Charter School Bonds


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Overview

Historically, one of the biggest obstacles to charter school formation has been the challenge of financing and securing affordable facilities.  With a growing charter school movement in Nevada and the need for a solution, the Nevada Legislature enacted the Charter School Financing Law during the 2013 session.

NRS 386.612-649 authorizes The Department of Business and Industry, Director’s Office (Department) to be a conduit issuer of tax-exempt bonds for Charter Schools in the State of Nevada. The statute authorizes the issuance of tax-exempt bonds and other obligations to finance the acquisition, construction, improvement, maintenance or furnishing of land, buildings and facilities for charter schools.  The Department works with bond council and charter schools to facilitate the acquisition of bond proceeds from the capital markets.

    Benefits of Tax -Exempt Bond Financing

    Better Rates: Tax-exempt rates are lower than taxable rates or traditional bank financing.

    Better Terms: No up-front cash or equity is required, allowing schools to borrow up to 100% of the cost of the project. 

    Longer Time:  Tax-exempt debt may be issued at a long-term fixed interest, allowing for predictable cost of capital beneficial to the budgeting process.

      Criteria to Apply

      To obtain bond financing from the capital markets for a project, a Charter School must provide financial and operational history sufficient to meet the market requirements.

      The applicant Charter School must have received within the preceding 3 consecutive school years one of the two highest ratings of performance pursuant to the statewide system of accountability for public schools or received equivalent ratings in another state as determined by the Department of Education (NRS 386.632).

      The applicant Charter School is required to provide a 5-year operating history unless the bonds are to be only sold to a qualified institutional buyer or the applicant has received a rating within one of the top four rate categories of Moody’s Investors Services, Inc.; Standard and Poor’s Rating Services, or Fitch IBCA, Inc.

      If an operating history is not available and the applicant does not meet the above requirement, the applicant will need to provide an obligor[i] that will guarantee the payment of the principle, premiums, if any, and interest on any bond issued.

      •  Financing is limited in amount and purpose to the payments of the costs associated with the cost of the project.
      •  The applicant will be responsible for the application fees and bond council fees needed to obtain bond financing.  A $50,000 deposit is due upon receipt of the certification of inducement by the Department.  The Department will refund the remaining portion of this deposit after deducting actual costs.
      • The applicant will also agree to pay the Department a $5,000 annual fee to cover the annual administrative costs of the bond issue.
      • All bonds issued by the Department pursuant to this statute, inclusive, are special, limited obligations of the State. 
      • The State Board of Finance must approve of the financial package before the bonds can be sold to the capital markets.
      • The Department and State Board of Finance must ensure there are sufficient safeguards in place so that all money provided by the bond financing will be expended solely for the purposes of the project.
      [i] as defined in NRS 386.621