$816,805,000* School District of Philadelphia General Obligation - - PowerPoint PPT Presentation
$816,805,000* School District of Philadelphia General Obligation & General Obligation Refunding Bonds, Series D, E & F of 2016 $560,805,000* State Public School Building Authority School Lease Revenue Refunding Bonds, Series 2016A
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* Preliminary, Subject to Change
Investor Presentation
Agenda
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Disclaimer
This investor presentation that you are about to view is provided as of October 14, 2016 for a proposed offering of State Public School Building Authority School Lease Revenue Refunding Bonds and The School District of Philadelphia General Obligation Bonds (together the “2016 Bonds”). This presentation has been prepared for information purposes only and solely for use in connection with the proposed
statement for the applicable series of the 2016 Bonds in its entirety before making an investment decision. The information contained herein and in each Preliminary Official Statement is subject to completion and amendment. Any offer or solicitation with respect to the 2016 Bonds will be made only by means of a final official statement relating to the applicable Series of 2016 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 or 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
appraisal of the risks, benefits, appropriateness and suitability of the proposed transactions described in this presentation and neither the State Public School Building Authority, The School District of Philadelphia nor the underwriters are making any recommendation (personal or otherwise) or giving any investment advice and will have no liability with respect thereto. Neither the State Public School Building Authority, The School District of Philadelphia 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 2016 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. 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.
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The School District of Philadelphia Marjorie G. Neff, SRC Chair
Uri Monson, Chief Financial Officer Erin O. Davis, Deputy CFO Phoenix Capital Partners Financial Advisor Andre Allen Eckert Seamans Cherin & Mellott, LLC Bond Counsel Joan N. Stern Robert I. Tuteur BofA Merrill Lynch Senior Managing Underwriter Anthony Griffith
Introductions
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Transaction Overview
General Obligation Bonds, Series D of 2016 General Obligation Bonds, Series E of 2016 (QSCBs) General Obligation Refunding Bonds, Series F of 2016 State Public School Building Authority (SPSBA) School Lease Revenue Refunding Bonds, Series 2016A Delivery Date1 November 16, 2016 November 16, 2016 November 16, 2016 November 16, 2016 Par Amount(1) $89,020,000 $147,620,000 $580,165,000 $560,805,000 Purpose New Money New Money Refunding Refunding Tax Status Tax‐Exempt Taxable – Direct Pay Qualified School Construction Bonds Tax‐Exempt Tax‐Exempt Maturities(1)
June 1, 2017‐2036 Ratings (M/F) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) Primary Source of Payment
Trustee of State Appropriation on specified dates in advance of Debt Service Payment Dates Key Features
School District is declared distressed
Commonwealth budget delays
for intercepted debt service now insulated from potential budget delays
____________________ 1) Preliminary, Subject to Change
Overview of the School District
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Comprised of 218 public schools, 83 charter schools and 26 alternative educational schools and programs
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The largest school district in Pennsylvania
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The eighth largest enrollment in the nation
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Approximately 202,700 students (including charter school students and students attending alternative education) enrolled throughout the School District as of June 2016
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The boundaries of the District are coterminous with the boundaries of the City of Philadelphia
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A separate and independent home rule district of the first class established by the Philadelphia Home Rule Charter
Overview of the District & Recent Developments
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Governance & School Reform Commission
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In 1998 and 2001, the Philadelphia School Code of 1949 (“School Code”) was amended by the State General Assembly to include criteria for a determination by the Secretary of Education that a school district of the first class is distressed
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On December 22, 2001 the District was declared financially distressed and the School Reform Commission (“SRC”) was established pursuant to the School Code
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The District is currently governed by the SRC with the following members appointed by the Governor and the Mayor of the City of Philadelphia:
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On October 6, 2016 it was announced that Ms. Neff and Ms. Houstoun have resigned, effective November 3, 2016 and October 14, 2016, respectively
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District management: Dr. William R. Hite, Jr., Superintendent of Schools Uri Monson, Chief Financial Officer
Overview of the District & Recent Developments
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Name Title Date of Appointment Expiration of Term Appointed By
Marjorie G. Neff Chair August 2014 January 2017 Mayor* William J. Green Commissioner January 2014 January 2019 Governor Feather O. Houstoun Commissioner May 2012 January 2017 Governor Farah Jimenez Commissioner January 2014 January 2019 Governor Sylvia P. Simms Commissioner January 2013 January 2017 Mayor
* Appointed Chair by the Governor; appointed Commissioner by the Mayor of the City of Philadelphia
District’s Strategic Planning
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Clearly defined long‐term goals, and five year goals tied to District Spending Plan
Current: 65% graduation rate 5 year milestone: 80% graduation rate
Current: 33% on grade level at age 8 5 year milestone: 66% on grade level at age 8
Current: 6% distinguished* teachers and principals 5 year milestone: Engaged and supported teachers and principals with strong instructional skills
Current: Narrow current fiscal year surplus with projected out‐year deficits 5 year milestone: Projected structural balance for each year of ensuing Five‐Year Plan
Overview of the District & Recent Developments
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*Pennsylvania’s Act 82 states that all professional employees must be evaluated once a year and temporary professional employees must be evaluated twice a year. Act 82 requires that all teachers will be rated as Distinguished, Proficient, Needs Improvement, or Failing. Distinguished is described as “the employee’s performance consistently reflects teaching at the highest level of practice.”
