$251,795,000* School District of Philadelphia General Obligation Bonds, Series 2018A ____________________ * Preliminary, Subject to Change
Notice to Recipient Disclaimer This investor presentation that you are about to view is provided as of March 16, 2018 for a proposed offering of The School District of Philadelphia General Obligation Bonds (the “2018 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 preliminary official statement for the 2018 Bonds 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 2018 Bonds will be made only by means of a final official statement relating to the applicable Series of 2018 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 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 neither 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 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 2018 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 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 School District. Such forward-looking statements speak only as of the date indicated on the projections. The School 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 School 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.
Overview of the District & Recent Credit Developments
School District of Philadelphia Overview of the District & Recent Credit Developments Overview of the School District of Philadelphia (“District”) Comprised of 215 public schools, 86 charter schools and 25 alternative educational schools and programs ■ The largest school district in Pennsylvania ■ The eighth largest enrollment in the nation ■ Approximately 203,644 students (including charter school students and students attending alternative education) ■ enrolled throughout the School District in Fiscal Year 2018 The boundaries of the District are coterminous with the boundaries of the City of Philadelphia ■ A separate and independent home rule district of the first class established by the Philadelphia Home Rule Charter ■ Governance & School Reform Commission – Background In 1998 and 2001, the Public 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 Section 691 of the School Code outlines the circumstances when a school district is distressed ■ On December 21, 2001 the Secretary of Education declared the District as a distressed school district because it: ■ Failed to adopt a valid budget; and ■ Failed or will fail to provide an educational program in compliance with State laws and regulations ■ As a result of the declaration, the District’s Board of School Directors was replaced by a five-member School Reform ■ Commission (“SRC”) 1
School District of Philadelphia Overview of the District & Recent Credit Developments Governance & School Reform Commission – Recent Developments In November 2017, the SRC adopted a resolution recommending its dissolution ■ In December 2017, the Commonwealth of Pennsylvania’s Secretary of Education issued a declaration to dissolve the SRC ■ effective June 30, 2018 On July 1, 2018, the District will be governed by a nine member Board of Education appointed by the mayor ■ After July 1, 2018, the following provisions will cease to be in effect and will not become powers of the Board of ■ Education: Section 6-696(h), commonly referred to as the “maintenance of effort” ■ Section 6-696(i) insofar as it confers the powers of a board of control pursuant to Section 6-693 of the School Code ■ on the SRC will not become powers of the Board of Education, since they apply only to a distressed school district Section 6-696(i)(2)(i) exempting applications for charter schools from certain provisions of the School Code. Note ■ that 53 PA C.S. §303 and certain court decisions have already removed most of these exemptions Subsections 6-696(i)(6) and (7), relating to suspension or dismissal of professional employees ■ Subsections 6-696(i)(11) and (12) and Section 6-696(k) relating to collective bargaining agreements and provisions ■ which cannot be included while the School District is distressed Section 6-696(l) prohibiting School District employees from engaging in any strike ■ 2
School District of Philadelphia Overview of the District & Recent Credit Developments Recent Achievements - Financial 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 Recurring revenue from the State ■ Cigarette tax (originally slated to sunset in FY18) made permanent, and has an annual $58 million floor ■ New rideshare fee revenues, budgeted at $2 million in 2017 ■ Introduced a multi-year strategic investment plan, including: ■ New instructional materials for K-8 math and new reading anthologies ■ Increased funding for AP courses, gifted education, and PSAT/SAT administration ■ Counselors for every school and nurses in every school building ■ Completed a bond refunding of over $1 billion of high interest debt which will save the District over $100 million in debt ■ service interest over the next 20 years Ratified collective bargaining agreements with all of the District’s bargaining units. ■ On September 8, 2017, the District received a rating upgrade by Moody’s Investors Service, the first upgrade since 2010 ■ 3
School District of Philadelphia Overview of the District & Recent Credit Developments District’s Strategic Plan Continues to Focus on Four Anchor Goals 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 (FY17) 5 year milestone: 80% graduation rate Anchor Goal 2 : 100% of eight year olds will read on grade level Current: 36% on grade level at age 8 (FY17) 5 year milestone: 66% on grade level at age 8 Anchor Goal 3 : 100% of schools will have great principals and teachers 5 year milestone: Engaged and supported teachers and principals with strong instructional skills Anchor Goal 4 : SDP will have 100% of the funding needed for great schools, and not operate at a deficit 5 year milestone: Five-Year balanced budget projections 4
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