California School Finance Authority — Moody’s affirms Baa3 on Summit Public Schools Obligated Group, CA’s revenue bonds; outlook revised to stable

Rating Action: Moody’s affirms Baa3 on Summit Public Schools Obligated Group, CA’s revenue bonds; outlook revised to stableGlobal Credit Research – 14 Feb 2022New York, February 14, 2022 — Moody’s Investors Service has affirmed the Baa3 rating on Summit Public Schools Obligated Group, CA’s Charter School Revenue Bonds (Summit Public Schools – Obligated Group) Series 2017. Concurrently, Moody’s has revised the outlook to stable from negative. The rating and revised outlook affect approximately $23.8 million in outstanding revenue bonds.RATINGS RATIONALEThe Baa3 rating reflects student enrollment approaching full enrollment at the two obligated group schools supported by the opening of Denali’s new high school in the fall of 2020, the narrow finances of the obligated schools with debt service coverage bolstered by pledged management fees of the home office, and reduced leverage following a $5 million early defeasance of debt in fiscal 2021. The rating also incorporates the receipt of substantial federal one-time grants approaching $15 million for the organization, which has served to stabilize financial performance of the obligated group given revenue and enrollment declines in fiscal 2021 stemming from a reduction in contributions and the coronavirus pandemic.RATING OUTLOOKThe stable outlook reflects the likelihood that enrollment at the two obligated schools will grow toward full enrollment supported by graduation rates and academic performance that exceed state averages. The outlook also incorporates the expectation that financial operations at both of the obligated group schools will become self-supporting.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- Attainment and maintenance of self-supporting operations at both of the obligated group schools- Recurring full enrollment at both schools with favorable waitlist- Debt service coverage and liquidity that strongly exceeds historical figuresFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Continued enrollment and revenue declines outside of one-time grants- Weakened debt service coverage or liquidity- Rising support of network school operations by Summit’s home officeLEGAL SECURITYLease payments from Obligated Group members to the Community High School Foundation, a California nonprofit corporation, represent the source of repayment under the Loan Agreement. Two schools along with Summit’s home office represent members of the Obligated Group for the Series 2017 bonds: Summit Shasta and Summit Denali high school. The Home Office revenues are derived from the management fee SPS charges its member schools, which equals 14.5% of state apportionment revenues of ten network schools located in California and Washington, as well as philanthropic contributions. Serving as a credit strength, payment obligations under separate leases with each member of the Obligated Group are cross-collateralized, and the Trustee is authorized to charge additional rents to either Obligated Group member if required.PROFILESummit Public Schools Obligated Group is a charter management organization started in 2003 with one school, which has since expanded to ten schools throughout the California Bay Area and Washington State serving grades 6-12. Total system enrollment for academic year 2021 – 2022 equals 4,340. Prior to the pandemic in fiscal 2019, Summit Public Schools reported an enrollment of 4,453. Shasta high school serves 458 students in Daly City, and Denali high school serves 377 students in grades 9-12 in the City of Sunnyvale.METHODOLOGYThe principal methodology used in this rating was US Charter Schools published in September 2016 and available at https://www.moodys.com/research/US-Charter-Schools–PBM_1039451. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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