$450,005,000* The School District of Philadelphia General - - PowerPoint PPT Presentation

____________________ * Preliminary, Subject to Change

$450,005,000* The School District of Philadelphia

General Obligation & General Obligation Refunding Bonds, Series A, B & C of 2019, Series of 2020 (Forward Delivery)

$187,730,000* State Public School Building Authority

School Lease Revenue Refunding Bonds, Series 2019 (Federally Taxable)

This investor presentation that you are about to view is provided as of October 8, 2019 for a proposed offering of The School District of Philadelphia General Obligation Bonds (the “2019/2020 GO Bonds”) and State Public School Building Authority School Lease Revenue Refunding Bonds (the “2019 Lease Revenue Refunding Bonds” and collectively with the 2019/2020 GO Bonds, the “Bonds”). This presentation has been prepared for information purposes only and solely for use in connection with the proposed transactions. This document does not purport to be complete and investors must read the related preliminary official statement for the Bonds (collectively, the “Preliminary Official Statement”) in its entirety before making an investment decision. The information contained herein and in the Preliminary Official Statement is subject to completion and amendment. Any offer or solicitation with respect to the Bonds will be made only by means of a final official statement relating to the applicable Series of Bonds. If you are viewing this investor presentation after the date stated above, events may have occurred that may have and/or could have a material adverse effect on information presented. This presentation does not constitute nor does it form part of an offer to sell or purchase, or the solicitation of an offer to sell or purchase, any securities or an offer

• r recommendation to enter into any transaction described herein nor does this presentation constitute an offer, commitment or obligation on the part of the

issuers, underwriters or any of their affiliates to provide, issue, arrange or underwrite any financing or enter into any transaction. You will be responsible for making your own independent investigation and appraisal of the risks, benefits, appropriateness and suitability of the proposed transactions described in this presentation and none of The School District of Philadelphia (the “District”), the State Public School Building Authority (“SPSBA” or the “Authority”), or the Underwriters are making any recommendation (personal or otherwise) or giving any investment advice and will have no liability with respect thereto. Neither the District nor the Underwriters make any representation or warranty as to the (i) accuracy, adequacy or completeness of any information in this investor presentation, or (ii) legal, tax or accounting treatment of any purchase of Bonds by you or any other effects such purchase may have on you and your affiliates. This investor presentation contains “forward-looking” statements that involve risks, uncertainties and assumptions. If the risks or uncertainties materialize or the assumptions prove incorrect, the results may differ materially from those expressed or implied by such forward-looking statements. Accordingly, we caution you not to place undue reliance on these statements. All statements other than the statements of historical fact could be deemed forward-looking. All opinions, estimates, projections, forecasts and valuations are preliminary, indicative and are subject to change without notice and none of the District, the Authority, or the Underwriters have any obligation to update their investor presentation. The projections, if any, as indicated herein, are forward-looking statements and any such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected and such differences could be material. Such risks and uncertainties which could affect the revenues and obligations set forth in these projections include, among others, changes in economic conditions, mandates from other governments, competition, limits on the amounts of and increases to third party payments and reimbursement for services and various other events, conditions and circumstances, many of which are beyond the control of the District. Such forward-looking statements speak only as of the date indicated on the projections. The District disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement contained herein to reflect any changes in the District’s expectations with respect thereto or any change in events, conditions or circumstances on which any such statement is based. THE PRINTING, DUPLICATING, DOWNLOADING, SCREEN CAPTURING, ELECTRONIC STORING, RECORDING, PUBLISHING OR DISTRIBUTING OF THIS INVESTOR PRESENTATION IN ANY MANNER IS STRICTLY PROHIBITED. By viewing this investor presentation you acknowledge that you understand and agree to the foregoing provisions. The State Public School Building Authority has not participated in the preparation of, and has no responsibility or obligation with respect to, this presentation.

Disclaimer

Notice to Recipient

Transaction Overview

The School District of Philadelphia

1

Transaction Overview - GO

General Obligation Bonds, Series A of 2019 General Obligation Bonds, Series B of 2019 (Green Bonds) General Obligation Refunding Bonds, Series C of 2019 General Obligation Refunding Bonds, Series of 2020 (Forward Delivery) Delivery Date(1) November 13, 2019 November 13, 2019 November 13, 2019 June 5, 2020 Par Amount(1) $274,920,000 $24,895,000 $24,360,000 $125,830,000 Purpose New Money New Money Refunding Refunding Tax Status Tax-Exempt Tax-Exempt Tax-Exempt Tax-Exempt Maturities(1)

