Board of Education Authorizes General Capital Bonds and Green Bonds
Board of Education Authorizes the Issuance of General Capital Bonds and Green Bonds for the School District
PHILADELPHIA — The School District of Philadelphia Board of Education approved the issuance of two series of bonds designed to fund necessary capital improvements at the October 7 special action meeting. The District generated $375 million from the Bonds for its Capital Improvement Program, which was approved by the Board in May.
A portion of the bonds were issued as Green Bonds, the proceeds ($60 million) of which are dedicated to energy efficiency projects at facilities across the District. These investments will fund the Guaranteed Energy Savings Act programs previously approved by the Board.
“These projects are designed to improve learning environments, reduce environmental footprints and lower operating costs through more efficient lighting, boiler replacements, cooling infrastructure improvements, temperature control systems and heat and ventilation improvements,” said William R. Hite, Jr., Ed.D., superintendent of the School District of Philadelphia.
The District benefited in terms of the interest cost of the Bonds, from its two notch bond rating upgrade by Moody’s in December of 2019, restoring the District to investment grade for the first time since 1977. Last month, Moody’s re-affirmed this rating. According to Moody’s, the rating reflects the strong management and highly effective governance of the District’s finances and budgeting. This will be key, Moody’s said, to the administration of federal aid over the next three years.
The combination of improved finances and a low interest environment, along with the efforts of the financing team, resulted in a Total Interest Cost of 2.694 percent, as compared to a 3.086 percent in 2019 and a 3.968 percent rate for its March 2018 bond issuance. When considering just the District’s improved fiscal situation, the average credit spread (relative to AAA bond rates and assuming all five percent coupons) was 41 basis points, 18 basis points lower than the 2019 issuance (59 basis points), resulting in over $8.6 million in interest savings. When compared to the District’s issuance in 2016, when the spread was 125 basis points, this transaction resulted in a $40.2 million interest savings.
According to Chief Financial Officer Uri Monson, the District took advantage of its improved credit strength and market conditions to obtain its best pricing in over a decade.
“We had a strong and broad positive response to our transactions with 42 different accounts placing orders totaling over $941 million for $316.9 million in bonds,” Monson said. “The result is lower interest costs so we can invest more of our funds in meeting the core mission of educating the students of Philadelphia, while getting additional resources needed to invest in our facilities.”
The District utilized an experienced and diverse underwriter’s team, led by Senior Manager Siebert Williams Shank, with co-managers: Amerivet Securities, Barclays, Bank of America Securities, PNC Capital Markets, Ramirez & Co, and RBC Capital Markets.