paid from the General Fund. The Legislature established a mechanism whereby the General Fund match may be generated through gifts and/or federal and local governmental funds. These funds are first deposited to special project accounts in the Treasury and then treated as General Fund moneys for purpose of the match.

2005-2007 Community College Bill Authorization Senate Bill 5514, Section 3, (Chapter 787 Oregon Laws 2005) authorized a maximum issuance of $38,500,000 of Article XI-G bonds in 2005-2007 for seven community colleges: Clatsop, Columbia Gorge, Oregon Coast, Rogue, Southwestern, Klamath and Tillamook Bay. The bill established a six-year limitation authority for the Department of Community Colleges and Workforce Development for $38.5 million of bonds and $38.5 million of match.

In March 2007, the Department issued a total of $25.9 million of Article XI-G bonds to finance capital construction projects for five of the seven community colleges: Columbia Gorge, Oregon Coast, Rogue, Clatsop, and Southwestern. Klamath Community College and Tillamook Bay Community College were not able to participate in the sale because they did not have the required matching funds. Both colleges were reauthorized for bonding by the 2007 Legislature in House Bill 5005.

Tillamook Bay Community College has now provided the required $4.9 million match. This sale is currently scheduled to be held in September 2008.

Request for Board Authorization to Issue. The Department is now seeking authorization from the Board to issue a total of $4,900,000 in Article XI-G bonds for the Tillamook Bay Community College Project as part of a sale currently planned by the State Treasurer for September 2008.

Article XI-G bond issuance costs are estimated at 2% ($98,000) and will be deducted from the bond sale proceeds for this project.

Prior to sale, the Department’s bond counsel may designate a portion of the sale as taxable, due to space utilization by private entities in the projects to be financed under this sale.

Two tables are provided after the resolution, to display information on the projects and information on debt services issues:

 Table A, included in the resolution, identifies the Tillamook Bay Community College Article XI-G project recommended for the September 2008 Bond Sale.

 Table B projects annual Article XI-G bonded debt outstanding and annual debt service beginning with the 1997-1999 biennium through the 2009-2011 biennium, assuming approval of the proposed September 2008 Bond Sale and March 2009 Bond Sale. The March 2009 sale will be brought to the State Board for approval early 2009.

Board/template-pK-12&CC.doc 1 Resolution for the Sale of Bonds for Capital Projects

The resolution now before the Board authorizes staff to pursue the sale of bonds for the Tillamook Bay Community College project currently identified by the College as needing bond financing consistent with the overall bond limitation imposed by the Legislature for the period 2005-2011.

STAFF RECOMMENDATION: Staff recommends that the Board adopt the following resolution: (1) finding that the Tillamook Bay Community College project for which Article XI-G bonds are proposed meets the requirements of Senate Bill 5514, Section 3; and, (2) authorizing the sale of $4,900,000 of Article XI-G bonds and requesting the State Treasurer to issue these bonds.

RESOLUTION FOR THE SALE OF ARTICLE XI-G BONDS

2008 Fall Bond Sale for Capital Projects Tillamook Bay Community College Project A Total of $4,900,000 Recommended for Sale for Article XI-G Bonds

WHEREAS, ORS 286.031 states, in part, that the State Treasurer shall issue all general obligation bonds of this state after consultation with the state agency responsible for administering the bonds proceeds; and

WHEREAS, ORS 286.033 states, in part, that the state agency shall authorize issuance of bonds subject to ORS 286.031 by resolution; and

WHEREAS, ORS Chapters 351, 288, and 286 provide further direction as to how bonds are sold and proceeds administered; and

WHEREAS, Chapter 787, Oregon Laws 2005, lists those projects that may be financed pursuant to Article XI- G of the Oregon Constitution; and

WHEREAS, it is appropriate for this Board to authorize the State Treasurer to issue bonds for projects authorized by previous Legislation and pending bills, once adopted by the Legislature and signed into law by the Governor, and in amounts not greater than authorized by the bond bill and for other projects specified as may be provided by law as otherwise required by law for the 2005-2007 biennium without requiring further action of this Board;

NOW, THEREFORE, be it resolved by the State Board of Education of the State of Oregon as follows:

Section 1. Article XI-G Projects. Pursuant to Article XI-G of the Oregon Constitution, the Board hereby finds that the Tillamook Bay Community College project identified below in Table A appear to the Board to be a project in which the community college has paid to the Department an equal matching amount from their own Other Revenue sources as required by Senate Bill 5514, Section 3. Bonds are authorized to be sold under Article XI-G in HB 5005 (2007) to provide funds to pay for this capital construction project and costs of issuance of these bonds.