• Sept. 1, 2020-2044
• Sept. 1, 2020-2029
• Sept. 1, 2033
• Sept. 1, 2021-2024

Optional Redemption @ Par(1) September 1, 2029 n/a September 1, 2029 n/a Ratings (M/F) A2/A+ (PA Intercept) Baa3/BB+ (Underlying) A2/A+ (PA Intercept) Baa3/BB+ (Underlying) A2/A+ (PA Intercept) Baa3/BB+ (Underlying) A2/A+ (PA Intercept) Baa3/BB+ (Underlying) Primary Source of Payment

• Daily Deposit of Locally

Collected School Tax Revenues collected by School Tax Collector

• State-Aid Intercept backstop

(Pre-Default)

• Daily Deposit of Locally

Collected School Tax Revenues collected by School Tax Collector

• State-Aid Intercept backstop

(Pre-Default)

• Daily Deposit of Locally

Collected School Tax Revenues collected by School Tax Collector

• State-Aid Intercept backstop

(Pre-Default)

• Daily Deposit of Locally

Collected School Tax Revenues collected by School Tax Collector

• State-Aid Intercept backstop

(Pre-Default) Issuer The School District of Philadelphia The School District of Philadelphia The School District of Philadelphia The School District of Philadelphia Fiscal Agent The Bank of New York Mellon Trust Company, N.A. The Bank of New York Mellon Trust Company, N.A. The Bank of New York Mellon Trust Company, N.A. The Bank of New York Mellon Trust Company, N.A. Syndicate BofA Merrill Lynch, PNC Capital Markets LLC, Citigroup, Barclays, Morgan Stanley, Loop Capital Markets, Siebert Cisneros Shank & Co. L.L.C. BofA Merrill Lynch, PNC Capital Markets LLC, Citigroup, Barclays, Morgan Stanley, Loop Capital Markets, Siebert Cisneros Shank & Co. L.L.C. BofA Merrill Lynch, PNC Capital Markets LLC, Citigroup, Barclays, Morgan Stanley, Loop Capital Markets, Siebert Cisneros Shank & Co. L.L.C. BofA Merrill Lynch, PNC Capital Markets LLC, Citigroup, Barclays, Morgan Stanley, Loop Capital Markets, Siebert Cisneros Shank & Co. L.L.C.

____________________

(1) Preliminary – Subject to Change

The School District of Philadelphia

2

Transaction Overview - SPSBA

School Lease Revenue Refunding Bonds, Series 2019 (Federally Taxable) Delivery Date(1) November 13, 2019 Par Amount(1) $187,730,000 Purpose Refunding Tax Status Federally Taxable Maturities(1) April 1, 2020-2032 Optional Redemption (1) Make Whole Ratings (M/F) A2/A+ (PA Intercept) Baa3/BB+ (Underlying) Primary Source of Payment Payment by Pennsylvania State Treasurer to Trustee of State Appropriation on specified dates in advance of Debt Service Payment Dates Issuer The State Public Building Authority Trustee The Bank of New York Mellon Trust Company, N.A. Syndicate BofA Merrill Lynch, Morgan Stanley & Co., LLC, Siebert Cisneros Shank & Co., L.L.C., Citigroup, Janney, PNC, Ramirez

____________________

(1) Preliminary – Subject to Change

The School District of Philadelphia

■ In connection with the District’s GESA-1 projects, proceeds of the Green Bonds are expected to be used to fund energy efficiency and conservation projects in the District’s buildings ■ The proceeds of the Green Bonds will be deposited in a segregated account and expenditures of such proceeds will be tracked by the District ■ In connection with the issuance of the Green Bonds, the District will require the energy services company or other vendors to provide industry standard annual reports on the performance of the projects, which the District will post on its website ■ The initial term of the contract with the energy services company is expected to be ten years

Transaction Overview – Green Bonds & Forward Delivery Bonds

3

General Obligation Series B of 2019 Green Bonds (“Green Bonds”)

■ The Forward Delivery Bonds are being sold pursuant to a Forward Delivery Bond Purchase Contract between the District and BofA Securities, Inc., as representative of the Underwriters ■ An investment in the Forward Delivery Bonds involves certain additional risks due to the forward delivery ■ Each prospective purchaser of the Forward Delivery Bonds should make an independent evaluation of all of the information presented in the Preliminary Official Statement, including the information under the caption “CERTAIN FORWARD DELIVERY CONSIDERATIONS FOR THE SERIES 2020 BONDS”

General Obligation Series of 2020 (“Forward Delivery Bonds”)

