Independent Schools
General availability of tax-exempt financing. Tax-exempt financings may be structured for most independent K-12 schools, with a few exceptions in a few states. While tax-exempt financing has been used by secular independent K-12 schools for some time, recent court cases have opened the door to tax-exempt financing for faith-based independent schools, regardless of religious affiliation.
Inherent advantages of tax-exempt financing. Tax-exempt financing typically offers nonprofit organizations the opportunity to borrow at lower interest rates than conventional taxable debt with the flexibility of longer repayment terms, less restrictive financial covenants and more favorable conditions for borrowing smaller amounts. These advantages are available to independent schools of all sizes, including those which are newly formed.
Constitutional analysis for faith-based schools. Our attorneys are experienced in the complex constitutional analysis of First Amendment issues of the separation of church and state, which is necessary to determine whether an issue for a faith-based school qualifies for tax-exemption. The portion of a school capital project that qualifies for tax-exempt financing can be maximized in accordance with the findings of this thorough analysis. We are also conversant with state law and and state constitutional issues (as they relate to bonds for faith-based schools) in any number of states.
Procedural assistance. We have a sound track record of winning approval from conduit governmental issuers for these types of financings, and of assisting experienced and inexperienced school officers through the process. We frequently have represented banks that issue letters of credit to credit enhance bond issues for educational institutions so we understand well bank credit considerations and related covenant requirements.
Experience with issuer approval considerations. We are familiar with the many issues surrounding the selection of an issuer for such financings. For example, when one faith-based university tried to do a tax-exempt issue through a state issuer, the financing was caught up in litigation involving the state constitutional provision regarding aid to "sectarian institutions." Due to this state litigation, no governmental issuer within the state would issue the bonds. Instead, following careful analysis, we determined that a Colorado issuer (avoiding the pitfalls of the state constitution) could issue tax-exempt bonds for the faith-based university. The Colorado issuer requires the bond opinion be rendered by a Colorado bond firm, which we can do through our Denver office. As part of this process, we were successful in getting "local approval" of bonds issued by the Colorado issuer from the state political subdivision where the faith-based university was located. So, a happy ending resulted for the faith-based university, which otherwise would not have been able to avail itself of tax-exempt debt. We have working on similar financings with this same issuer for other out-of-state schools. We were also successful in obtaining local issuer approval of a bond issuance for a Christian K-12 school, even though the issuer had not issued bonds for a faith-based school before, because the issuer ultimately became comfortable with our analysis.