District’s Strategic Planning
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A new Five Year Plan based on the principles set forth below was introduced in March 2016 and its first year was adopted by the SRC as part of the FY 2017 budget adoption in May 2016
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The FY 2017 budget represents year one of that Five Year Plan
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The plan is based on the following principles:
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Propose a budget and spending plan which strives for structural balance, while determining investments designed to achieve the District’s mission of equity in educational opportunity for all children
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Utilize reasonable projections for revenues and expenditures, based on:
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Actual revenues and expenditures
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Current law
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Historic trends
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Most recent budget proposals of the Governor and Mayor
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New investment in schools
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The Plan’s primary objectives are:
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Identify sufficient revenues to meet the anticipated obligations of the first 24 months
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Establish baseline financial projections to enable dialogue among all School District funders (City, State, Federal and Private) identifying pathways to achieving long‐term structural balance
Overview of the District & Recent Developments
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District has Experienced Improved Outcomes with City and Commonwealth over the Past Few Years
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Traditional revenues of State subsidies and local real estate taxes have been supplemented by State authorization for additional locally generated funds:
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City Sales Tax: Effective July 1, 2014, 1% sales and use tax (in addition to permanent 1% sales and use tax authorized in 1991) authorized as a permanent City tax (projected to yield $150.4mm in FY17)
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By statute, first $120mm of this tax is paid directly to the District by the State Treasurer
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For FY15‐18, next $15mm collected may be applied by the City to payment of debt service on obligations issued by the City in Fiscal Year 2014 for the benefit of the District
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School District Cigarette Tax: Legislation enacted in July 2016 providing for establishment of $58mm annual floor and elimination of 2019 sunset provision for this tax
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The changes are expected to provide additional $125mm in revenues during the period FY2017‐2021
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Bi‐Partisan Funding Formula: Act 35 established a Basic Education Funding Formula for school districts based on factors including the wealth of the district, the district’s current tax effort and the ability of the district to raise revenue
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As a result of the application of the Act 35 formula in the education appropriations for Fiscal Year 2017, the District receives 23% of new funding as opposed to 18% of existing basic education subsidies
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The enactment of Act 85 effected new state intercept provisions to be used during a Commonwealth Budget impasse designed to mitigate exposure to the Commonwealth’s budget process
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New intercept provisions appropriate General Fund monies to be used to make intercept payments if no education appropriations have been enacted
Overview of the District & Recent Developments
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General Obligation Bonds
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Priority of payment of $966mm of School District taxes (“Daily Deposit Tax Revenues”) collected by Revenue Department of the City of Philadelphia as School Tax Collector for the District (5.1x coverage of existing GO debt service) deposited daily in general obligation bond sinking funds
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Neither the amount nor rate of these taxes can be reduced by City Council while the District is distressed due to maintenance of effort provision in Section 696 of PA School Code
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State Aid is intercepted in the event each Sinking Fund is not fully funded by the Daily Deposit 15 days prior to a debt service payment date
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Pursuant to Act 85, Commonwealth General Fund monies are appropriated for intercept payments when no education appropriations have been enacted Lease Revenue Bonds
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State Appropriation paid by Treasurer to Bond Trustee pursuant to Intercept Agreement on specified dates scheduled at least 35 days prior to each debt service payment date
