SMART BONDS PROGRAM

Chapter 1438, Statutes of 1985, as amended by Chapter 598, Statutes of 1987, established the California School Finance Authority (CSFA) and authorized the issuance of $400 million in revenue bonds or other debt instruments. The proceeds from the sale of the bonds are available for loans to school and community college districts to assist with the acquisition of equipment and new school sites, construction of new facilities, reconstruction of existing facilities, capital improvements, acquisition of portable/relocatable buildings, and to provide working capital. The proceeds of loan repayments provide the resources necessary for payment of bond debt service. All expenditures of CSFA for debt service and other expenses must be paid from the revenues available to CSFA. Effective January 1, 1997, Chapter 1071, Statutes of 1996, authorized the issuance of an additional $400 million in revenue bonds per fiscal year for school districts and county offices of education that agree to guarantee payment of the bonds with Proposition 98 funds. The total outstanding amount may not exceed $4 billion at any one time. Pursuant to Chapter 741, Statutes of 1998, effective January 1, 1999, the $400 million annual issuance cap was eliminated.

CHARTER SCHOOL FACILITIES PROGRAM

Chapter 935, Statutes of 2002, created a pilot program - the Charter Schools Facilities Program, that provides funding for the new construction or renovation of charter school facilities. CSFA and the Office of Public School Construction jointly administer the program. Proposition 47, approved by the voters in November of 2002, made $100 million available for the program. Chapter 587, Statutes of 2003, modified the program, and among other things, set out to maximize the number of projects funded in subsequent rounds of program funding. With the passage of Proposition 55, in March 2004, an additional $300 million was made available for the program. In February 2005, 28 schools were awarded funding through the program's second funding round.

The program provides a 50% state subsidy for charter school facilities, with the balance of the project cost being repaid (to the state) by the charter school in the form of a long-term lease. Eligible charter schools must provide site-based instruction, be deemed financially sound by CSFA, and meet other program eligibility requirements.

STATE CHARTER SCHOOL FACILITIES INCENTIVE GRANTS PROGRAM

The CSFA administers the State Charter School Facilities Incentive Grants Program to provide California charter schools with assistance for facilities costs. The $50 million federal grant is being allocated over a five-year period (through 2009) to eligible charter schools. Grant funds are used toward a charter school's cost of rent, lease, mortgage or debt service payments for existing or new facilities or toward the purchase, design and construction costs of acquiring land and constructing or renovating a facility. Grants are awarded to charter schools based on preference points allotted for the percentage of low-income students, percentage overcrowded and whether the school is a not-for-profit entity. Eligible charter schools must, at a minimum, be in good standing with their chartering authority, provide site-based instruction, and have completed at least one school year of instructional operations. Additional requirements are listed in the program regulations.