The Los Angeles Unified School District (LAUSD) issued $850 million in bonds to finance general improvements to its schools.
The issuance includes $801.5 million in tax-exempt bonds maturing between 2024 and 2048, yielding between 3.5% and 4.67%. It also includes $48.5 million in federally taxable bonds maturing on January 1, 2024, and yielding 5.7%. The bonds received a rating of AAA from Fitch Ratings, AAA from Kroll Bond Rating Agency, and Aa3 from Moody’s Investors Service, which assigned a positive outlook.
“The positive outlook reflects the expectation that the district will develop plans to drive revenues and restrain expenditure growth to support long-term budgetary balance as it confronts ongoing enrollment declines,” Moody’s analysts wrote.
The issuance comes amid rising competition between traditional public and charter schools in Los Angeles. LAUSD’s non-charter school enrollment has dropped an average of 3% annually over the past decade, according to Fitch. Meanwhile, charter schools now enroll one if five public school students in the city.
While traditional public schools boast higher public financing, critics of charter schools say they attract more motivated families and funding, leaving behind students who require more resources to educate.
The bonds are general obligations of the school district, backed by its full faith and credit and secured by property taxes.
Morgan Stanley & Co LLC and Stifel, Nicolaus & Company Inc served as lead underwriter on the issuance, purchasing the bonds for almost $900 million. The price reflected a premium of $50 million.