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Pursuant to Act 85, Commonwealth General Fund monies are appropriated for intercept payments when no education appropriations have been enacted GO and Lease Revenue Bondholders are protected by Local and Commonwealth Credit Structures
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If a budget impasse were to begin on July 1, 2017, bondholders would have access to over $1.7 billion in revenue regardless of the status of the Commonwealth’s budget or the School District’s operations
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This amount is based on a combination of FY 2017’s Daily Deposit Tax Revenues ($966mm) and 50% of FY 2017’s interceptable state aid (total aid = $1,544mm, 50% = $772mm)
Overview of the District & Recent Developments
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Recent Changes Support Operations and Build on Existing Credit Structures
General Obligation Credit
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$1.9 billion, or 63%, of the District’s debt is General Obligation debt
■ The District’s General Obligation (“GO”) debt is backed by the faith and credit of the District and the primary source of repayment is the Daily Deposit Tax Revenues ■ Between FY17 and FY20, General Obligation debt service ranges between $172.6 million and $193.7 million ■ The District’s Daily Sinking Fund Covenant creates a priority of payment of these revenues to the GO Bond sinking funds ■ In FY17 these revenues are expected to equal approximately 5.0x annual GO debt service budgeted in FY17 ■ Due to provisions in the PA School Code, the amount and rates of these taxes cannot be reduced by City Council year‐
■ The obligation to collect and remit the school taxes to the Fiscal Agent is not dependent on the District’s operations ■ As a backstop, State aid intercept provisions would cover any deficiencies ■ Intercept has never been triggered
General Obligation Credit
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Daily Sinking Fund Deposits – Covenant 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 (the School Tax Collector) directly to the GO bonds’ Fiscal Agent for deposit in the School District’s GO Bonds sinking funds ■ The sinking funds’ daily deposit 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 City Revenue Department by the School District as a part of the irrevocable direction ■ 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 payment
■ For example, collections for the $13.675 million principal payment due on June 1, 2017 started on May 17, 2016 ■ With 263 business days between May 17, 2016 and May 17, 2017 the daily deposit requirement for this principal payment is $51,996.20
■ If a given day’s Daily Deposit 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 deposit requirement is current
■ As a result, each Sinking Fund is brought current as Daily Deposit Tax Revenues are collected
Only when the sinking funds are current is the City Revenue Department permitted to transfer School Tax Revenues to the District’s Operating Account
General Obligation Credit
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Daily Deposit Tax Revenues constitute a large portion of the District’s local revenues
■ Only the school taxes collected by the City’s Revenue Commissioner, as tax collector for the District, are Daily Deposit Tax Revenues
Summary of Daily Deposit Tax Revenues ($000’s) Daily Deposit Tax Revenue Source FY17 Amount FY16 Amount Collector Description School Real Estate Tax $721,234 $706,118 City as Collection Agent Tax on real estate in Philadelphia Business Use & Occupancy Tax $139,500 $139,500 City as Collection Agent Tax on the use of real estate within the School District for commercial or industrial activity Liquor Tax $65,650 $63,950 City as Collection Agent Tax on the sale of liquor by the drink Non‐Business Income Tax $39,900 $39,800 City as Collection Agent Tax on the non‐business income of Philadelphia residents Total Daily Deposit Tax Revenues $966,284 $949,368
■ In addition to the School District taxes collected by the City as School Tax Collector for the District, the District also receives Local Revenues which are collected by the Commonwealth (School Cigarette Tax, up to $120 million from proceeds of a 1% City Sales Tax and the School District’s Public Utility Realty Tax)
General Obligation Credit
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Daily Deposit Tax Revenues are received by the Fiscal Agent 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 School Reform Commission 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 interest of 1.5% per month ■ 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 sale of liquor by the drink (rate is 10%) ■ Tax is due monthly 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
Local Tax Revenues by Month
■ Based upon information from the School District, unaudited Daily Deposit Tax Revenues by month for FY16 are set forth below:
School District of Philadelphia ‐ Fiscal 2016 Daily Deposit Tax Revenues by Month (1) Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Daily Deposit Tax Revenues $33,483 $24,644 $29,247 $27,271 $26,701 $29,254 $69,999 $381,518 $181,455 $67,298 $47,712 $31,788 $950,370
General Obligation Credit
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Section 696 of the PA School Code prevents the City from reducing the Daily Deposit Tax Revenues
