by PIDCphila
February 7, 2013

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Bonds101On January 25th, PIDC hosted more than 25 charter school administrators, principals, and board members, as well as representatives from Community Development Corporations (CDCs) who are working for or with Philadelphia Charter Schools. Fourteen schools were represented and ranged from existing clients to new potential clients who are considering future expansions or new facility plans. The event was the first of many sector specific events PIDC will host in 2013 and beyond to educate members of the business community about PIDC programs that can assist them with their growth needs.

Tax exempt bank loan and bond issues must be issued through a conduit governmental agency. The Philadelphia Authority for Industrial Development (PAID) issues tax-exempt bonds on behalf of  a broad array of non-profit organizations, qualified manufacturers, other exempt organizations and the City of Philadelphia. Tax exempt financing typically carries interest rates below those of taxable financing products. Since 2007, PAID has issued 63 financings on behalf of 55 borrowers totaling approximately $1.5 billion. PIDC manages the activities of PAID, which also includes acquiring, improving, selling and leasing real estate, facilitating special economic development activities on behalf of the City, as well as a conduit for governmental grant funds.

In the last few years, PIDC has seen a large increase in the number of charter school tax-exempt transactions issued through PAID. In 2012, there were 4 charter school issuances through PAID totaling close to $52M in project transactions. Since 2002, PAID has issued 24 financings on behalf of 19 charter schools totaling approximately $286 million. Because tax exempt financing is becoming more of a viable financing vehicle for charter schools, PIDC wanted to reach the more than 80 Philadelphia charter schools to help them understand this complex, but low cost financing facility.

One of the event’s featured speakers was Greg McKenna, PNC’s Managing Director in charge of PNC’s Charter School Tax-Exempt Revenue Bond Program across PNC’s footprint. Mr. McKenna presented a basic overview of tax exempt financing, and considerations specific to the charter school market in accessing the municipal bond market. Mr. McKenna explained the pros and cons of a tax exempt bond issue versus a tax exempt bank loan. Tax exempt bond issues can be amortized up to 30 years at fixed rates for 100% of the cost of the project, but carry higher costs of issuance, IRS restrictions on the use of proceeds, and generally work for project needs of $6M or greater. A tax exempt bank loan can be amortized up to 20 years at fixed or variable rates, and have lower costs of issuance. However, a tax exempt bank loan typically has an 80/20 Loan to Value requirement with an equity contribution and can be repriced in 5 to 10 years.

Attendees also learned the difference between general obligation versus revenue bonds, the numerous parties involved in a bond issue, and the principal documents involved in a tax exempt transaction. Finally, Mr. McKenna highlighted key charter school underwriting criteria for a tax exempt issue including corporate governance, financial characteristics of the school, and a school’s academic characteristics, as well as charter renewals. Some of the main red flags highlighted were high staff or board turnover, poor academic performance, and a lack of understanding by the charter school leadership about what a real estate transaction entails.

The second featured speaker was Nancy Winkler, the City of Philadelphia’s Treasurer who is responsible for oversight of all activities related to the issuance of debt by the City.  Ms. Winkler has worked for thirty years advising municipalities, colleges and not-for-profit entities on municipal bond issuances, debt restructuring, and various strategies to manage her client’s debt portfolios. She also serves on the Government Finance Officers Association Debt Committee. Ms. Winkler highlighted best practices for charter schools, who are often infrequent borrowers in the bond market. She reviewed the importance of hiring a financial advisor who can help schools determine if this is the right financing product for them. She provided an overview of the kinds of activities an advisor should perform for its client. Ms. Winkler reviewed many of the assessment factors including the importance of management and administration of a school, the strength of debt and capital planning, along with the need for a comprehensive business plan. Finally, she provided a list of resources for charter schools to access that could help them better understand tax exempt financing generally, as well as the environment for charter school financing.

PIDC has a depth of experience in tax exempt financing with dedicated staff who work with our clients on these complex structures. Sakinah Rahman oversees PIDC’s tax-exempt activities’ with over a decade of experience in the field previously working for Wells Fargo. Nicole Krippel helps move these transactions through the approvals process and came to PIDC from a law firm who worked on public finance transactions. Marla Hamilton and Carol de Fries work within PIDC’s Marketing & Business Development group and have a focus on charter schools within their client portfolios as market managers.

If you are interested in learning more about tax exempt financing for your charter school, please feel free to reach out to PIDC’s market managers as the client’s front door.  Marla Hamilton handles charter school transactions associated with a CDC or community based organization and can be reached at 215.496.825 or . Carol de Fries handles all other charter school transactions and can be reached at 215.496.8150 or .  For more information on PIDC, tax exempt financing or other programs, please visit


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