Transaction Details

Santa Monica-Malibu Unified School District

Municipal

Lead Bookrunner

Baird’s California K-12 Public Finance group served as senior managing underwriter on the $200,000,000 General Obligation Bonds of School Facilities Improvement District No. 1 of Santa Monica-Malibu Unified School District (Santa Monica Schools), Election of 2024, Series A (the “Bonds”) on June 10, 2025. The Santa Monica-Malibu Unified School District (the “District”) was established in 1875 and includes, within its boundaries, the City of Santa Monica, the City of Malibu, as well as an unincorporated portion of Los Angeles County in the Malibu region. The District is composed of two distinct, non-contiguous geographical areas, the Malibu schools area to the north and the Santa Monica schools area to the south, which are divided by a portion of territory which is part of Los Angeles Unified School District. The District currently operates nine elementary schools, three middle schools, two comprehensive high schools, one continuation high school, one K-8 grade alternative school, and one project-based learning high school pathway, in addition to child development and adult education programs.  For fiscal year 2024-25, the District’s enrollment is approximately 8,555 students. With respect to District finances, in addition to benefitting from status as a Basic Aid district, the District’s revenue sources include a number of significant local sources, including a voter-approved parcel tax, a share of the City of Santa Monica’s voter-approved transaction use taxes to be used for educational purposes, revenues produced by facilities use agreements with the City of Malibu and the City of Santa Monica, foundation revenues, and redevelopment pass-through revenues derived from two redevelopment project areas located within District boundaries.

The District’s School Facilities Improvement District No. 1 (“SFID No. 1”) was formed on June 14, 2018, by the Board of Education of the District and consists of the geographical portion of the District which is its southern territory, which is coterminous with the City of Santa Monica.

SFID No. 1’s total assessed value in fiscal year 2024-25 is $50,904,714,966.  District-wide total taxable property assessed value in fiscal year 2024-25 is $78,116,544,293. As such, the total assessed value of SFID No. 1 is 65.1% of District-wide total assessed valuation in fiscal year 2024-25. The Bonds are the first series of bonds issued by the District pursuant to an election held by the District within SFID No. 1 on November 5, 2024, at which more than 55% of the qualified electors of SFID No. 1 authorized the District to issue general obligation bonds in a principal amount of $495,000,000.

During the week of pricing (June 9^th), the week’s $14 billion calendar moved to center stage and demand proved sturdy. Both negotiated and competitive volume was heavy, especially in California. Secondary flows stayed light; buyers focused on syndicate balances. On the day of pricing, the AAA municipal market data (“MMD”) curve closed unchanged from 2026 through 2055. Ratio levels held in their recent ranges—≈ 68 % inside five years, 75 % at ten years, 92 % on the long bond—leaving relative value stable and supportive. Overnight strength in global sovereigns pulled U.S. rates 2 – 4 basis points (“bps”) lower before New York opened; gains faded as desks looked ahead to the week’s $119 billion 3-, 10-, and 30-year supply plus key CPI/PPI prints. At the MMD setting (3 p.m. ET) the 2-year stood at 4.01 % (+1 bp day-over-day), the 10-year at 4.47 % (unch), and the 30-year at 4.94 % (-1 bp). The market tone was neutral, and buyers were selective but responsive to concession. High-grade refundings and maximum-yield discount bonds continued to attract oversubscription, while par structures longer than 15 years required price discovery. With inflation data pending, most accounts maintained tight risk budgets and favored liquid points on the interest rate curve.

The District was able to capitalize by entering the market on Tuesday, June 10^th heading into a good/stable market tone. The District recently had both, the Moody’s Investors Service (“Moody’s”) and S&P Global Ratings (“S&P”) ratings affirmed to Aa1 and AA+, respectively, on existing general obligation bonds. It is important to note that many districts are facing negative watch status or have been downgraded in California due to state revenue losses and an atmosphere of declining enrollment. Basic aid or community funded school district finances, such as the District are generally less impacted from these downturns.

Scale adjustments made on the day of pricing, despite the presence of national and global uncertainty as well as tariff implementation, benefited taxpayers by nearly $500,000 in interest cost savings. Baird was able to successfully pre-market this transaction and garner more than $350 million in orders from 37 separate investors for the $200 million of general obligation bonds offered. The District ultimately experienced a five (5) basis point (0.05%) improvement (reduction) in true interest cost over the pricing process (from the pre-pricing discussion to the final sale). This was $23 million less in borrowing costs from February estimates. The Bonds secured lower interest rates and pricing spreads to the MMD index (and lower upfront underwriting fees which means more dollars for projects) than other similarly rated transaction that priced the same day and weeks prior to the sale.