The San Diego, California, Unified School District issued $200 million in tax and revenue anticipation notes to better manage its finances in the current fiscal year.
The notes are due in June 2025 and yield 3.14%. They pay interest at 5%. The securities received a rating of SP-1+ from S&P Global Ratings.
The rating reflects the notes’ “very strong projected coverage,” S&P analyst Cenisa Gutierrez said in a press release.
The issuance comes as the San Diego school district stares down a massive budget shortfall. The district has proposed several cuts to finance the $94 million deficit, including the postponement of almost $2 billion in planned investments. Included in the cuts are $550 million for a kindergarten grant program and $500 million for zero-emission school buses.
The district has also cut dozens of jobs, and average daily attendance at its schools has fallen by 11,081 students—or more than 10% of the district’s enrollment—over the past two years, according to the official statement accompanying the sale of the notes.
“Losses in enrollment will cause a school district to lose operating revenues without necessarily permitting the district to adjust fixed operating costs,” according to the sale documents.
The notes are general obligations of the school district, but they are only payable by tax, income, and other revenue received in or attributable to the 2024–25 fiscal year.
BofA Securities, Inc served as lead underwriter on the issuance, purchasing the notes for $203.3 million. The price reflected a premium of more than $3 million. KNN Public Finance, LLC acted as municipal advisor.