Alternative Financing Programs: Chancellor Financial

PROGRAMS

General Obligation Bonds--GO Bonds are predicated on authorization from the District's voters at an election called for the purpose of issuing bonds. In most instances a property tax increase is necessary to support the additional bonded indebtedness. GO bonds are guaranteed through the Permanent School Fund thus interest rates are low. The term of the bonds vary from 20 to 30 years in length.

Lease Purchase Revenue Bonds--LP Bonds arc authorized by the Board of Trustees of the District and do not require an election, The authorizing statute requires a public notice and a sixty day comment period wherein 5% of the registered voters may by petition require an election on whether the board should or should not execute the lease purchase contract. In addition, the LP bond documents are reviewed by the Attorney General's bond desk to determine if all statutory requirements have been met. Upon AG approval the bonds are issued and the project is funded. Lease Purchase Revenue Bonds are predicated on the revenue sources of the district including but not limited to Tier I funds. LP bonds are tax-exempt.

Maintenance Note--maintenance notes may be issued for any amount and for any term period limited by the previous years district income. Maintenance Note funding is based on the M and O taxes collected by the district as well as other financial elements within a district's budget . Maintenance notes are utilized for repair and rehabilitation of existing facilities and/or purchase of equipment. Maintenance notes may not be utilized for new construction.

QZAB (Qualified Zone Academy Bond)--QZAB is a federal program administered in part by the Texas Education Agency. The program is to provide school districts with 0 % financing for equipment and some construction needs. There are multiple steps in this program starting with securing a financial consultant and then following the application process. The program has a set sum of money available with approvals limited to no more than $8 million dollars or less. QZAB financing must conform with authorizing state statutes such as the lease purchase personal property program, time warrants, and/or the maintenance note, Districts with at least 35% student participation in the free lunch program will qualify.

Instructional Facility Allotment Program--The IFA program was established by the Texas Legislature in 1997. The program is designed to provide funds to poor school districts (poor in wealth per student) to offset annual payments on lease purchase revenue bonds or general obligation bonds. The amount of money available to each district is predicated on a formula with emphasis on the wealth of the district. The program is administered by the Texas Education Agency.The application process has very specific requirements.

Personal Property Lease/Purchase Program--personal property has been defined loosely as movable or relocatable property. A multitude of projects such as mobile buildings, typewriters, computers, HVAC systems, energy saving devices, furniture, science equipment-lab equipment, telephone systems and the list goes on. Movable or relocatable property is personal property.LP personal property funding is based on the kind of property to be financed. Movable property including equipment, portable buildings, computers, modular construction etc. fall into this category. LP personal property requires board action only. Credit is predicated on the district's ability to pay from a variety of sources including fund balance, delinquent taxes, maintenance tax receipts etc. LP personal property contracts are tax-exempt.

Real Estate Lease Purchase Program--This funding program is designed for the construction of new facilities or the expansion-repair-rehabilitation of existing facilities. There are specific legal and financial requirements which Chancellor's President and bond counsel have developed in a step-at-a-time approach. Chancellor has implemented more financing for school construction than any group or organization in Texas.

Time Warrant Program--Texas law authorizes school districts to utilize a time warrant to finance a variety of different projects. A time warrant is a tax-exempt instrument traded in the national market. State law requires that a warrant cannot be financed longer than five years and for an amount not to exceed $500,000 dollars. Chancellor has developed a financial program which utilizes time warrants as one element in an overall financing program including construction projects. Time Warrants may be issued for a variety of projects including the purchase of land, renovations, new construction, equipment etc.. The warrant is limited to a 5 year payment term and for an amount not to exceed $500,000 or 75% of the previous year's income. Warrants are tax-exempt instruments,

Energy Conservation Program-- A school district may enter into a lease-purchase contract for energy conservation measures designed to reduce energy consumpation or operating costs of the school facilities such measures include: insulation, storm windows, caulking and weather-stripping, multiglazed windows or doors, automatic energy control systems, computer software, HVAC systems, etc. The lease purchase contract has no limit on the amount but cannot exceed a ten year payout period.

WHAT ARE THE NECESSARY PROGRAM STEPS?

Step 1. Engagement Letter--an agreement between the district and Chancellor authorizing Chancellor to secure financing for a particular project. The letter sets out the fees and requirements with no upfront cost to the district as Chancellor is only paid when the project funds.
Step 2. Chancellor Time-Line--Chancellor provides the district with a step-at-a-time calendar outlining every step and element of the financing program.
Step 3. Financial Document Checklist-- Chancellor provides the district with a checklist of district financial documents which are necessary to determine the district's credit worthiness.
Step 4. Project Description and estimated cost.

Step 5. Term Sheet--Legal Document--Funding