Overview of the District & Recent Credit Developments

The School District of Philadelphia

■ As of September 2019, comprised of 215 public schools, 86 charter schools and 29 alternative educational schools and programs ■ The largest school district in Pennsylvania ■ The thirteenth largest enrollment in the nation ■ Approximately 204,514 students (including 73,670 charter school students and 3,850 students attending alternative education) enrolled in Fiscal Year 2019 ■ The boundaries of the District are coterminous with the boundaries of The City of Philadelphia ■ The District is a separate and independent home rule district of the first class established by the Philadelphia Home Rule Charter ■ Effective July 1, 2018, the Board of Education succeeded the School Reform Commission (“SRC”) which had been the governing body of the District since 2001 ■ In November 2017, the SRC adopted a resolution recommending its dissolution ■ In December 2017, the Commonwealth of Pennsylvania’s Secretary of Education accepted the recommendation and issued a declaration to dissolve the SRC effective June 30, 2018 ■ On July 1, 2018, a nine member Board of Education appointed by the Mayor became the governing body

Overview of the District & Recent Credit Developments

4

Overview of The School District of Philadelphia (“District”) Return to governance by The Board of Education

The School District of Philadelphia

■ The current Board of Education is made up of the following members appointed by the Mayor of The City of Philadelphia: ■ District management: ■ Dr. William R. Hite, Jr., Superintendent of Schools ■ Dr. Malika Savoy-Brooks, Chief Academic Support Officer ■ Uri Monson, Chief Financial Officer ■ Danielle J. Floyd, Chief Operating Officer ■ Lynn Rosner Rauch, General Counsel

Overview of the District & Recent Developments

5

Name Title Date of Appointment(1)

Joyce Wilkerson President July 1, 2018 Wayne Walker Vice President July 1, 2018 Julia Danzy Member July 1, 2018 Leticia Egea-Hinton Member July 1, 2018 Mallory Fix Lopez Member July 1, 2018 Lee Huang Member July 1, 2018 Maria McColgan Member July 1, 2018 Christopher McGinley Member July 1, 2018 Angela McIver Member July 1, 2018

Governance of the District

____________________ (1) Effective date of assumptions of power and duties of the Board

The School District of Philadelphia

■ Clearly defined long-term aspirational goals, and five-year goals tied to the District’s spending plan ■ Anchor Goal 1: 100% of students will graduate ready for college and career ■ Current: 67% graduation rate ■ 31 High Schools improved their graduation rates – some by double-digits ■ 5-year milestone(1): 80% graduation rate ■ Anchor Goal 2: 100% of eight-year olds will read on grade level ■ Current: 36% on grade level at age 8 ■ 5-year milestone(1): 66% on grade level at age 8 ■ Anchor Goal 3: 100% of schools will have great principals and teachers ■ 5-year milestone(1): Engaged and supported teachers and principals with strong instructional skills ■ Anchor Goal 4: The District will have 100% of the funding needed for great schools, and not operate at a deficit ■ Four consecutive years of balanced budgets and growing fiscal year end fund balances ■ 5-year milestone(1): To project five-year balanced budgets

Overview of the District & Recent Credit Developments

6

District’s Strategic Plan Continues to Focus on Four Anchor Goals

____________________ (1) 5-year milestones are renewed with the adoption of each five year plan

The School District of Philadelphia

■ Over the past few years, initiatives have been undertaken to increase recurring revenue, improve the efficient and effective use of public dollars, and plan for sustainable investments ■ The return of the District to governance by the Board of Education has had a positive impact on the current financial

• utlook of the District

■ Revenues continue to grow ■ Total revenues increased by over $182.1 million from FY17 to FY18 ■ Revenues are estimated to have increased again in FY19 and are budgeted to increase in FY20 ■ FY19 marks the fourth consecutive year where revenues have exceeded expenditures based on estimates ■ From FY16 to FY19(1), year end fund balances have increased 58% ■ District’s most recent five-year plan (for FY20 through FY24) reflects positive fund balances through FY21

Overview of the District & Recent Credit Developments

7

Recent Achievements - Financial

____________________

(1) Based on Amended FY19 Budget adopted on May 30, 2019

General Obligation Credit

The School District of Philadelphia

General Obligation Credit

8

■ The District’s General Obligation (“GO”) debt’s primary source of repayment is certain local tax revenues ■ The District’s Daily Sinking Fund Covenant creates a priority of payment of these revenues to the GO Bond sinking funds ■ In FY19, these revenues were 3.71x FY19 GO debt service ■ The obligation of the Department of Revenue of The City of Philadelphia (the “City”) to collect the school taxes in its capacity as school tax collector and remit the school taxes to the Fiscal Agent

