Charter School Bond Issuance: A Complete History Volume 4
Overview
Charter School Bond Issuance: A Complete History Volume 4 is the latest LISC-published report on the subject and the fourth installment of the LISC Charter School Bond Issuance Series. This study provides the charter school sector and capital market professionals with comprehensive data and analysis of charter school bond issuance since 1998, highlights why bond financing remains an important source of financing for charter schools, underscores trends in the charter school bond sector and offers policy suggestions to expand access to capital in the future.
For the charter school sector, these publications continue to provide greater transparency and information to all sector participants—investors, underwriters, rating agencies, bond and underwriter’s counsel, conduit issuers, states and municipalities, as well as charter schools and their authorizers. This research is designed to improve underwriting standards and provide greater transparency and strategic insights that can help creditworthy charter schools access the tax-exempt bond market at affordable rates. Email us to access archived volumes of the Charter School Bond issuance Histories.
Key Findings:
- Historical Perspective: The only comprehensive analysis of over 2,200 tax-exempt bond transactions undertaken by charter schools since the inception of the sector in 1998 until 2022; an analysis of more than $40B in transactions.
- The charter school sector of the municipal bond market achieved record growth in the seven-year period since the last LISC Bond Study. Between January 1, 2015, and December 31, 2022, charter schools issued more than $29 billion in tax-exempt bonds—nearly three times the total par issued in the sector’s first 17 years.
- For the first time in the sector’s history, 2022’s annual charter school bond issuance ($4.9 billion) surpassed 1% of total municipal bond issuance that year ($391 billion).
- Comprehensive Data: Updated data provided for charter school bond transactions including par amount, issuer, jurisdiction, rating, credit enhancement, term and pricing - including coupon, yield, and costs of issuance
- Approximately half of all charter school bonds issued since 1998 were rated at issuance by one of the three major rating agencies. Of the 920 rated transactions since 1998, 68% were rated investment-grade, including a significant number of “enhanced” transactions that utilized third-party credit enhancement to increase the rating on the bond.
- Trends and Impact Analysis: Understand the impact of state bond credit enhancement programs on sector growth and individual deals and view new state charter school bond data dashboards including average costs of issuance and rating distribution within the state.
- As of December 31, 2022, charter schools in 34 states and the District of Columbia have accessed the tax-exempt bond market to finance their facilities. Five states—Texas, Arizona, Florida, Colorado, and California—account for more than 57% of aggregate charter school bond issuance since 1998. Hawaii issued its first charter school bond in 2022.
- As of 2022, six states offer bond credit enhancement programs that result in a higher rating on charter school bonds due to the presence of some additional security provided by the state; however, one of these programs has not enhanced a charter school bond since 2015. The 5 active programs, including those with 'moral obligation' provisions in Colorado, Utah, and Idaho, along with the Texas Permanent School Fund (Texas PSF) and the Arizona Public School Credit Enhancement Program, offer distinct mechanisms for charter school bond credit enhancement.
- State bond credit enhancement programs represent one of the most effective and least costly options available to lower the cost of financing for charter school facilities. These programs significantly reduce taxpayer dollars spent on facility debt service by effectively substituting the state’s generally far superior credit rating for that of the charter school, resulting in a lower interest rate and reduced debt service payments.
Join us on March 12th at 2pm ET for a conversation between Yvonne Nolan, LISC VP of Education Programs and Sara Sorbello of Sorbello Strategic Finance about our latest findings, the current state of the charter school bond market, and the implications of our findings for school leaders and other bond market participants. Register here.
Read Charter School Bond Issuance: A Complete History Volume 4