July 26, 2010 Newsletter

29-Jul-2010
 
Topics: SBOE Wants Charter Leaseback Program; Bond Rating Agencies Balk at New Liability  State of the Housing Bond Market 
Texas State Board of Education Reverses Decision, Votes to Lease Property to Charter Schools

On Thursday, July 22, 2010, the SBOE met in committee to discuss a proposal from SBOE member David Bradley, which would allocate 0.5% or about $100 million of the Texas Permanent School Fund (PSF), to purchasing land and leasing it back to charter schools, in an attempt to support the charter facilities finance gap.

Download the Bradley proposal here (Word Document).

Multiple concerns have been cited since the plan was proposed in June 2010, including whether the Permanent School Fund can legally be used to fund charters; whether taking on mortgages and tenants is a good fit for the SBOE; and what now happens to an earlier proposal to use PSF allocation to guarantee charter school debt so they can purchase, build and own their own facilities. (Texas Tribune: "SBOE Warned of Risk in Renting to Charter Schools", July 22, 2010)

After hearing testimony from SBOE board attorneys and investment advisers during committee discussion on Thursday, the plan was tabled over the legality issue (Texas Tribune, "SBOE Votes Down Charter Allocation", July 22, 2010), and a formal opinion was sought from the Texas Attorney General's office. This delay seemed likely to kill the proposal entirely—since it is opposed by newly elected SBOE members who will assume their positions in January 2011.

But SBOE member Rick Dagosto (D-San Antonio), who opposed the proposal on Thursday, was absent from the general meeting on Friday—creating a one-vote margin for the plan's proponents. (Austin American-Statesman, "Charter school investment plan gets approval," July 23, 2010).  Word broke on Friday that the Thursday vote had been reversed and the charter leaseback plan had been approved after all. A final opinion from the AG's office is still pending.

Read the AP story at the Houston Chronicle: "Board adopts charter facilities investment plan", July 23, 2010.

The Lone Star Report has minutes from Friday's meeting including action on the passage of the charter lease amendment.

"Bond Sale? Don't Quote Us, Request Credit Firms"

The financial reform legislation signed on Wednesday has got the credit rating agencies in a fix. "Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law." ....Read the full story at the Wall Street Journal.

Finance radio show Marketplace reported on Wednesday that Standard & Poors wants the SEC to drop its requirement that bond deals carry a credit rating, altogether.


INDUSTRY NEWS

 •   "Tax-Exempt Bond Blues" - Affordable Housing Finance, July/August 2010 Edition

The tax-exempt bond market continues to struggle with limited investor appetite and a tight private-placement market, while the impact of the government's New Issue Bond Program remains to be seen. ....READ THE FULL ARTICLE

•   Six Organizations Push Senate to Keep Build America Bonds Program - NABL, July 16, 2010

Six state and local government associations sent a letter to Senate Finance Committee Chairman Max Baucus (D-MT), asking that he find a new way to extend the Build America Bonds program. Previous BAB extenders failed last week when the American Jobs and Closing Tax Loopholes Act didn't get enough votes to make it to the Senate floor. Read the letter from the National Association of State Treasurers.

Other orgs participating were the Council of State Governments; the National Association of Counties; the National Association of Auditors, Comptrollers and Treasurers; the National League of Cities; and the United States Conference of Mayors. ....READ THE FULL ARTICLE

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