• ccurs daily prior to any payment to the School District

■ As a backstop, State aid intercept provisions would cover any deficiencies ■ In FY19, state aid was 5.14x combined GO and Lease Revenue bond debt service ■ Intercept for GO debt has never been triggered

School District of Philadelphia Existing GO Bond Debt Service(1) FY Principal Interest Debt Service 2020 $128,755,667 $99,609,959 $228,365,625 2021 133,920,667 93,838,785 227,759,451 2022 136,030,667 87,776,317 223,806,983 2023 127,570,667 81,732,056 209,302,723 2024 110,125,000 76,376,222 186,501,222 2025 106,275,000 71,392,139 177,667,139 2026 109,275,000 66,464,977 175,739,977 2027 102,300,000 62,008,750 164,308,750 2028 101,670,000 56,488,299 158,158,299 2029 102,044,750 51,842,070 153,886,820 2030 105,021,089 47,301,741 152,322,830 2031 82,946,089 39,143,495 122,089,584 2032 45,236,089 32,193,547 77,429,636 2033 46,956,089 30,238,671 77,194,761 2034 123,211,089 28,188,567 151,399,656 2035 50,626,089 22,503,255 73,129,344 2036 52,601,089 20,249,507 72,850,597 2037 50,896,089 17,980,384 68,876,473 2038 52,876,089 15,695,869 68,571,958 2039 52,331,089 13,366,183 65,697,272 2040 37,586,089 11,420,173 49,006,263 2041 25,296,089 9,909,222 35,205,311 2042 25,961,089 9,243,997 35,205,086 2043 26,656,089 4,823,449 31,479,538 2044 17,020,000 371,425 17,391,425 Total $1,953,187,667 $1,050,159,055 $3,003,346,721

$1.8 billion, or 66%, of the District’s debt is General Obligation debt

____________________ (1) Does not reflect the issuance of the 2019/2020 GO Bonds. Includes debt service on the bonds to be refunded by the 2019/2020 GO Bonds

The School District of Philadelphia

General Obligation Credit

9

Daily Sinking Fund Covenant – Obligation and Mechanism

■ In 1982, the District covenanted to irrevocably direct the Revenue Commissioner of the City to pay all school taxes collected by the Revenue Commissioner on behalf of the District (the “School Tax Collector”) directly to the GO Bonds’ Fiscal Agent for deposit in the School District’s fixed rate GO Bonds’ sinking funds ■ The revenues subject to the Daily Sinking Fund Covenant include the School Real Estate Tax, Business Use & Occupancy Tax, Liquor Tax, and Non-Business Income Tax (together the “Locally Collected School Tax Revenues”) ■ The sinking funds’ daily deposit requirement is equal to the pro-rata amount required to be deposited on each City business day such that amounts will accumulate by 15 days before each interest and principal payment date (“Accumulation Date” or “Sinking Fund Deposit Date”) the interest and principal due on that date ■ For each fiscal year, the daily deposit amounts are set forth on a schedule delivered to the Revenue Department by the District ■ In order to ensure sufficient funds on each Accumulation Date, collections start six months prior to each Sinking Fund Deposit Date for interest and one year prior to each Sinking Fund Deposit Date for principal

■ For example, collections for the $103.6 million principal payment due on September 1, 2019 started on August 17, 2018 ■ With 261 business days between August 17, 2017 and August 17, 2018 the daily deposit requirement for this principal payment is $396,935

■ If a given day’s Locally Collected School Tax Revenues are insufficient to cover the daily deposit requirement, the covenant is not breached; the shortfall is added to the subsequent day’s requirement until the sinking funds are current ■ As a result, the sinking funds are brought current as Locally Collected School Tax Revenues are collected ■ The City Revenue Department transfers Locally Collected School Tax Revenues to the District’s Operating Account only when all required payments have been made to the sinking funds.

The School District of Philadelphia

General Obligation Credit

10

Locally Collected School Tax Revenues constitute 85% of the District’s local revenues

■ Only the school taxes collected by the City’s Revenue Commissioner, as tax collector for the District, are subject to the Daily Sinking Fund Covenant

Summary of Locally Collected School Tax Revenues Subject to Daily Sinking Fund Covenant ($000’s)(1) School Tax Revenue Source FY18 (Actual)(1) FY19 (Amended) Budget)(2) FY20 (Adopted Budget) (2) Collector Description School Real Estate Tax $791,806 $848,710 $840,666 City Tax on real estate in Philadelphia Business Use & Occupancy Tax $81,162 $186,537 $186,572 City Tax on the use of real estate within the School District for commercial or industrial activity Liquor Tax $76,650 $78,815 $79,040 City Tax on the sale of liquor by the drink Non-Business Income Tax $48,048 $49,374 $49,650 City Tax on the non‐business income

• f Philadelphia residents

Total School Tax Revenues $997,666 $1,163,436 $1,155,928

■ In addition to the local taxes collected by the City as School Tax Collector for the District, the District also receives local revenues that are collected by the Commonwealth (School Cigarette Tax, the first $120mm of proceeds of 1% City Sales Tax, Ridesharing Revenue and Public Utility Realty Tax). These revenue sources are not subject to the Daily Sinking Fund Covenant.

