1. 1 PASBO ANNUAL CONFERENCE Pittsburgh, PA March 12-16, 2007 Financing Pennsylvania School Projects Under the Taxpayer Relief Act (Act 1 of the Special Session of 2006) Kenneth A. Phillips RBC Capital Markets Lancaster, PA (717)519-6001 Paul A. Lundeen, Esquire Rhoads & Sinon LLP Harrisburg, PA (717)231-6004 Beth A. Ewing Janney Montgomery Scott LLC Pittsburgh, PA (724)770-0232

2. 2 Table of Content Section IOverview of the District’s Current Debt Profile Section IIReferendum Exception Worksheet Examples Section III “60% Test” Calculation Example Section IVOverview of Electoral Debt

3. 3 Section I Overview of the District’s Current Debt Profile

4. 4 under mgmt are municipal holdings - 170 institutional salespeople in 19 offices - 135 Underwriters & Traders - 26 Research Analysts - 102 Support Personnel SALES & TRADING The District’s Debt Profile

5. 5

6. 6 The District’s Debt Profile with New, Non-Grandfathered Debt

7. 7 Section II Referendum Exception Worksheets- “Grandfathered Debt”

8. 8 Referendum Exception Worksheet Example

9. 9

10. 10 Section III Academic Building Construction Exception (60% Test)

11. 11 To pay interest and principal on indebtedness for up to 60% of the construction cost average on a square foot basis of an academic elementary (pre-K to 6) or secondary (7-12) school buildingTo pay interest and principal on indebtedness for up to 60% of the construction cost average on a square foot basis of an academic elementary (pre-K to 6) or secondary (7-12) school building Statute specifically excludes natatorium, stadium bleachers, athletic field, athletic field lighting equipment and apparatus used to promote and conduct interscholastic athleticsStatute specifically excludes natatorium, stadium bleachers, athletic field, athletic field lighting equipment and apparatus used to promote and conduct interscholastic athletics PDE forms also exclude District administration offices, daycare/pre-school (nonacademic), and non-district use spaces (health clinic, public library, etc.)PDE forms also exclude District administration offices, daycare/pre-school (nonacademic), and non-district use spaces (health clinic, public library, etc.) “The indebtedness is incurred only after existing fund balances for school construction and any undesignated fund balances have been fully committed to fund the project.” (emphasis added)“The indebtedness is incurred only after existing fund balances for school construction and any undesignated fund balances have been fully committed to fund the project.” (emphasis added) For 2nd, 3rd and 4th Class Districts, project approval has been given by PDE under Section 731. For 1st Class A Districts, the plans and specs for the project have been approved by PDE (reimbursable project) or the board of school directors (nonreimbursable project).For 2nd, 3rd and 4th Class Districts, project approval has been given by PDE under Section 731. For 1st Class A Districts, the plans and specs for the project have been approved by PDE (reimbursable project) or the board of school directors (nonreimbursable project). Plancon F approval for reimbursable projectsPlancon F approval for reimbursable projects Academic Building Construction Exception (60% Test)

12. 12 The District’s Debt Profile

13. 13 The District’s Debt Profile

14. 14 The District’s Debt Profile with New, Non-Grandfathered Debt

15. 15 The District’s Debt Profile with New, Non-Grandfathered Debt

16. 16 60% Test Example

17. 17 60% Test Example

18. 18 60% Test Example

19. 19 60% Test Example

20. 20 60% Test Example

21. 21 Section IV Electoral Debt Review

22. 22 Act 1 Debt Exceptions To The Back-End Referendum  Payment of Interest And Principal On Any Electoral Debt Incurred Under The Local Government Unit Debt Act (§333(f)(2)(iii)(B)) PDE Approval Required to Exceed Act 1 Index

23. 23 Electoral Debt Under The Local Government Unit Debt Act (LGUDA) DEFINITION –All Debt Incurred With The Assent Of The Electors, Whether Issued By The School District Or Through An Authority (§8002(a)) ELECTORAL DEBT LIMIT –None (§8021) QUESTION –“Shall Debt In The Amount Of (Insert Amount) Dollars For The Purpose Of Financing (Insert Brief Description Of Project) Be Authorized To Be Incurred As Debt Approved By The Electors?” (§8042) REQUIRED APPROVAL –Majority Of The Votes Cast Upon The Question At A General Or Special Election (§8043(d))

