Since 2023, one of the most notable developments with LAUSD’s bond program has been the role played by the Royal Bank of Canada. While RBC is the largest bank in Canada, the multi-national bank subsidiary RBC Capital Markets operates out of downtown Los Angeles. RBC also owns City National bank which has a large footprint in the city. RBC Capital Markets, the division of the bank that handles public sector finance, has been the lead or co-lead underwriter on six out of the last seven LAUSD bond issuances since 2023.  

RBC returned to business with LAUSD after an over 10-year hiatus to underwrite nearly $400 million in Certificates of Participation (COPs) in 2023.1 This was the second bond issuance following the arrival of Superintendent Alberto Carvalho in February 2022. As one of LAUSD’s lead underwriters, RBC has encouraged and aided Carvalho’s leadership on finance.  

In public finance, an underwriter is a bank who agrees to buy the entirety of a bond issue from the borrower (LAUSD) at a discount (plus fees) and then line up buyers for a resale. The 2023 COPs deal, for example, was underwritten by a syndicate of banks co-lead by Bank of America and RBC. Because LAUSD’s bonds are such a safe bet, investors are willing to pay over face value for them (a premium). With the premium on the COPs, the entire issue sold for $425 million compared to the $384 sticker price. The bank syndicate, however, only gave LAUSD $422 million upfront—the $3million difference is the money the banks made off the deal which is called the “underwriters’ discount.” 

In practice, the underwriter is involved in far more than just the sale of the bonds. Underwriters help borrowers like LAUSD structure deals, advise them on when to go to the credit markets and for how much, and help them market the bonds for maximum investor appeal. For example, it is likely the underwriter approaches an issuer with pitch of a certain type of issuance—GO bond, COP, Refunding, etc. Each type of debt security has important differences. COPs, for example, are paid back out of the LAUSD general fund (and therefore compete with funding for classrooms) while GO bonds are paid via special voter-approved property tax levies.  

Since returning to business with the district in 2023, RBC has underwritten $5.7 billion in bond issues for LAUSD. Put another way, just six issuances with LAUSD represent over 26% of all the public-sector bond issues RBC has done in California since 2005.2 For their services, LAUSD has paid RBC and RBC-led bank syndicates about $12.6 m in underwriter fees and discounts. The same year that RBC and Carvalho joined forces for the COPs, RBC skyrocketed to second place from fifth in terms of municipal bond market share. 

Steak Dinners  

Helping Carvalho get meetings on Wall Street is big business for RBC. In August 2023, for example, weeks before the 2023 COPs were offered to investors, RBC took Carvalho on a field trip to give roadshow presentations to the major credit rating agencies and potential investors. E-mails obtained by UTLA reveal weeks of preparation between the district, RBC Capital Markets, other banks RBC brought into the underwriting syndicate, and bond counsel putting together the pitch deck. This is when the district listens to outside firms about how to best portray its financial position. 

According to the trip itinerary (printed on RBC letterhead), a group including Carvalho, two other LAUSD officials, and reps from Bank of America and the Public Resources Advisory Group all rehearsed a presentation to be given to the rating agencies at the RBC offices in New York City’s financial district. On August 2nd, Carvalho and the team had dinner at Del Frisco’s Grille—a restaurant with a dress code and $89 steaks. On August 3rd Carvalho, RBC, and the team made presentations to both Moody’s and Fitch with a lunch break at the RBC offices in between. 

RBC’s Contribution to Declining Enrollment 

In an April 4, 2025, Moody’s credit opinion regarding LAUSD, the agency remarked that one of LAUSD’s main credit risks was “ongoing enrollment declines and competition from independent charter schools.” Later in the same report, Moody’s elaborates that enrollment decline “accelerated to over 4% during the pandemic…driven by lower birthrates, charter school competition, and high area housing costs.”3 

Much of that competition from charters was enabled by financing from RBC. In addition to profiting from LAUSD’s austerity in more recent years, RBC Capital Markets has also been one of the key backers of charter school expansion in Los Angeles and California. Prior to taking on LAUSD as a client, RBC underwrote at least 50 conduit bonds for southern California charter schools since 2007. As of 2023, when RBC did their last major charter issue, RBC had underwritten about $822 million of charter school bonds and had pulled down about $8.7 million in underwriter fees. Charter bonds were particularly lucrative for RBC: whereas RBC’s fees for LAUSD are about .22% of the total principal issued, for charter bonds it was 1.06%.  

Based on our analysis, at least 13 of the 50 issues were for charter schools within LAUSD boundaries and at least 39 were for schools in southern California. One of the largest LAUSD area charters that RBC helped finance is Alliance College-Ready Public Charter Schools, an employer that has been found to have committed a multitude of violations of educator’s rights under California labor law over the past decade. 

RBC Fined by SEC and FINRA 

The growth of RBC Capital Markets’ municipal bond operation has not come without trouble for bond buyers. In 2021 RBC Capital Markets was fined $863,326 by the SEC for willfully violating multiple municipal securities rules and SEC rules related to how they allowed certain bond investors known as “flippers” to skip the line in purchasing new bonds. Between January 2014 and December 2017 in forty-one instances when orders exceeded the bonds available, RBC failed to prioritize institutional customer and/or dealer orders ahead of flipper orders. Because these flippers were able to get their hands on the bonds before institutional and retail investors, they were able to sell the bonds to other dealers at a profit. 

RBC was also fined a combined total of $1,096,956 by FINRA (the financial industry’s self-regulatory body) in 2021 and 2024 for failing to institute properly supervisory systems over its high-yield municipal bonds and sending the wrong transaction confirmations to customers, respectively. In the 2024 case, RBC was sending confirmations to customers implying RBC was just a broker of securities when they were selling securities from their own inventory. The biggest customers of “muni” bonds are individual investors who hold about 70% of outstanding municipal securities, both through individual purchases and through mutual funds. 

Stay tuned for part two to better understand the influence of RBC on LAUSD finances. 

  1. Bond official statement   ↩︎
  2. Calculated based on public data made available by the California Debt and Investment Advisory Commission: https://debtwatch.treasurer.ca.gov/issue-level-detail  ↩︎
  3. “Los Angeles Unified School District: Update to Credit Analysis”, Moody’s Ratings. April 4, 2025.  ↩︎