____________________ (1) Derived from the School District’s Comprehensive Annual Financial Reports (2) The FY2019 and FY2020 figures reflect the School District’s Amended and Adopted Budgets, respectively, as approved by the Board of Education on May 30, 2019

The School District of Philadelphia

General Obligation Credit

11

School Tax Revenues are received throughout the fiscal year

■ School Real Estate Tax – annually assessed on all real estate located within City boundaries ■ Rate is authorized by the City and levy is imposed by the governing body of the School District by June 30th of each year ■ Assessments are certified on the first Monday of each October and taxes are levied for the calendar year commencing January 1 following the adoption of the June levy resolution ■ Taxes are due by March 31st; however, if paid by the end of February, taxpayers are given a discount of 1%; if paid after the end of March, the amount due is subject to additional interest and unpaid tax can lead to a tax lien on the property ■ Business Use & Occupancy Tax – imposed on the use or occupancy of real estate within the City for the purpose of conducting any business, trade, occupation, profession, vocation, or any other commercial or industrial activity ■ Tax is due monthly ■ Liquor Tax – imposed on the retail sale of liquor by the drink (rate is 10%) ■ Tax is due monthly from the retailer on the 25th of the month ■ Non-Business Income Tax – applied to the non-business income of residents from the ownership, lease, sale or disposition of certain real or personal property, including net income for dividends and interest on securities ■ Tax is due April 15th

School Tax Revenues by Month

■ School Tax Revenues subject to Daily Deposit Covenant by month for FY19 (unaudited) are as follows:

School District of Philadelphia - Fiscal 2019 School Tax Revenues by Month ($000s)(1)

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total School Tax Revenues

39,166 29,217 29,197 32,478 30,918 41,984 80,302 451,157 252,647 93,635 50,433 35,680 1,166,814

____________________ (1) The School District’s actual monthly cash receipts

School District School District Taxpayers Fiscal Agent City Department of Revenue (School Tax Collector) All Bondholders

Collections of Locally Collected School Tax Revenues FIRST, Locally Collected School Tax Revenues (Amounts of Required Daily Deposits and Any Prior Shortfalls in

• rder to accumulate funds sufficient to

pay debt service on the Sinking Fund Deposit Date, which is 15 days before the payment date) SECOND, Locally Collected School Tax Revenues (Amounts not Required to make Daily Deposits for all Fixed Rate GO Bonds and Any Prior Shortfalls) School District pays to Fiscal Agent not less than 15 days prior to debt service payment date, if Fiscal Agent not in receipt of required moneys from the daily deposits GO Debt Service

The School District of Philadelphia

General Obligation Credit

12

Note: the Fiscal Agent is required to trigger the State intercept if Fiscal Agent does not have full amount due on the upcoming payment date 15 days before the payment date

Locally Collected School Tax Revenue Daily Sinking Fund Deposits for GO Debt

The School District of Philadelphia

General Obligation Credit

13

GO Debt has the State Aid Intercept backstop

■ In the event that insufficient moneys are on deposit in the Daily Sinking Funds 15 days prior to a debt service payment date, the Fiscal Agent is required to trigger the State Aid Intercept provisions in Section 633 of the PA School Code ■ In this circumstance, pursuant to the Fiscal Agent Agreement, the Fiscal Agent will make demand of the Secretary of Education (“Secretary”) to cause the implementation of the pre-default intercept provisions in Section 633 in advance of an actual debt service payment date ■ The Secretary will then “withhold out of any State appropriation due such school district” an amount needed to cure the deficiency and pay such amount over to the Fiscal Agent ■ The payment schedule of the District’s State Aid receipts provides coverage throughout the fiscal year from appropriations due to the District over the remainder of the fiscal year

(1)

Actual data is derived from the School District’s Comprehensive Annual Financial Reports. The estimated data is derived from the School District’s Amended Budget, as approved by the Board

• f Education on May 30, 2019

(2)

Net Commonwealth subsidies reflect Gross receipts for General Fund, Area Vocational Technical Fund and Intermediate Unit, less certain cash deductions made by the Commonwealth for payments to other educational entities

(3)