24. 24 LGUDA Electoral Debt Referendum Procedure 1.Board Adopts A “Desire” Resolution (§8041) Resolution May Call For A Special Election, If Nearest Election For Other Purposes Is More Than 90 Or Less Than 30 Days After The Effective Date Of The “Desire” Resolution, Cost Of A Special Election Not Held For Other Purposes To Be Paid By School District 2.Board Submits Certified Copy Of Desire Resolution And Form Of The Question To The County Board Of Elections At Least 45 Days Prior To The Election (§8043)

25. 25 LGUDA Electoral Debt Referendum Procedure 3.Board To Publish A Notice of Election (§8042) 4.County Board Of Elections Computes The Vote And Transmits A Certified Return To The School District (§8043)

26. 26 Effect Of Approval Of Question Under LGUDA If The Ballot Question Is Approved By Majority Vote, School District May Then Undertake Local Government Unit Debt Act Proceedings To Incur The Debt And Issue Bonds Or Notes Or Enter Into A Lease In The Same Manner As For Nonelectoral Or Lease Rental Debt, But Debt Limits Do Not Apply (§8046) Board Must Issue The Approved Debt Within 10 Years (§8047)

27. 27 Effect Of Approval Of Question Under LGUDA Board May, By Resolution, Rescind Or Cancel, In Whole Or In Part, The Authorization To Incur Electoral Debt For Any Stated Reason (Without Any Assent Of The Voters) (§8047) Proceeds Of The Approved Electoral Debt May Be Used Only For The Project For Which Approval Was Obtained Or To Retire Such Debt (Board May Call For Another Election To Change The Purpose, However) (§§8048, 8049)

28. 28 Effect Of Defeat Of Question Under LGUDA (§8045) If Question Is Not Approved By Majority Vote, Another Election For The Same Purpose May Not Be Held Until 155 Days Have Elapsed During The Interim, No Bonds Or Notes May Be Issued Or Lease Rental Debt Incurred For The Same Purpose, Except That Which Is Incurred As Nonelectoral Or Lease Rental Debt (i.e., By The Board And Within The Statutory Debt Limits) To - –Complete Projects Already Under Construction –Finance A Different Portion Or Portions Of A Capital Budget, Or –Evidence Emergency Debt Incurred With Court Approval Under Debt Act Section 8022(e)

29. 29 Comparison of LGUDA And Act 1 Referenda Regarding Debt For A School Building Project Debt Act ReferendumAct 1 Referendum Question Focus Building Project/Amount of Debt Annual Budget/Tax Increase Question Content Estimated Amount of Debt; Brief Description of The Project Specific Tax Rate or Rate of Tax Increase; Reason for Tax Increase WhenBefore Debt is IssuedAfter Debt is Issued Timing of Election Any Election Fixed by the Board of School Directors Before Debt is Issued Primary Election Before Start of Fiscal Year for Which Tax Increase is Needed Vote Required For Approval Majority

30. 30 Comparison of LGUDA And Act 1 Referenda Regarding Debt For A School Building Project Debt Act ReferendumAct 1 Referendum Effect of Approval Debt Service Eligible for Back- End Referendum Exception Under Act 1 Board May Raise Taxes by Amount Authorized, but Only in the Following Fiscal Year Approved Debt Does Not Count Against Statutory Borrowing Limits Board May Issue Approved Debt at Any Time Within 10 Years

31. 31 Comparison of LGUDA And Act 1 Referenda Regarding Debt For A School Building Project Debt Act ReferendumAct 1 Referendum Effect of Disapproval Board Cannot Resubmit Question to Voters or Incur Debt for the Project for 155 Days Board May Not Increase Taxes Above the Index for the Following Fiscal Year After Waiting Period, Board May Incur Debt as Nonelectoral Debt or Lease Rental Debt Subject to Statutory Borrowing Limits and Act 1 Tax Increase Limitations When Subsequent Referendum Required If and When Additional Debt Needed or Board Desires to Change Purpose of Approved Debt Any Subsequent Fiscal Year in Which Taxes Need to be Increased Above Index After Application or Denial of Exceptions