Financing Process

Once the school has determined there is a likelihood of needing capital finance, it should initiate procurement of a municipal advisor (MA). A sample MA RFP template is included in the forms section. Procuring the services of an MA is a beginning step in the financing process. The MA guides the school and provides advice throughout the financing process. The MA acts as a fiduciary to the school and ensures that the transaction is efficient and meets the school’s needs.

Schools that qualify for credit enhancement by the State of Utah can significantly reduce their borrowing costs. Eligibility for credit enhancement is reserved for schools with a proven track record, as outlined in the Credit Enhancement Program Standards.

The municipal advisor can provide the school guidance on the value of securing a rating of the bonds. While there is an upfront cost for a rating, rated bonds may result in a lower cost of borrowing than could be attained with non-rated bonds. Schools seeking credit enhancement must have an investment grade bond rating (BBB- equivalent or above) from a Nationally Recognized Statistical Rating Organization.

Once it is determined that a new financing would be advantageous in consultation with an MA, the MA and the school’s legal counsel can help the school in assembling the financing team. The MA will assist in conducting competitive procurement for services from qualified public finance professionals who will help the school with structuring and administering the transaction. The finance team typically also includes an underwriter, bond counsel, and bond trustee. The Office of Attorney General (OAG) prequalifies firms to serve as bond counsel. Schools using the UCSFA as issuer must select bond counsel from the list of prequalified firms. In addition, the UCSFA requires the services of issuer’s counsel, paid for from bond proceeds.

A school and its MA can ensure it is receiving competitive pricing by referring to cost of issuance information on this website.  This information provides details of prior transactions, participating professionals, and the fees paid for services.

Schools submit a financing application to the UCSFA to be considered by its board.  The board meets on an ad hoc basis to consider applications once submitted. The MA helps with preparation and submission of the application. A school seeking eligibility for the Credit Enhancement Program must also submit an addendum to the application with additional information pertinent to the program. A $20,000 deposit is submitted with the financing application, which is applied to the cost of application evaluation.

The UCSFA Board, together with its MA and counsel, review each application to ensure compliance with application requirements and assess the financial strength of the school. Once review of the application has been completed by the UCSFA and its MA counsel, the application will be considered in an open and public meeting of the UCSFA. In this meeting, school officials and members of its financing team will appear before the board to answer any questions board members may have regarding the school’s operations and outlook. Bond counsel will present a bond resolution to the UCSFA outlining the parameters of the transaction. Adoption of the resolution by the board constitutes approval of the application.

The MA and the bonding team will guide the school through the completion of the sale of the bonds, including drafting the necessary bonding documents required to protect each of the various parties to the transaction and ensuring the legality of the bond sale.

The professionals who helped with the bonding transaction will be paid from the bond proceeds. These costs are called “cost of issuance.” Additionally, once the bond sale is complete, the UCSFA will return the $20,000 deposit provided upon application. Failure to complete the sale may result in the forfeiture of the application deposit.

SEC rule 15c2-12 requires the school to enter into an agreement to provide periodic disclosures regarding the financial health of the school and other pertinent information on the bond securities through the EMMA website. In addition, the school is responsible to ensure that federal laws regarding the tax exemption of the bonds are followed. The school’s bond counsel can assist in developing comprehensive Post-Issuance Compliance and Continuing Disclosure Policies that must be followed meticulously. Failure to comply with Post-Issuance Compliance and Continuing Disclosure Policies will likely hinder the school’s ability to utilize the UCSFA as an issuer for future financings. For additional information, please see the Post Issuance Overview.