Union Elementary School District

Background

Union Elementary School District, located in Santa Clara County, serves approximately 5,200 students across grades TK–8. The District operates six elementary schools and two middle schools.

Following voter approval of $125 million and $128 million general obligation bond measures in 2014 and 2022, respectively, the District continued its capital improvement program with the final issuance under the 2014 authorization and the second issuance under the 2022 authorization.

On July 30, 2026, Baird's California K-12 Public Finance group served as sole managing underwriter for the District's $37.6 million financing, consisting of $34.1 million of Election of 2014 General Obligation Bonds, Series G, and $3.5 million of Election of 2022 General Obligation Bonds, Series B. The bonds carried an AA+ rating from S&P.

Opportunity, Implementation and Market Conditions

The District sought to generate funding for near-term capital projects while structuring the financing around its existing obligations and preserving flexibility under the 2022 authorization for future facility needs.

Working collaboratively with the District and its financing team, Baird structured the Series G Bonds using a combination of current interest and capital appreciation bonds from 2027 through and including 2051 to maintain the District’s tax rate objectives and leave room for future series of bonds to be layered into the program. The Series B Bonds were structured as current interest bonds maturing in 2027 and 2028.

The Bonds were sold on Thursday, July 30 which was the day after the most recent Federal Reserve meeting on July 29, 2026. The transaction was the only GO Bond issue in the market that day for a California K-12 issuer. Overall, the District received 114 separate orders for the two series of bonds which represented over $100 million in par amount. The current interest bond component performed very well and outpriced many recent similarly rated and structured transactions. The capital appreciation bonds struggled in certain areas which led to an increase in the proposed and ultimate final pricing for those bonds. It should be noted that the investors that participated in the capital appreciation bonds mostly participated in the current interest bond portion. Baird committed to underwrite the unsold capital appreciation bonds with a final maturity value of $7 million in years 2044 through and including 2047 with a price adjustment to reflect changing market conditions. There had not been recent comparable transactions for the capital appreciation bonds in 7-8 weeks with a similar rating and call provision. There were factors that came into play during the sale regarding the rising interest rate environment the market had been experiencing over the past several weeks: 1) continued market volatility due to the Iran War; 2) continued inflationary concerns due to the Iran War continuing and 3) Fed meeting on 7/29/26 insinuating higher rates for a longer period of time.

Results & Impact

The financing provided funding to continue the District's voter-approved school facility improvement program while preserving $92.5 million of authorization under the 2022 measure for future capital needs. Below is the final comparison of the actual results compared to the estimated results presented to the District at the board meeting approving the financing which ultimately delivered a significantly lower cost to taxpayers than originally planned*:

* final pricing results of July 30, 2026 compared to good faith estimates presented to the board of education on May 11, 2026.