Case Study

Palm Beach County School District

Student headcount growth in excess of 5,000 students per year and the need to renovate and replace functionally obsolescent schools led the District to undertake the largest capital program in Florida beginning at the turn of the century. The District had already issued almost $1 billion in COPs and would require another $1 billion to fund the program. PFM and the District needed to develop a plan of finance to maximize proceeds available from existing revenues and develop alternate funding sources.

Bond Buyer's
2002 Southeast
Deal of the Year

Given significant financial pressures, the School Board encouraged staff to consider new revenues and creative financing concepts. PFM worked with Staff, Bond Counsel, the Finance Committee and the District's Underwriters to develop a comprehensive, strategic capital financing plan. The District not only funded a multi-billion dollar capital program, but used a combination of traditional fixed rate debt, variable rate obligations, swaps and a variety of restructurings to save over $50 million to date and approximately $2 million per year moving forward.

As construction costs grew exponentially, the District also created the first Commercial Paper program for a Florida school district to accelerate construction of projects funded by a 6 year dedicated Sales Tax. PFM and PFM Asset management developed a unique spend down plan for the CP program that when coupled with actively managed investments will result in the District financing $560 million in projects with no net interest expense.

The financial decisions that led to these structures were not made in a vacuum. The District has a financially sophisticated Finance Committee that requires PFM and staff to prepare thorough evaluation of options, before the Committee recommends programs to the Board.

PFM has assisted the District with the following financings since 2001:

• Certificates of Participation - $2.1 Billion in 16 series
• Tax Anticipation Notes - $400 Million in 6 series
• General Obligation Bonds (2 series)
• Qualified Zone Academy Bonds (3 series)
• First "cancelable swap" which generated $6.1 million in upfront cash for the District and reduced annual debt service payments by over $750,000
• "Crossover refunding" that enabled the District to enhance savings by $1 million over a traditional refunding
• "Basis swap" that reduced interest expense by over $500,000 per year for an upcoming COP financing
• First Commercial Paper Program ($275 Million) for a school district in Florida

The Bond Buyer -- the industry newspaper -- recognized the creativity involved in developing the financial plan for the School District of Palm Beach County by selecting it as the Deal of the Year for the southeast United States in 2002.