CHICAGO -- The Illinois Development Finance Authority plans to issue $12 million to $16 million of tax-exempt bonds to help build 10 child-care centers in low-income areas as part of an innovative public-private partnership.
Bob Star, a partner and head of public finance at Katten Muchin & Zavis, the bond counsel for the deal, said he was not aware of any other public-private partnerships in the nation that have financed the construction of child-care centers.
Carol Rubin, director of child-care facilities for the Illinois Facilities Fund, said the financing will serve as a national model for child-care funding.
The deal is the work of "a critical precedent-setting private-public partnership to help low-income families and their children," Ms. Rubin said. "It solves problems that exist throughout the state and country for nonprofits who don't have access to capital markets."
The partnership comprises the state Department of Children and Family Services, the Chicago Community Trust, the finance authority, and the Illinois Facilities Fund, a private not-for-profit 501(c)3 corporation that will own the centers.
The fixed-rate bonds with a 12-year maturity are expected to be priced within the next two weeks, according to Christine Kelly, a partner at William Blair & Co., the sole underwriter for the deal. She said the issue is expected to close in late October or early November.
Ronald Bean, director of the finance authority, said the exact amount of bonds to be sold will be determined after construction costs for the centers are tabulated.
Debt service payments on the bonds will come from Department of Children and Family Services grant money subject to the annual appropriation by the Illinois legislature. The payments are expected to total between $1 million and $2 million a year, Mr. Bean said.
As additional security, the finance authority will pledge $1 million to $2 million of its credit enhancement funds to a debt service reserve fund that will equal 10% of the par amount of bonds sold, Mr. Bean said. The authority has between $10 million and $12 million in its credit enhancement fund, he added.
The Chicago Community Trust, a charitable organization, also will contribute funds as security. Ms. Kelly said that a portion of the "several million dollars" the trust expects to contribute to the program will be pledged as security.
Ms. Rubin said the child-care centers, which will provide space for up to 2,000 children in the state's poorest neighborhoods, are expected to be completed next year. She added that six or seven of the centers probably would be located in Chicago.
Gov. Jim Edgar praised the program.
"This innovative program will help meet the state's pressing child-care needs, especially where the working poor are struggling to make ends meet," he said in a press release announcing the program.
The centers will be operated by nonprofit groups subsidized with federal Child Care Block Grant funds, Mr. Rubin explained.
The Illinois Facilities Fund, which typically arranges financing for construction projects by other not-for-profit organizations, and the state Department of Children and Family Services have issued a statewide request for proposals from child-care agencies that will be selected for the program.