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 to 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 provide funds in March 2021. 2021 Subject to demand from districts; please contact us by mid-January 2021 if interested.
- If your district hits a cash low point in July/August or in November/December, the summer 2021 TRANs can help.
|March 2021 Issuance||April 2021 Issuance||Summer 2021|
|Application period for districts||Until October 30||Until October 30||April/May|
|District board approvals||By January 15||By February 12||By mid-May|
|Credit ratings received||Late February||Late March||Late June/July|
|Interest rates determined||Early March||Early April||July/August|
|TRAN closing and funds available||March 24||March 24||Late July/August|
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, CA Community College Chancellor’s Office.
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.
- Call a team member for a quote of issuance costs and a discussion of 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