DALLAS — The Louisiana State Bond Commission on Thursday authorized $18 million of revenue bonds supported by state payments for a tuition-free public charter school in Lake Charles.
The revenue pledged for debt service consists entirely of the state minimum foundation payment and local matching funds, according to commission director Whit Kling Jr.
Kling said the school’s proposed budget indicates that 30% of the state aid and the entire local match would be sufficient for the $1.6 million of annual debt service on the bonds.
Louisiana requires charter schools to devote 70% of their state funding for instructional purposes.
The authorized bonds include $17.6 million of tax-exempt bonds and a $435,000 of taxable debt to provide a reserve fund and capitalized interest.
The bonds will be issued by the Louisiana Public Facilities Authority for the Lake Charles Charter Academy Foundation.
Meredith Hathorne of Foley & Juddell LLP, the foundation’s bond counsel, said the debt service pledge will cover the foundation’s total revenue, which includes state and local payments, federal grants, and other sources. It does not specifically pledge the state educational payment or the local match.
Hathorne said 95% of the charter’s budget comes from state and local educational payments.
State Treasurer John Kennedy, chairman of the Bond Commission, questioned whether buyers of the debt would be warned that the state revenues would cease if the foundation loses its charter.
Hathorne said investors will be informed that the foundation has no other revenue source.
“These bonds will be marketed to qualified institutional investors,” she said. “That’s only about 35 buyers at the most.”
Hathorne said the foundation expects the bonds to be sold at an interest rate of about 7% because of it’s a higher-risk debt than many tax-exempt offerings.
The charter school’s application to the commission did not include a feasibility study, but Hathorne said one is under way. It will be included in the preliminary official statement, she said.
The Lake Charles school currently has an enrollment of 630 at a temporary facility, but will use the bond proceeds to build a new school with a capacity of 860 students.
Louisiana has $195 million of remaining Gulf Opportunity Zone bond capacity, Kling said, but he expects that to dwindle to around $13 million as several large deals should close soon.
The commission approved $125 million of revenue bonds for campus projects at Loyola University New Orleans. The bonds will be issued by LPFA.