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Facility Financing – Bonds 101
A national leader in charter school facility financing
Charter schools, from start-ups to stabilized operators, are able to issue tax-exempt bonds with no up front, out of pocket costs. These proceeds can finance their facility needs including: building acquisition or refinancing, construction or renovation, land acquisition, furniture, fixtures and equipment and athletic facilities.
What are tax-exempt bonds?
Tax-exempt bonds are governmental purpose bonds and qualified private activity bonds. They are designed to allow certain entities to raise capital (long-term debt) at attractive interest rates.
Are tax-exempt bonds a new financing option?
Public bodies have been issuing bonds for over 100 years. Additionally, Private sector, non-profit entities have been using tax-exempt financing for decades. The non-profit must be a 501 (c}(3} organization.
Characteristics of a typical charter school bond financing
- 100% financing
- Both construction & permanent financing
- Uses: acquisition, renovation, construction, refinancing, fixtures
- Up to 40-year fixed rate maturities
- Debt Service Reserve Fund - equal to annual debt service
How much can a charter school afford?
An architect's dream vs. a charter school's reality
- Debt per student/lease aid per student
- Percent of revenues/expenditures
- Debt service coverage
- Factor in growth
- What do you need?
What do we consider?
- History & founding
- Historic enrollment
- Waitlist
- Educational program/academic performance
- Financial performance liquidity, operating margin & debt service coverage
- Governance
- Administration
- Charter Contract
- Retention - students & teachers
- Student demographics (including free & reduced lunch)
- The Project
- Competition
Common challenges
- Charter renewal/revocation risk
- Limited operating history compared to other sectors
- Slim margins/limited liquidity
- High debt burden
- Construction risk
- Significant increase in facility size
- Demonstrating demand