In order to offset the fiscal impact of COVID-19, the State’s 2020-21 Adopted Budget deferred $12.9 billion in aid to school districts, community colleges and offices of education (“LEAs”) expected to be paid in 2020-21 to 2021-22.  In response to this, California State Treasurer Fiona Ma has created a new Statewide working capital financing program to help LEAs manage the financial impacts of the deferrals.  The California School Finance Authority (“CSFA” or the “Authority”) was created in 1985 to aid LEAs by providing access to financing for working capital and capital improvements.  The goal of the CSFA State Aid Intercept Notes is to provide LEA’s with a streamlined and secure process that minimizes the impact of the deferrals on their operations.

The District currently projects that it will experience a cash flow shortfall during fiscal year 2020-21 created by timing differences between its anticipated expenditures and estimated receipt of revenues.  The Resolution being presented to the Governing Board authorizes a short-term borrowing by the District to address this cash flow shortfall through the issuance of tax and revenue anticipation notes (“TRANs” or “Notes”) through the CSFA State Aid Intercept Notes Program.

(a) District Resolution.  The resolution authorizes the issuance of the Notes by the District in an amount not-to-exceed Fifteen Million Dollars ($15,000,000), specifies certain basic terms, parameters and form of the District Notes, and approves the form of the Note Purchase Agreement and Indenture described below.  In particular, the Resolution establishes the maximum aggregate principal amount of the District TRANs to be issued ($15,000,000).  The Resolution describes the State Aid Intercept procedure to assist with repayment of the District Notes, the determination of repayment periods, certain representations and covenants of the District, and the District’s Pledged Revenues.  Pursuant to the resolution, the District requests that the County Board of Supervisors notify the District within 45 calendar days following receipt of the certified copy of the Resolution, that the District may issue the District Notes on its own behalf, so that the District can participate in the CSFA State Aid Intercept Notes Program. 

(b) Form of Indenture.  Under the CSFA Program, each participating District issues a series of Notes which is sold to the CSFA.  CSFA pools each District’s Notes with Notes of other districts, and sells one or more series of Authority Notes, pursuant to an Indenture between CSFA and U.S. Bank National Association, as Trustee.  The Authority Notes would be purchased by joint senior managers RBC Capital Markets and Citigroup Global Markets Inc., each acting on behalf of itself and other Underwriters to be appointed by the State Treasurer at a later date, who would in turn sell the Authority Notes to the investing public.  Proceeds of the District Notes and the funds used to repay such Notes will be invested by the District in the County Treasury, or by the Trustee on the District’s behalf in another type of permitted investment under the Indenture, respectively.  District Note Proceeds will be deposited in the general fund of the District and used to finance projected cash flow deficits. 

(b)  Form of Note Purchase Agreement.  The Resolution approves the form of a District Note Purchase Agreement (the “Purchase Agreement”) by and between the District and the Authority.  Pursuant to the Purchase Agreement, the Authority will agree to buy the District’s Note.  The conditions of closing the transaction are set forth in this document, including the documentation to be provided at the closing by various parties.  Upon the pricing and sale of the TRANs, the final execution copy of the Purchase Agreement will be prepared following this form and the District’s Authorized Officer will sign the Confirmation of Pricing. 

(c) In the event the District is deemed to be a non-State Credit Issuer, the Governing Board authorizes the District’s Authorized Officer to provide information for a Preliminary Official Statement (“POS”).  The POS is the offering document describing the CSFA State Aid Intercept Notes which will be distributed to prospective purchasers of the Authority Notes.  The POS discloses information with respect to, among other things, (i) the proposed uses of proceeds of the Authority Notes, (ii) the terms of the TRANs (interest rate, yield, etc.), (iii) the security for repayment of the TRANs (pledged revenues), (iv) may include District cash flows, financial and operating data, and (v) disclosure of litigation and other miscellaneous matters expected to be of interest to prospective purchasers of the TRANs.  Following the pricing of the TRANs, a final Official Statement for the TRANs will be prepared, substantially in the form of the POS.