■ Since the District has been declared “distressed”, the PA School Code contains provisions that prevent the City from taking actions which would reduce any School District Taxes including the Daily Deposit Taxes, while the District is distressed ■ Section 696 requires the City Council to authorize taxes in each fiscal year to yield School Tax Revenues (the Daily Deposit Tax Revenues plus any other school taxes authorized by the City) in an amount at least equal to the highest amount of School Tax Revenues in the three preceding fiscal years and to maintain all other payments and grants to the School District at the same level each fiscal year ■ As a result, Daily Deposit Tax Revenues cannot be reduced by City Council ■ Below is a chart showing FY16’s unaudited Daily Deposit Revenues compared to existing GO debt service to project the debt service coverage provided by FY16 Daily Deposit Tax Revenues
Projected GO Debt Service Coverage based on FY16 Daily Deposit Tax Revenues ($000s)
Average Projected D/S Coverage 2017‐26: 5.6x Average Projected D/S Coverage 2017‐40: 14.0x
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Coverage (rhs) GO Debt Service (lhs) FY16 Daily Deposit Tax Revenues (lhs)
School District School District Taxpayers Fiscal Agent City Department of Revenue (School District Tax Collector) All Bondholders
Collections of Daily Deposit Tax Revenues FIRST, Daily Deposit Tax Revenues (Amounts of Required Daily Deposits and Any Prior Shortfalls in order to accumulate funds sufficient to pay debt service on the sinking fund deposit date which is 15 days before the payment date) SECOND, Daily Deposit 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 monies from the daily deposits GO Debt Service
General Obligation Credit
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Note: the Fiscal Agent is required to trigger the intercept law if Fiscal Agent does not have full amount due on the upcoming payment date 15 days before the payment date
Daily Deposit Tax Revenue Daily Sinking Fund Deposits for GO Debt
* In addition to fixed rate general obligation debt service, the District has included variable rate General Obligation debt service on its Variable Rate Refunding Bonds issued in June 2016, in its Daily Sinking Fund Covenant. The decision to make variable rate debt service part of the daily deposit covenant is made on a case‐by‐case basis by the District.
General Obligation Credit
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GO Debt is further supported by a State Aid Intercept backstop
■ In the event that insufficient monies are on deposit in the GO Bonds’ 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 ■ In FY16 a historically long Commonwealth budget impasse meant no interceptable aid was made available to school districts until January 2016 and the remainder of a full year’s appropriation of the basic education subsidy was not made available until May 2016 ■ If the Fiscal Agent had needed to trigger the intercept provision in Section 633 prior to December 2015, no money would have been available to make an intercept payment ■ When the complete Commonwealth FY17 budget was ultimately passed, the Fiscal Code was amended with new intercept provisions that reduce bondholder exposure to the Commonwealth’s annual budget process
General Obligation Credit
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PA recently enacted new intercept provisions that strengthen the mechanism
■ The Fiscal Code amendment (“Act 85”) enacted new intercept provisions that appropriate General Fund money to be used for intercept payments in the event the “annual appropriations for payment of Commonwealth money 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 ■ Upon receipt there is a 10 day review/comment period ■ The House and Senate committee chairs may comment, but have no power to deny or alter the funding of the appropriation ■ In order to be eligible to receive intercept payments, school districts must submit information to the Department of Education summarizing their intercept‐eligible debt ■ Format of this submission has been developed by the Department of Education, but until the new format is final, school districts must submit final official statements and loan documentation within 30 days of receipt of bond proceeds ■ 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 $772 million based on FY17’s appropriation ■ If a budget impasse were to occur on July 1, 2017, for example, when combined with Daily Deposit Tax Revenues, the effect of Act 85’s provisions would mean that the District’s bondholders have access to over $1.7 billion ■ Comprised of a combination of State appropriations (total aid = $1,544mm, 50% = $772mm) and Daily Deposit Tax Revenues ($966mm) without regard to the status of the Commonwealth’s fiscal year appropriations for education
General Obligation Credit
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Act 85 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 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. ■ The District has not been advised as to whether PDE will submit a justification covering all school districts at the beginning