Includes both long-term debt service (both for GO debt service and lease rental debt service for bonds issued by the State Public School Building Authority for the District) and short-term debt service principal and interest

(4)

Short-term debt service represents interest and principal payments on the School District’s borrowings in each fiscal year, in anticipation of the receipt of taxes and other revenues

Coverage Ratios of Net Cash Received from Commonwealth Subsidies to Debt Service Payments (1) ($000s) ACTUAL AMENDED BUDGET FY2015 FY2016 FY2017 FY2018 FY2019

Net Commonwealth Subsidies (2) $1,337,985 $1,382,298 $1,464,185 $1,533,279 $1,598,151 Long Term Debt Service (including State Public School Building Authority) 264,516 259,203 267,859 272,292 300,349 Ratios 5.06 5.33 5.47 5.63 5.32 Long Term and Short Term Debt Service (3) 566,152 1,087,903 646,984 678,732 758,083 Ratios 2.36 1.27 2.26 2.26 2.11 Short Term Note Debt Service (4) 301,666 828,700 379,125 406,440 457,734

The School District of Philadelphia

General Obligation Credit

14

In 2016, PA enacted an additional intercept provision that strengthens the mechanism

■ The Fiscal Code amendment of Act 85 (“Article XVII – E.4”) enacted intercept provisions that appropriate General Fund money to be used for intercept payments even if the “annual appropriations for payment of Commonwealth subsidies to school districts have not been enacted by July 1 and continue to be not enacted when a payment is due” ■ In order to fund the appropriation and make payments under an intercept statute or agreement during a budget impasse, the Department of Education must submit justification to each of the majority and minority chairs of the House and Senate Appropriations Committees ■ In order to be eligible to receive intercept payments, school districts must submit information to the Department of Education summarizing their intercept-eligible debt ■ Interceptable aid when no education appropriations have been enacted is limited to 50% of the prior fiscal year’s state aid appropriation for each school district ■ For the District, such amount would be $799 million based on FY19’s appropriation in the FY19 amended budget ■ The combination of Article XVII-E.4 and the District’s Daily Sinking Fund Covenant means that if a budget impasse had occurred on July 1, 2019, GO bondholders could have been paid from nearly $1.96 billion in revenue without regard to the status of the Commonwealth’s fiscal year appropriations for education or the District’s operations ■ $799mm from State appropriations (1/2 of FY19’s Commonwealth subsidies) ■ $1.16Bn of Locally Collected School Tax Revenues

The School District of Philadelphia

General Obligation Credit

15

Article XVII – E.4 Process and Procedures

■ Before amounts necessary to comply with the intercept statutes are appropriated, in the absence of Commonwealth appropriations for education for the applicable fiscal year, certain conditions must be met, including: 1. The Pennsylvania Department of Education (“PDE”) must submit justification to the majority and minority chairs of the appropriations committees of the Pennsylvania Senate and House of Representatives allowing ten (10) calendar days for their review and comment but have no power to deny or alter the funding of the appropriation 2. Each school district subject to an intercept statute or intercept agreement must deliver to PDE, in such format as PDE may direct, a copy of the final Official Statement for the relevant bonds or notes or the loan documents relating to the obligations, within thirty (30) days of receipt of the proceeds of the obligations ■ To help ensure the required justification is submitted timely, the District will: ■ Include in its (i) fiscal agent agreements for general obligation bonds; (ii) direct pay intercept agreements for Lease Revenue Bonds; and (iii) fiscal agent agreement for TRANs, provisions requiring notice to be given to PDE that the required justification must be submitted to the appropriation committee chairs immediately (if it has not already been submitted) so that the steps necessary for the intercept payment to be made by the applicable debt service payment date can be implemented in sufficient time ■ To comply with the PDE filing requirements, the District will file, in the format requested by PDE, schedules of principal and interest payments and payment dates and sinking fund deposit dates for each series of outstanding obligations eligible for the benefit of the intercept provisions, including the 2019/2020 GO Bonds, together with a hard copy of the Official Statement

Lease Revenue Credit

The School District of Philadelphia

Lease Revenue Bond Credit

16

$948 million, or 34%, of the District’s debt is Lease Revenue Debt

■ In addition to its GO debt, the District also periodically incurs lease rental debt through the State Public School Building Authority (“SPSBA” or “Authority”), which issues Lease Revenue Bonds for the benefit of the School District ■ The primary source of repayment is the direct payment of Commonwealth education subsidies otherwise due to the School District by the State Treasurer (“Treasurer”) to the Bond trustee ■ The vehicle for these payments is a direct-pay intercept agreement among the School District, SPSBA, the Treasurer and the Department of Education ■ The payments occur semi-annually on pre-determined dates that are at least 32 days in advance of debt service payment dates ■ The amount of these periodic payments is sufficient to cover debt service when due ■ SPSBA Lease Revenue Bonds also benefit from the Act 85 intercept provisions that appropriate Commonwealth General Fund money for payments due under an intercept agreement when no education appropriations have been enacted by the Commonwealth by July 1 of a fiscal year

