Westhoff, Cone & Holmstedt

Phoenix Advantage
Charter School

Success Stories
Phoenix Advantage Charter School

The firm recently senior managed the issuance of $10,895,000 Education Revenue Bonds for the Phoenix Advantage Charter School in Phoenix, Arizona ("PACS").

PACS started its operation with 250 students in grades K-8 in August 1997. Charter Schools in Arizona have limited financial resources and unlike District public schools have no ability to levy taxes. Therefore, PACS must generate revenues based upon the number of students attending classes on a daily basis (like user fees). This money must cover all operational expenses and capital costs (like bond debt service) if any. This is a real challenge. In order to be a successful school, while education comes first, student revenues must be augmented by charitable contributions (fund raising), grants and other entitlements in order to provide funding for both the school's educational programs and capital requirement.

When Mr. Holmstedt met officials representing PACS they wanted to acquire their existing campus that was being leased. A review of PACS' historical revenue stream showed a limited ability to service the required debt. Based upon changes in PACS' operational cash flow suggested by Mr. Holmstedt and revenue projections derived from current operations, Mr. Holmstedt designed a debt repayment structure and associated covenants that would enhance the creditworthiness of PACS. The adoption by PACS of the bond terms and covenants recommended by Mr. Holmstedt allowed PACS to secure credit enhancement of its Bonds from American Capital Access and an "A" rating on the bonds. The receipt of the ACA credit enhancement assured PACS access to the public tax-exempt bond market and the lowest possible debt cost.

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