The California School Finance Authority (“CSFA”) recently issued $12 million in Qualified School Construction Bonds (“QSCBs”) to finance K-8 school facilities in Chula Vista, California, for the High Tech High charter school. The High Tech High bonds represent the first issuance of QSCBs in California for a charter school and have been recognized as the “Far West Deal of the Year” for small issuers by The Bond Buyer.
QSCBs are authorized as part of the Build America Bond program under the American Recovery and Reinvestment Act of 2009 (“ARRA”) to help finance school construction, rehabilitation and repair. The QSCBs provide either a federal tax credit for bond holders or interest subsidy payments to issuers, each designed to significantly reduce the issuer’s cost of borrowing for public school construction.
For the High Tech High bonds, the CSFA will receive direct interest subsidy payments from the U.S. Department of Treasury. City National Bank, represented by Goodwin Procter, provided a direct-pay letter of credit that will pay the interest and principal with respect to the bonds. The federal subsidy payments will be used to reimburse City National Bank for interest drawings under its letter of credit. The High Tech High bonds mature on July 1, 2020, and bear interest at the rate of 5.041% per year. The transaction received an “AAA” rating from Standard & Poor’s, primarily based on a standby letter of credit issued by the Federal Home Loan Bank of San Francisco.