Board/template-pK-12&CC.doc 2 Table A - Article XI-G Project Recommended for September 2008 Bond Sale

Article XI-G Projects Estimated Bond Cost, Maximum Term excluding issuance costs Tillamook Bay: New campus. $4,900,000 30 years TOTAL XI-G Projects $4,900,000 30 years

In accordance with guidance provided to the Department from the State Treasurer’s office, approximately 2% issuance cost for Article XI-G bonds will be deducted from the bond proceeds to cover underwriting and other costs associated with the sale. This will reduce the amount of funds available to Tillamook Bay Community College for actual project costs.

Section 2. Terms, Sale and Issuance. The bonds authorized by this resolution (the "Bonds"), shall be issued in such series and principal amounts as the State Treasurer, after consultation with the Commissioner of the Department of Community Colleges and Workforce Development or the Commissioner’s designee (the “Designee”), shall determine are required to fund the projects described in Section 1 of this resolution. The Bonds shall mature, bear interest and otherwise be structured, sold and issued as the State Treasurer determines after consultation with the Commissioner. The maximum net effective interest rate for the Bonds shall not exceed 10 percent per annum.

Section 3. Maintenance of Tax-Exempt Status. The Commissioner, or the Designee are hereby authorized to covenant, on behalf of the Board, to comply with the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), that are required for interest on tax-exempt Bonds to be excluded from gross income for federal income taxation purposes.

Section 4. Other Action. The State Treasurer, the Commissioner, or Designee, is hereby authorized, on behalf of the Board, to take any action that may be required to issue, sell, and deliver the Bonds in accordance with this resolution.

Board/template-pK-12&CC.doc 3 Debt Service

Table B - Article XI-G Bonded Debt Outstanding Actual and Projected

2007-09 Debt Service 2009-11 XI-G Bonds Principal Interest Total Debt Service Old Debt Service $650,000 $54,845 $704,845 -

March 2007 Bond Sale - SB 5514 (2005) * Clatsop $7,500,000 $125,000 $585,852 $710,852 $898,193 Columbia Gorge $7,500,000 $125,000 $585,852 $710,852 $898,193 Oregon Coast $4,500,000 $75,000 $351,254 $426,254 $539,545 Rogue - Medford $4,100,000 $70,000 $320,006 $390,006 $490,793 Southwestern - Curry $2,300,000 $40,000 $179,397 $219,397 $273,810 SUBTOTAL $25,900,000 $1,085,000 $2,077,206 $3,162,206 $3,100,534

September 2008 Bond Sale ** Tillamook Bay (reauthorized from 2005) $4,900,000 $0 $147,000 $147,000 $705,650

March 2009 Bond Sale ** Klamath (reauthorized from 2005) $7,700,000 $0 $0 $0 $1,118,300 SB 5516 (2007): Central Oregon $5,778,000 $0 $0 $0 $839,100 Chemeketa $5,625,000 $0 $0 $0 $815,800 Clackamas $5,156,250 $0 $0 $0 $749,700 Lane $6,750,000 $0 $0 $0 $979,900 Linn-Benton $3,731,250 $0 $0 $0 $539,900 Mount Hood $2,500,000 $0 $0 $0 $363,200 Oregon Coast $3,000,000 $0 $0 $0 $437,600 Portland $7,500,000 $0 $0 $0 $1,089,300 SB 5555 (February 2008) Clatsop $4,000,000 $0 $0 $0 $582,000 SUBTOTAL $51,740,500 $0 $0 $0 $7,514,800

GRAND TOTAL $82,540,500 $1,085,000 $2,224,206 $3,309,206 $11,320,984

* Debt service based on actual 4% rate from March 2007 sale as detailed in final Official Statement document dated 3/29/07. ** Debt Service based on estimate of 6% for new projects.

Project Description

Tillamook Bay Community College: $4,900,000 XI-G Bonds The Tillamook Bay Community College capital project has four components. The major project is the construction of a new comprehensive community college campus that includes adequate space for growth, current technology with laboratories and classrooms that will meet the current and future needs of students and programs. This project is a single, two story building that will be approximately 45,000 square feet. The other three components include the construction of a South County Center on the site of Nestucca High School, a North County Center on the site of Neah-Kah-Nie school district and the renovation of the Career and Technical Building at Tillamook High School which will be a joint-use facility to meet the colleges Career and Technical Program needs.

Board/template-pK-12&CC.doc 4