CSFA’s Pooled TRANs Program for K-12 & Community College Districts
A lower cost alternative to single district TRAN with
greater support and oversight than other TRAN pools
Will my district need a TRAN?
- Districts are expected to receive only about 70% of their State apportionment payments for 2020-21, with deferrals starting in February 2021 and continuing through June 2021. The apportionment deferrals are expected to continue for 2021-22
- Unless a district has significant amount of cash reserves, it’s likely the district will need to borrow from external sources like its county or investors by issuing a Tax and Revenue Anticipation Note (TRAN)
- A review of your district’s financial situation, particularly current and projected cash balances, will determine the size and timing of the TRAN
What is a TRAN and how is sizing and timing determined?
- TRANs are a short-term cash management tool used to even out temporary cash deficits in advance of the receipt of revenues, like the State’s deferred apportionment payments or local property tax payments
- Because districts benefit from issuing TRANs at lower, tax-exempt interest rates, there are few federal tax law requirements:
- Prepare monthly cash flows to determine the projected cash deficit, which must be within six months of TRAN issuance
- The maximum TRAN size will cover the projected cash deficit plus a minor working capital reserve of up to 5% of last fiscal year’s expenditures
- The TRAN must be repaid within 13 months of issuance from the same fiscal year’s revenues
Will stand-alone TRANs or pooled TRANs be the best option for my district?
- Districts issuing their own TRAN (stand-alone TRAN) have maximum control over the timing of their issuance and may select their own financing team members, but also have ultimate responsibility for cost controls and TRAN execution
- Pooled TRANs typically offer an experienced financing team that is “pre-assembled” to save the time and effort necessary for a district to construct their own team for a short-term borrowing
- Pooled TRANs lower upfront fees by combining the TRANs of multiple districts at one time to create economies of scale
- Pooled TRANs aggregate the issues of multiple districts into a larger offering (without creating a joint obligation) to attract more investors and increase competition to lower interest costs
Why might CSFA’s Pooled TRAN Program be my best option?
- California School Finance Authority (CSFA) is a governmental entity governed by a three-member board comprised of the elected State Treasurer, the elected State Superintendent of Public Instruction and the Director of Finance appointed by the Governor
- CSFA has a 35-year history helping our K-12 schools, community colleges and county offices finance the acquisition of property; construction, remodeling, and renovation of capital projects; refinance debt; and secure working capital like TRANs
- CSFA’s state-level intercept of TRAN debt service will streamline repayment for districts and increase investor security
- The pooled TRAN will be supported by the State Treasurer’s Office (STO) which has expertise in overseeing all bonds issuances of the state
- The financing team selected by CSFA and the STO have over 30 years of K-14 TRAN expertise and competitive fees
- An experienced CPA firm will be on hand to assist districts and county offices with the preparation of monthly cash flows
- Financing documents will be standardized for consistency, and specific directions for board action will be provided to districts
When can districts get cash from the Pooled TRANs?
- With the State’s apportionments deferred from February through June 2021 and from July through November 2021, we expect most districts to project cash deficits by June 2021
- If your district expects to need a TRAN to manage the State deferrals, the Pooled TRANs will close and provide funds in February 2021 before the deferrals begin. CSFA anticipates offering additional series of Pooled TRANs in April, May and/or June. Districts will have the option to participate in any of these series of pooled TRANs in April, May and/or June. Districts will have the option to participate in any of these series. Please see below the key dates for the February Deferrals TRANs
- If your district expects to need a TRAN before the State deferrals begin, a series of Pooled TRANs will close and provide funds in early December of 2020. Please see below the key dates for the Regular TRAN
- Note: if your district will need cash before February 2021 and again in the spring to manage the deferrals, federal tax law require that your district utilize two different TRANs to permit tax-exempt borrowings
|February Deferrals TRANs
|Application period for districts||Until Sept. 4||Until Oct. 9|
|Cash flows developed & TRANs sized / Financing documents prepared||August & September||mid-September to mid-November|
|District board approvals||by Oct. 12||by Jan. 4|
|CSFA Board approval||Oct. 19||Jan. 11|
|Credit ratings received||Oct. 26||Jan. 18|
|Interest rates determined||Nov. 9||Feb. 1|
|TRAN closing and funds available||Nov. 30||Feb. 22|
Who is involved with the Pooled TRANs Program?
- Issuer: California School Finance Authority
- Borrowers: K-14 school districts, community college districts and county offices of education
- Issuer’s Counsel: Office of the State Attorney General
- Agent for Sale: State Treasurer’s Office
- Municipal Advisor: Montague DeRose and Associates
- Note Counsel: Norton Rose Fulbright
- Disclosure Counsel: Nixon Peabody
- Joint Sr. Managing Underwriters: RBC Capital Markets & Citi
- Cash Flow Consultant: Eide Bailly
- Interested Parties: CA Dept. of Finance, CA State Controller’s Office, CA Dept. of Education
What are the upfront costs and expected interest rates?
- There is no cost to apply to the Pooled TRANs Program
- The issuance costs will be competitive with other TRAN pools and likely less than those paid for a stand-alone TRAN. CSFA & the State Treasurer’s Office are currently finalizing the financing team’s fees
- We expect to periodically post estimates of issuance costs and interest rates
Who can I contact with questions?
|California School Finance Authority||Montague DeRose||RBC Capital Markets||Citi||Norton Rose Fulbright||Eide Bailly|
|Ann La Morena Rohlin