School District of Philadelphia Existing Lease Revenue Bond Debt Service(1) FY Principal Interest Debt Service 2020 $21,520,000 $47,570,025 $69,090,025 2021 22,570,000 46,494,025 69,064,025 2022 23,640,000 45,365,525 69,005,525 2023 24,780,000 44,183,525 68,963,525 2024 47,575,000 42,977,025 90,552,025 2025 50,795,000 40,598,275 91,393,275 2026 52,665,000 38,058,525 90,723,525 2027 64,760,000 35,425,275 100,185,275 2028 72,840,000 32,187,275 105,027,275 2029 77,355,000 28,327,750 105,682,750 2030 73,300,000 24,460,000 97,760,000 2031 102,210,000 20,795,000 123,005,000 2032 141,080,000 15,684,500 156,764,500 2033 125,855,000 8,630,500 134,485,500 2034 15,915,000 2,337,750 18,252,750 2035 16,715,000 1,542,000 18,257,000 2036 14,125,000 706,250 14,831,250 Total $947,700,000 $475,343,225 $1,423,043,225 ____________________ (1) Does not reflect the expected issuance of the 2019 Lease Revenue Refunding Bonds. Includes debt service on the bonds expected to be refunded by the 2019 Lease Revenue Refunding Bonds

The School District of Philadelphia

Lease Revenue Bond Credit

17

The Intercept Agreement creates a direct flow of Commonwealth subsidies to the Trustee

■ The Intercept Agreement entered into by the SPSBA, the District, the Treasurer and the Department of Education provides that education appropriations from the Commonwealth otherwise payable to the School District will be paid by the Treasurer directly to the SPSBA Lease Revenue Bonds’ Trustee ■ The payments will occur on pre-determined payment dates (“Appropriation Payment Dates”), which, for the 2019 Lease Revenue Refunding Bonds, will be the fourth Thursday of each February and August (these dates coincide with currently scheduled payment dates for appropriations allocable to school districts that include Basic Education Subsidy Payments, the largest component of interceptable aid) ■ The payment of withheld appropriation amounts provides the Base Rental Payments due from the District pursuant to Sublease between the District and the SPSBA ■ For the 2019 Lease Revenue Refunding Bonds, Base Rental Payments are due from the District to the Trustee on March 15 and September 15, approximately 15 days prior to the April 1 and October 1 debt service payment dates

2019 Bonds Debt Service Due Apr 1st 2019 Bonds Debt Service Due Oct 1st July 1, 2020 July 1, 2021 Aug 1, 2020 Sep 1, 2020 Oct 1, 2020 Nov 1, 2020 Dec 1, 2020 Jan 1, 2021 Feb 1, 2021 Mar 1, 2021 Apr 1, 2021 May 1, 2021 Jun 1, 2021 Base Rental Payment Due Mar 15th Base Rental Payment Due Sept 15th Appropriation Payment Date Feb 25th Appropriation Payment Date Aug 27th

Timeline of Payment for District’s April and October Lease Revenue Bond Payment Dates (Fiscal Year 2021)

The School District of Philadelphia

Lease Revenue Bond Credit

18

Act 85 Intercept provisions eliminate exposure to Commonwealth budget process

■ Historically, the payment to the Trustee on scheduled Appropriation Payment Dates was dependent on enactment of annual education appropriations ■ As a result, in prior years, if no education appropriations were enacted before the first scheduled payment date, then the District would have to provide such amounts to the Trustee ■ This occurred in FY16 when the District made the Base Rental Payments in September and March (for the 2012 Lease Revenue Bonds) and in November (for the 2003, 2006, 2015, 2016A Lease Revenue Bonds) ■ Act 85 now appropriates money from the Commonwealth’s General Fund to make these payments for the District when no education appropriations have been enacted because of a budget impasse ■ Even if no education appropriations were enacted for the duration of the fiscal year, the ability to access up to 50% of the prior fiscal year’s total Commonwealth education subsidies provides over 11.5x* coverage versus the District’s budgeted FY20 SPSBA Lease Revenue Bond debt service

* Using budgeted education subsidies for Fiscal year 2020 as an example and current debt service on SPSBA Lease Revenue Bonds

