Measure BB & Bond Oversight Committee

1. Measure BB& Bond Oversight Committee Bond Oversight Committee April 30, 2012

2. Meeting Agenda • Measure BB Background & Initial Budget • How Bond Financing Works • Governance of Bond Oversight Committee (BOC) • Creation of BOC • Responsibilities of BOC • Highlight of Accomplishments To Date • Lease / Leaseback Transactions • Initial Role of Bernards • Current Role of Bernards • Bernards Change: Impact on BOC Measure BB Bond Oversight Committee

3. Measure BB Background • MBUSD Resolution No. 2008-12 • Election authorizing issuance of general obligation bonds held November 2, 2008 • Passed by the voting residents of Manhattan Beach • “shall MBUSD rehabilitate 58-year old Mira Costa High School…by issuing $67,480,000 in bonds at legal rates” (originally built in 1950) • “..including replacing deteriorated classrooms with new classrooms and science labs, upgrading technology, replacing deteriorated plumbing / restrooms, and improving safety/energy-efficiency.” Measure BB Bond Oversight Committee

4. Measure BB Background • “Independent oversight” • “Mandatory audits” • “No money for administrator salaries” • “All funds staying local to improve Manhattan Beach schools.: Measure BB Bond Oversight Committee

5. Measure BB & Initial Project List • New math/science instructional building (Bldg. A) • New academic instructional building (Bldg B) • Technology Upgrades • Career/technical skills center • Arts instructional building • Safety • Student services • High school maintenance building • Pay or prepay certain existing long-term debt • (See more details on handout) Measure BB Bond Oversight Committee

6. Measure BB & Initial Budget Measure BB Bond Oversight Committee

7. How Bond Financing Works • Organization determines amount of financing need • Election held for community agreement • Underwriters relay to the county the amount needed to pay principal and interest (typically once per year) • County, based on assessed values, determines incremental property tax • Example, incremental tax of $35 per $100,000 of assessed value Measure BB Bond Oversight Committee

8. Governance of BOC California Legislation • California Proposition 39 includes various accountability requirements, including audits • California Assembly Bill 1908 (“AB 1908”) includes additional requirements related to school district general obligation bond elections • AB 1908 established appointment of members to a Citizens Oversight Committee Measure BB Bond Oversight Committee

9. Governance of BOC MBUSD School District • MBUSD also established Bylaws for the Measure BB Bond Oversight Committee • Purpose: Funds used in accordance with the intention of voters • Goals: (1) Validate spending (2) Progress reports • Mission: Independently review and authenticate planning and execution of Measure BB, and inform the public and Board regarding spending to ensure compliance with invention of voters and state law Measure BB Bond Oversight Committee

10. BOC Requirements • Committee shall consist of at least 7 members (but may be larger) • Serve for a term of two years (MBUSD exception made for a one year term) • Serve for no more than two consecutive terms Measure BB Bond Oversight Committee

11. BOC Requirements At least one member from each of the following: • Active in business organization representing business community within the school district • Active in senior citizen’s organization • Active in a bona fide taxpayer association • Parent or guardian of child enrolled in school district • Both a parent (or guardian) of a child in the district and active in a parent-teacher organization Measure BB Bond Oversight Committee

12. Responsibilities of BOC • Actively review and report on the proper expenditure of the taxpayers’ money for school construction • Advise the public as to whether the school district is in compliance with the requirements of Article XIIIA, Section 1(b)(3) of the California Constitution • Advisory role • Proposition 39 requires BOC to issue a report annually • MBUSD By-Laws, however, require BOC to issue a report quarterly Measure BB Bond Oversight Committee

13. Highlight of Key Measure BB Events 2008 • Measure BB passed in November • One BOC meeting held 2009 • Focus on planning by architects Harley Ellis Devereaux • Several meetings held with teachers, students and community for schematic design • Discussed various green initiatives • Four BOC meetings held Measure BB Bond Oversight Committee

14. Highlight of Key Measure BB Events 2010 • Bernards retained as construction services management (April) • Schematic design approved by BOD (May) • Decision to remodel, not demolish, existing “M&O” building (Summer) • Bonds issued totaling $9.738,877 (July) • BOC review of architect and other contracts • Construction documents to DSA (November) • First audit report issued (December) • Seven BOC meetings held Measure BB Bond Oversight Committee

15. Highlight of Key Measure BB Events 2011 • Lease / Leaseback alternative explored (Spring) • Budget revisions made by Bernardsbased on design changes (March) • BOC review of Lease / Leaseback contract • Math / Science building construction began (November) • Five BOC meetings held Measure BB Bond Oversight Committee

16. Highlight of Key Measure BB Events 2012 • Construction continues on Math & Science Building • Both audit reports (financial and performance) finalized and issued on 1/30/12 • Third meeting to be held today. Measure BB Bond Oversight Committee

17. Lease Leaseback:In Summary The Builder is selected by qualifications, not low bid. Builder provides a Guaranteed Maximum Price. Traditionally, included a significant financing component. Possible legal challenges (but none in recent years, and none ever upheld.) 17

18. History of LLB • LLB is authorized under Ed.Code 17406. • A long-term, revenue-based financing vehicle for projects. • Growing problems with claims and cost overruns on design-bid-build projects led districts to look for alternatives to the low bid model. • LLB widely used in recent years due to qualifications-based selection rather than low bid. • Legal and legislative challenges to LLB have failed.

19. Structure Basically Is The Same Owner Construction Manager (Opt.) LLB Builder or D-B-B Contractor Architect Subcontractors =Owner Team 19

20. Initial Role of Bernards • Retained by the Board as Construction Manager in April 2010 • Oversee the construction of the entire project, working closely with the Architect and all contractors • Prepare the detailed project budget by phase • Monitor and report on project spending • Recommend changes to the budget as necessary • Responsible for Quality Assurance • Limited Financial Responsibility Measure BB Bond Oversight Committee

21. Current Role of Bernards • Lease / Leaseback agreement signed with Bernards on Nov. 22, 2011 • Accountable for all costs of the project, not to exceed $48,800,193 (Guaranteed Maximum Price) • Fulfill role of the General Contractor • Agree to all construction plans • No longer Quality Assurance responsibility(transitioned to Steve Romaine) Measure BB Bond Oversight Committee

22. Bernards Change: Impact on BOC • Continue to actively review and report on proper expenditures • Continue to advise the public regarding the compliance of expenditures • Relationship with Bernards is a “fixed fee”; day to day expenses less of a concern • Scope of project likely to transition over time, as it has already (“scope creep”) Measure BB Bond Oversight Committee

23. Questions? Measure BB Bond Oversight Committee