Assembling Your Facility Refinancing Team | Local Initiatives Support Corporation

An important precursor to refinancing is assembling the team that will be responsible for managing the process, which requires a great deal of time, coordination, and financial and legal expertise. Assembling a strong, experienced team, led by a designated charter school representative, either from the staff or the board, is paramount to successful implementation. The range of potential charter school representatives includes the school leader, chief financial officer, or chief operating officer. The school may also be represented by one or more board members with the requisite expertise and willingness to dedicate significant time and energy to the school’s refinancing. The key is to have a trusted school stakeholder with authority to champion the effort and expedite decision making throughout the process.

Team Assembly Checklist
Unless the charter school staff or board has in-house capacity, the school should consider contracting with knowledgeable professionals for guidance through the different financial and legal aspects of the process. Whether external parties are selected through a formal request for proposals process or a more informal vetting process, schools should establish clear selection criteria, request details on relevant experience, obtain references from charter school clients, and interview potential candidates to ensure a good fit. Brief descriptions of the roles or services provided by the more common external team members are included below.

Need for a Champion
Every financing needs a school representative to lead the process and serve as champion. The champion should have authority to marshal resources, access to all pertinent information, and willingness to dedicate four to six hours a week to the refinancing process.

Early-stage Technical Assistance (TA) Provider
The breadth of the team will depend on the nature of the refinancing and the requirements of the ultimate financing source. However, even the assessment of options can be difficult. Who can assist schools in evaluating financing options and making certain threshold decisions regarding project scope and affordability? Many individual refinancing sources provide technical assistance; however, assistance is generally tied to a specific source rather than an evaluation of different financing options available to schools. There are independent charter school facility financing consultants and advisory firms, but some specialize in certain sources and others in certain geographies. How do schools choose expert partners that will serve the school’s long-term interests?

This early-stage assessment of options can be best performed by a mission-aligned technical assistance provider. These TA providers can help schools realistically assess their internal capacity and enhance that capacity as necessary, choose their optimal financing option, and assemble an appropriate team. To find technical assistance providers in different markets, consult individual state charter school associations, LISC’s SchoolBuild website, or the Charter School Facility Center at the National Alliance.

Idaho Charter Schools
To ensure these early-stage needs are met for schools in Idaho, the Communities of Excellence Project (Project) will provide schools with technical assistance by vetted Project consultants well versed in charter school facility financing. These Project consultants will also assist in selection of any additional team members required given school capacity and the nature of the financing option. They will ensure that basic affordability considerations have been addressed early on, that schools pursue the refinancing option that serves them best in the long run, and that the correct team is put in place to execute that option.

Legal Counsel
The legal counsel’s major role is to protect the charter school’s interests. Counsel negotiates legal issues, drafts or reviews legal agreements the charter school enters into, and advises the charter school at critical points. It is important to engage legal counsel with experience in real estate for charter school facility transactions generally. When undertaking a bond offering, it will be important to have counsel also versed in tax-exempt issuance, who will work with the underwriter’s counsel and bond counsel throughout the issuance process.

Financial or Municipal Advisor
A school may decide that it needs additional financial expertise on the team. Some financial advisors specialize in shorter-term bank and community development financial institution (CDFI) financing sources, while others are able to advise on the issuance of municipal securities (bonds) as Registered Municipal Advisors (MAs). Some may be able to advise on both bond and non-bond financing options. These financial advisors and MAs have a fiduciary duty to act in a school’s best interests. According to the Equitable Facilities Fund’s (EFF’s) 2018 Year in Review, there is an increasing trend of charter schools engaging MAs for assistance on their bond issues, with 19 different MAs engaged in charter school bond offerings during the year.1 When selecting MAs, schools should inquire about their prior charter school experience and the number of discrete underwriting firms used in their transactions, since over-reliance on a single underwriter raises questions about the MA’s observance of its fiduciary commitment.

Underwriter
For publicly offered bond transactions, schools will also select an investment banking firm that will structure and underwrite the offering, prepare financial disclosure information, assist in any presentations to the rating agencies, and market the issue to investors. If a school has engaged an MA, the MA will assist in this selection. Of note, there were 19 broker-dealers active in the sector in 2018; however, five were responsible for underwriting or placing the majority of charter school bonds, both in terms of number and dollar volume. When selecting underwriters, schools should inquire about prior charter experience nationally and within the school’s market.

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Facility Refinancing: Team Assembly Checklist

Legal Disclaimer:

Nothing in this material should be construed as investment, financial, brokerage, or legal advice. Moreover, the facts and circumstances relating to your particular project may result in material changes in the processes, outcomes, and expenses described herein. Consult with your own professional advisors, including your financial advisors, accountants, and attorneys, before attempting to consummate any transaction described in this material.