Keygent provides strategic and technical municipal advisory services to California school and community college districts.
Our distinguishing characteristic is our rigorous quantitative approach, including financial modeling, interest rate analysis, and bond pricing expertise. This knowledge allows us to present multiple financing options for every situation.
Exclusive Focus on California Education
Keygent is a California-based, minority-owned firm serving only California K-14 districts. We neither serve out-of-State issuers nor non-educational entities. This specialization gives us a deep understanding of the nuances in California education bonds.
Independent Municipal Advisory Firm
Keygent serves solely as an independent municipal advisor. We don’t act as broker-dealers or underwriters, who may have competing financial or other interests. As your fiduciary, our responsibility is to put our client’s best interests first.
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Keygent Vice President, Chris Hiatt, was recently quoted in an article by the Beverly Hills Courier titled “BHUSD Sells $160 Million in Measure BH Bonds.” Keygent advised Beverly Hills Unified School District (the “District”) on its first general obligation bond financing from its Measure BH authorization approved by District voters on June 5, 2018.
Municipal bonds are investments purchased by all types of investors such as “mom and pop” retail, banks, money managers, investment advisors, hedge funds, insurance companies, and even
governmental agencies. Municipal bonds are typically sold under one of three sale methodologies: competitive, negotiated and private sales.
Many municipalities had utilized tax-exempt advanced refundings for debt service savings through interest cost reductions and debt restructuring. The loss of this valuable tool is a blow to the many agencies who acted as good stewards of their limited repayment resources. The beneficiaries of these savings ranged from taxpayers to operating budgets to obligors of the debt. While districts may still advance refund bonds, they now have to do so with taxable bonds, and taxable bonds are more expensive than tax-exempt bonds.
California K-14 districts can elect to have their bonds approved under proposition 39 or Proposition 46. Selecting Proposition 39 or Proposition 46 for a bond election could be a political, facility-related, financial, or timing decision, among others.
While there are many types of municipal bonds such as GO bonds and revenue bonds, these bonds are generally issued as either current interest bonds or capital appreciation bonds. A common misconception is that current interest bonds pay both regular interest and regular principal. This is not true. Multiple current interest bond maturities though could be structured such that principal is amortized more regularly.
A common misconception of CABs is that it’s a balloon payment whereas current interest bonds are not. This is not always true as a current interest bond could also have one large principal payment due out in the future. Similar to current interest bonds, CAB maturities could be structured such that principal is amortized more regularly.
When investors loan bond funds to a municipality, they are expecting a rate of return on their investment. Unlike a mortgage where one bank loans the entire amount to a borrower, in a municipal bond financing there are typically multiple investors who loan funds based on their desired maturity length and other factors.
Many school and community college districts have previously issued bonds in a higher interest rate environment. With interest rates still near historic lows, opportunities to refinance (or refund) debt exist for many districts. In this post, learn more about bond refinancing.