Charter School Financing

CECFA is the largest financier of charter schools in the U.S., having issued more than $700 million in bonds to support 50 charter schools in Colorado. We help both relatively new charter schools and well-established schools borrow money at low interest rates. Typically, a school that has been in existence three years and has at least 300 students can issue bonds through CECFA. In special circumstances, we have even financed start-up charter schools.

State statutes have created two mechanisms that help charter schools borrowing through CECFA obtain lower interest rates:

Intercept Program. This program encourages investors to buy charter school bonds by assuring that State funds are used first for debt service. The “debt service intercept program,” allows a charter school to direct the State Treasurer to withhold State per pupil payments (“intercept”) in the amount needed to pay debt service on the bonds and to pay that money directly to the trustee for the bondholders.

Moral Obligation Program. For more mature schools with a consistent track record of fiscal soundness, the State will provide its “moral obligation” to repay the bonds, which substantially increases investors’ confidence that the bonds will be repaid and therefore lowers the interest rate the school pays. To qualify for the Moral Obligation Program, the school must be given an “investment grade” rating by one of the national bond rating agencies and be approved by the State Treasurer. There is currently a “cap” of $400 million on the amount of Moral Obligation bonds which CECFA can issue.


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