In December 2019 and January 2020, the Alliance for College-Ready Public Schools re-marketed two tax-credit financings and re-issued a subordinate tax-exempt financing. The two schools involved were Alliance Alice M. Baxter College-Ready High School, and the Alliance Margaret Bloomfield Technology High School.
In 2013, Alliance issued $10.75 million in direct pay Qualified School Construction Bonds (QSCBs) for the Margaret Bloomfield school. The QSCBs were purchased by three CDFIs at a taxable interest rate of 6.5% with a 2034 final maturity and a 2019 conversion/re-marketing date. The QSCBs carried a direct-pay subsidy of approximately 5.3%, for a net borrowing cost of about 1.2%.
In 2014, Alliance also issued about $4.5 million in Qualified Zone Academy Bonds (QZABs) to two CDFIs, and about $5.0 million of subordinate tax-exempt bonds for the benefit of the Alliance Alice M. Baxter College-Ready High School to a private investor. About $500K worth of the QZAB tax credits were stripped off and sold to the tax-exempt bond investor. The QZABs had a 5.5 year maturity and carried a 5.75%% interest rate, and the tax-exempt bonds 20-year maturity.
Analysis of the benefits of re-marketing the tax-credit bonds versus refinancing them with tax-exempt bonds showed that Alliance would gain most by keeping the tax-credit financings outstanding, given the various terms of each school’s proposed re-marketing, lowering the interest rates either through the conversion or re-negotiation, and in some cases restructuring the repayment schedule to the benefit of Alliance.
Alliance operates a network of 25 middle school and high schools serving over 13,000 students in the Los Angeles metropolitan area. It was begun over 15 years ago, and today sends over 95% of its graduates on to college, with over 73% going on to a four-year college or university. Across their network, over 93% of scholars qualify for free or reduced lunch, 12% have special needs, 15% are English language learners, and 97% are African American, Black, or Latinx. Through 2019, Alliance high school students exceeded both LAUSD and the State in Mathematics and English Language Arts in terms of meeting or exceeding standards on State exams. Its curriculum demands students are in class the equivalent of 38 more days per year.
Buck Financial Advisors served as municipal advisor to The Alliance. Ballard Spahr served as bond counsel, Robert W. Baird & Co. served as senior re-marketing agent, GVC Capital served as C0-remarketing agent, and Musick, Peeler & Garret LLP served as borrower’s counsel. The QSCBs, QZABs, and tax-exempt bonds were re-marketed / re-issued through the California School Finance Authority.