Agreement among the Authority, the School District, the State Treasurer, the Pennsylvania Department of Education and Trustee for payment of Base Rental Payments for 2019 Lease Revenue Refunding Bonds(1)

Lease Revenue Bond Credit

School District 2019 Bondholders State Treasurer 2019 Bonds Debt Service

State Appropriations (Net

• f payments under

Intercept Agreement) FIRST, State Appropriations (February/August Appropriation Payment Dates) Pays Base Rental Payments for PA State Public School Building Authority 2019 Bonds from State Appropriations SECOND, if not fully funded by the Intercepted State Appropriations, the District makes Base Rental Payments

• n each March 15 and

September 152 (1) The Intercept Agreement also covers the PA State Public School Building Authority outstanding 2003 Bonds, 2006 Bonds , 2012 Bonds (a portion of which are expected to be refunded by the Series 2019 Bonds), 2015 Bonds, and 2016A Bonds issued for the benefit of the School District. (2) The School District is obligated to pay Base Rental Payments without consideration of the Intercept Agreement.

The School District of Philadelphia

19

Trustee

Transaction Summary & Schedule

20

Indicative Amortization(1)

Transaction Summary & Schedule

The School District of Philadelphia

____________________

(1) Preliminary – Subject to Change School District of Philadelphia State Public School Buidling Authority General Obligation Bonds Lease Revenue Refunding Bonds Maturity Series A of 2019 Series B of 2019 (Green Bonds) Series C of 2019 Series of 2020 (Forward Delivery) Total Maturity Series 2019 (Federally Taxable) 9/1/20 $6,285,000 $5,000 $5,000 $6,290,000 4/1/20 $1,590,000 9/1/21 6,510,000 5,000 5,000 $42,820,000 49,335,000 4/1/21 2,340,000 9/1/22 6,815,000 5,000 5,000 44,785,000 51,605,000 4/1/22 2,390,000 9/1/23 7,160,000 5,000 5,000 37,110,000 44,275,000 4/1/23 16,125,000 9/1/24 3,890,000 3,645,000 5,000 1,115,000 8,650,000 4/1/24 16,510,000 9/1/25 4,090,000 3,830,000 5,000 7,920,000 4/1/25 16,910,000 9/1/26 4,295,000 4,030,000 5,000 8,325,000 4/1/26 17,340,000 9/1/27 4,520,000 4,235,000 5,000 8,755,000 4/1/27 17,805,000 9/1/28 4,750,000 4,455,000 5,000 9,205,000 4/1/28 18,280,000 9/1/29 4,995,000 4,680,000 5,000 9,675,000 4/1/29 18,785,000 9/1/30 10,170,000 5,000 10,170,000 4/1/30 19,320,000 9/1/31 10,695,000 5,000 10,695,000 4/1/31 19,875,000 9/1/32 11,240,000 5,000 11,240,000 4/1/32 20,460,000 9/1/33 11,820,000 24,295,000 36,180,000 9/1/34 12,425,000 12,425,000 9/1/35 13,060,000 13,060,000 9/1/36 13,730,000 13,730,000 9/1/37 14,435,000 14,435,000 9/1/38 15,175,000 15,175,000 9/1/39 15,955,000 15,955,000 9/1/40 16,770,000 16,770,000 9/1/41 17,630,000 17,630,000 9/1/42 18,535,000 18,535,000 9/1/43 19,485,000 19,485,000 9/1/44 20,485,000 20,485,000 $274,920,000 $24,895,000 $24,360,000 $125,830,000 $450,005,000 $187,730,000

21

Transaction Summary & Schedule

The School District of Philadelphia

Event Date Post Preliminary Official Statement October 7 Investor Outreach October 9 – October 15 Pricing October 16 Written Award October 17 Closing(2) November 13 GO Forward Delivery Bonds Settlement June 5, 2020

Prospective Financing Schedule(1)

October November S M T W T F S S M T W T F S 1 2 3 4 5 1 2 6 7 8 9 10 11 12 3 4 5 6 7 8 9 13 14 15 16 17 18 19 10 11 12 13 14 15 16 20 21 22 23 24 25 26 17 18 19 20 21 22 23 27 28 29 30 31 24 25 26 27 28 29 30

____________________ 1) Preliminary, Subject to Change 2) Preliminary Closing for Forward Delivery Bonds

22

Contact information

Contact Information

The School District of Philadelphia

Contact Organization Email

Uri Monson CFO, School District of Philadelphia umonson@philasd.org Tony Griffith Bank of America Merrill Lynch, Senior Manager tony.griffith@bofa.com Andre Allen Phoenix Capital Partners, Financial Advisor aallenpcp@aol.com