Delano Financing Authority, California

Delano Financing Authority
Capital Facilities Apportionment Revenue Anticipation Notes, Series 2012
(Delano Union Elementary School District)
July 25, 2012
Role of HSE: Sole Manager

In July of 2012, HSE served as sole manager for $10,000,000 Delano Financing Authority’s Capital Facilities Apportionment Revenue Anticipation Notes on behalf of Delano Union Elementary School District.

The proceeds of the sale were used to finance the construction of the District’s Westside Educational Complex. The completed school will have a 12,621 square foot multipurpose room/kitchen facility. Also included in the project plan are a library and media center, 68 classrooms and an administration building.

The construction contract was signed on July 14, 2011 and the notice to commence the project was issued on October 5, 2011. The initial phase of construction used District funds from a prior bond issue. Prior to HSE’s involvement, the District had been informed that it could issue Certificates of Participation (COPs) secured by the District’s general fund to fund construction of the project, however there were two problems with this conclusion. The first problem was that the District’s board did not want to implement a financing approach that would further encumber the District’s general fund. Secondly, the District’s general fund did not have the capacity to issue COPs in an amount sufficient to fund the project. With this understanding the District began the process of securing financial hardship status with the hopes of expediting funding for the Westside Complex. A problem arose when it became apparent that the District would soon exhaust the funds it had on hand and the hardship funding would not be in place prior to that occurrence. This would result in the project construction having to be stopped which would present a significant increase in cost due in part to the contractor’s ability to re-bid certain aspects of the construction contract. In order to avoid this development, HSE recommended that the District sell its rights to its future hardship apportionments to the Delano Financing Authority. The Authority could issue notes secured by the apportionments.

The Authority issued $10 million in notes and used the proceeds of the sale to purchase the future apportionments payments. By completing the note sale, the District was able to avoid having to stop construction on the Westside project thus avoiding a significant increase in project cost. The notes were sold through a limited public offering and placed with two institutional investors. This transaction was significant because no other school district in the State had ever completed a sale of their anticipated future state hardship apportionments.