■ To help make sure the required justification is submitted timely the District will: ■ Include in its (i) fiscal agent agreements for general obligation bonds; and (ii) direct pay intercept agreements for Lease Revenue Bonds provisions requiring notice to be given to PDE that the justification required by Act 85 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 hard copy of the Official Statements and applicable loan documents, including 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 provision ■ Any electronic filing with contain the same schedules
Lease Revenue Bond Credit
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$1.1 billion, or 37%, 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 ■ Between FY17 and FY20, Lease Revenue Debt service ranges between $70.7 million and $71.7 million ■ 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 State Treasurer and the Department of Education ■ The payments occur semi‐annually on pre‐determined dates that are weeks in advance of debt service payment dates ■ The amount of these periodic payments is sufficient to cover debt service when due ■ The Lease Revenue Bonds will benefit from the new intercept provisions of Act 85 that appropriate Commonwealth General Fund money for payments due under an intercept agreement when no education appropriations have been enacted by July 1 of a fiscal year
Lease Revenue Bond Credit
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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 Lease Revenue Bonds’ Trustee ■ The payments will occur on pre‐determined Payment Dates which, for the 2016A bonds, will be the fourth Thursday of each April and October (these dates coincide with scheduled payment dates for appropriations allocable to school districts which 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 2016A bonds, Base Rental Payments are due from the District to the Trustee on May 15 and November 15, approximately 15 days prior to the June 1 and December 1 debt service payment dates
Debt Service Due Dec 1st Debt Service Due June 1st July 1, 2016 July 1, 2017 Aug 1, 2016 Sep 1, 2016 Oct 1, 2016 Nov 1, 2016 Dec 1, 2016 Jan 1, 2017 Feb 1, 2017 Mar 1, 2017 Apr 1, 2017 May 1, 2017 Jun 1, 2017 Base Rental Payment Due Nov 15th Base Rental Payment Due May 15th Payment Date Oct 27th Payment Date April 27th
Timeline of payment for District’s June and December Lease Revenue Bond Payment Dates (Fiscal Year 2017)
Lease Revenue Bond Credit
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New Intercept provisions eliminate exposure to Commonwealth budget process
■ Historically, the payment to the Trustee on scheduled payment dates was dependent on enactment of an the 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 happened in FY 2016 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 and 2015 Lease Revenue Bonds) ■ The new state aid intercept provisions included in Act 85, the amendment to the Fiscal Code, now appropriate money from the Commonwealth’s General Fund to make these payments for the School District when no education appropriations have been enacted ■ 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 10x* coverage versus the District’s budgeted FY17 Lease Revenue Bond debt service
* Using education subsidies for Fiscal year 2016 as an example and current debt service on 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 2016A Lease Revenue Bonds
Lease Revenue Bond Credit
School District 2016A Bondholders State Treasurer Debt Service
State Appropriations (Net
Intercept Agreement) FIRST, State Appropriations (April/October Payment Dates) Pays Base Rental Payments for PA State Public School Building Authority 2016A Bonds from State Appropriations SECOND, , if not fully funded by the Intercepted State Appropriations m the District makes Base Rental Payments
November 152
(1) The Intercept Agreement also covers the PA State Public School Building Authority outstanding 2003 Bonds, 2006 Bonds , 2012 Bonds and 2015 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. 1
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Trustee
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Transaction Overview
General Obligation Bonds, Series D of 2016 General Obligation Bonds, Series E of 2016 (QSCBs) General Obligation Refunding Bonds, Series F of 2016 State Public School Building Authority (SPSBA) School Lease Revenue Refunding Bonds, Series 2016A Delivery Date1 November 16, 2016 November 16, 2016 November 16, 2016 November 16, 2016 Par Amount1 $89,020,000 $147,620,000 $580,165,000 $560,805,000 Purpose New Money New Money Refunding Refunding Tax Status Tax‐Exempt Taxable – Direct Pay Qualified School Construction Bonds Tax‐Exempt Tax‐Exempt Maturities1
June 1, 2017‐2036 Redemption1
Make‐Whole
December 1, 2026 @ Par Ratings (M/F) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying) A2/A+ (PA Intercept) Ba3/BB‐ (Underlying)
____________________ 1) Preliminary, Subject to Change
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Transaction Summary
Event Date Preliminary Official Statement Posted October 7 Institutional Pricing October 19 Written Award October 20 Closing November 16
* Preliminary; subject to change
Prospective Financing Schedule*
October November S M T W T F S S M T W T F S 1 1 2 3 4 5 2 3 4 5 6 7 8 6 7 8 9 10 11 12 9 10 11 12 13 14 15 13 14 15 16 17 18 19 16 17 18 19 20 21 22 20 21 22 23 24 25 26 23 24 25 26 27 28 29 27 28 29 30 30 31
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Contact information
Contact Information
Contact Organization Email
Uri Monson CFO, School District of Philadelphia umonson@philasd.org Tony Griffith Bank of America Merrill Lynch tony.griffith@baml.com