Financing

An Alternative Funding Method for Capital Improvements

Many Ohio school districts face significant facility needs while balancing taxpayer considerations, capital budgets, and project timelines. One financing option available under Ohio law is a lease-purchase financing structure commonly referred to as a Certificate of Participation (COP) program.

COP financing has been used by Ohio school districts to fund a variety of capital projects, including building additions, renovations, athletic facilities, parking lots, safety improvements, and other permanent improvements. Ohio law specifically authorizes school districts to enter into lease-purchase agreements for the construction, enlargement, improvement, furnishing, and equipping of school facilities.

How Does COP Financing Work?

While each financing program is structured by the district's legal and financial advisors, a typical COP financing arrangement generally follows these steps:

1. A lease-purchase structure is established by the school district and its financing team.

2. Investors purchase Certificates of Participation, which provide funding for the project.

3. Construction proceeds similarly to other capital projects.

4. The school district makes lease payments over the agreed financing term.

5. At the conclusion of the lease-purchase agreement, ownership of the facility or improvement transfers to the district.

In practical terms, COP financing allows a district to spread the cost of a capital project over time rather than funding the entire project from existing cash reserves.

What Types of Projects Can Be Financed?

Ohio Revised Code §3313.375 permits lease-purchase financing for a broad range of school facility improvements, including:

• Building additions

• Classroom expansions

• Renovations and modernization projects

• Athletic facilities

• Parking lots

• Safety and security enhancements

• Site improvements

• Furnishing and equipping facilities

The specific eligibility of a project should always be reviewed by the district's legal counsel and financial advisor.

Why Do Some Districts Consider COP Financing?

Every district's financial situation is different, but COP financing may be considered when a district:

• Has an identified facility need that cannot wait several years for cash accumulation.

• Wants to preserve capital reserves for future needs.

• Seeks flexibility in structuring project funding.

• Is evaluating alternatives to traditional bond financing.

• Has dedicated capital revenue sources available to support long-term payments.

Districts commonly work with bond counsel, financial advisors, underwriters, trustees, auditors, and other professionals to determine whether a lease-purchase structure is appropriate for their circumstances.

Funding Sources

Depending on the district's financial plan and applicable legal requirements, lease-purchase payments may be supported by various capital funding sources. Ohio law recognizes Certificates of Participation issued as part of lease-purchase agreements as a funding mechanism for permanent improvement projects.

The availability and use of any funding source should always be evaluated by the district's treasurer, financial advisor, and legal counsel.

How We Help

Our role is not to provide financial, legal, or investment advice. Instead, we work collaboratively with school districts and their professional advisors to help align facility planning, project scope, construction budgets, and project delivery with the district's selected funding strategy.

When a district is considering a lease-purchase or COP financing structure, we can assist by:

• Developing conceptual budgets and project scopes.

• Providing preliminary cost estimates.

• Evaluating phased construction options.

• Assisting with long-term capital planning discussions.

• Coordinating project schedules to align with financing timelines.

• Delivering projects through cooperative purchasing, design-build, construction management, or other approved procurement methods.

Our team regularly works with school districts, financial advisors, bond counsel, and other stakeholders to help move projects from concept to completion while maintaining transparency and budget accountability.

Important Notice

Financing decisions should always be made in consultation with the district's treasurer, financial advisor, bond counsel, legal counsel, and other qualified professionals. This information is provided for general educational purposes only and should not be construed as financial, legal, tax, or investment advice.

Funding Energy Improvements Without Large Upfront Capital Expenditures

Many public entities are seeking ways to improve aging facilities, reduce utility costs, enhance occupant comfort, and modernize infrastructure without requiring substantial upfront capital investments.

One financing option that may be available for qualifying projects is Property Assessed Clean Energy (PACE) financing. In Ohio, PACE financing is administered through Energy Special Improvement Districts (ESIDs) and can be used to fund eligible energy-related improvements on commercial, nonprofit, institutional, and governmental properties.

PACE financing is commonly used for projects involving:

• HVAC system replacements

• Building automation systems

• LED lighting upgrades

• Solar energy systems

• Geothermal systems

• Building envelope improvements

• Insulation and window upgrades

• Energy efficiency and sustainability improvements

• Certain resiliency and water conservation measures

How PACE Financing Works

PACE financing is designed to help property owners fund qualified energy improvements using long-term private capital.

A typical project generally follows these steps:

1. Eligible energy-saving improvements are identified.

2. The property is enrolled in an Energy Special Improvement District (ESID), if necessary.

3. A private capital provider funds the qualified improvements.

4. The financing is repaid through a voluntary special assessment associated with the property.

5. Repayment occurs over an extended term, often aligned with the useful life of the improvements.

The objective is often to spread project costs over time while allowing the facility to benefit from reduced energy consumption, improved comfort, and modernized building systems.

Benefits Public Entities May Consider

Depending on the specific project and financing structure, PACE financing may offer several potential advantages:

• Reduced upfront capital requirements

• Long-term financing options

• Funding for comprehensive energy improvement projects

• Ability to bundle multiple facility upgrades into a single project

• Improved building performance and energy efficiency

• Potential utility cost savings

• Support for sustainability and energy reduction goals

Because eligibility requirements vary by jurisdiction and project type, each opportunity should be evaluated individually by qualified advisors.

Common Public Sector Applications

Public entities frequently evaluate PACE financing for projects such as:

• School HVAC modernization programs

• Municipal facility energy upgrades

• Government office building renovations

• Community center improvements

• Renewable energy installations

• Campus-wide energy conservation initiatives

PACE financing is often considered when a facility requires significant energy-related improvements and the owner wishes to preserve available capital for other priorities.

How We Help

Our role is not to provide financial, legal, tax, or investment advice. Instead, we work alongside our clients and their professional advisors to evaluate project feasibility and develop construction solutions that align with available funding strategies.

For projects where PACE financing may be appropriate, we can assist with:

• Facility assessments and capital planning

• Energy efficiency project identification

• Budget development and cost estimating

• Life-cycle cost analysis

• Project phasing strategies

• Design-build delivery

• Coordination with energy consultants, ESIDs, capital providers, and other project stakeholders

Our team works collaboratively with owners, financial advisors, legal counsel, ESID representatives, and financing partners to help move qualified projects from concept to completion.

Important Notice

PACE financing availability, eligibility requirements, project qualification standards, and financing structures vary by jurisdiction and project type. All financing decisions should be made in consultation with qualified legal counsel, financial advisors, ESID representatives, and other appropriate professionals. This information is provided for general educational purposes only and should not be construed as financial, legal, tax, or investment advice.