1. 0 Virginia Public School Authority Providing Financing for Virginia’s Schools for over 50 Years VASBO – Helping Shape the Future Fall Conference - October 16, 2015

2. School Financing Options  Virginia local officials have a number of options available to address financing needs for school projects  General Obligation Bond issue by locality following a successful referendum  Lease Revenue Bonds through a conduit issuer  Bank loan  Literary Fund loan  Virginia Public School Authority (VPSA)  The option selected may depend on funding availability, circumstances in the locality, and the attributes of the project 1

3. School Financing Options, continued  Local Options  General Obligation Bonds – Issued directly by you. Your rating. Secured by full faith and credit of your locality. Referendum required.  Lease Revenue Bonds – Requires conduit issuer such as your Economic Development Authority. Secured by appropriation. No referendum required.  Bank Loans – Lending bank negotiates terms of loan.  Literary Fund Loan – Issued by DOE. No direct Literary Loans or interest rate subsidies for foreseeable future *  All subject to your own debt policy, i.e. types of debts and limitations on indebtedness. 2

4. School Financing Options, continued  VPSA’s Pooled Bond Program  Flagship program  Bond bank  Authority issues bonds and uses the proceeds to purchase general obligation local school bonds  Payments on local schools bonds held by the Authority provide for the debt service on the VPSA bonds  Schools and only schools  All types of real and personal property for public schools, including land, buildings and equipment 3

5. VPSA Pooled Bond Program  Program Highlights.....  Provides Market access – particularly helpful to localities not frequently in the bond market  Highly Rated (AA+/Aa1/AA+)  “Credit enhancement” through state-aid intercept/sum sufficient provisions  Streamlined application process with no application fee  Minimizes burden on local officials 4

6. Why VPSA?  Experience  Administrative ease  Cost 5

7. Why VPSA?  Experience  Established in 1962 and completed first bond issue in 1963  $ 6.6 billion has been issued through the Pooled Bond Program alone  $ 2.6 billion in local school bonds from 104 different localities are currently held by the VPSA  Pooled Bond Program has been enhanced and refined over the years to simplify and streamline 6

8. Why VPSA?  Administrative Ease  Local GO Bonds sold to the VPSA do not require voter referendum  Streamlined application process with no application fee  Market access – particularly helpful to localities that are not frequently in the bond market  Authority does the heavy lifting for the bond sale  Bond documents, ratings, public offering documents, coordination of sale  Decreased administrative burden on local officials  Arbitrage rebate compliance, continuing disclosure and monitoring for refunding opportunities 7

9. Why VPSA?  Cost  No application fee  Administrative costs are low – 5 basis points added to local debt service  Covers VPSA costs of issuance and administrative costs  Local costs of issuance (local counsel, FA) paid by locality or financed as part of the bond issue 8

10. Sample VPSA/Local Loan 9 VPSA Locality Maturity PrincipalCoupon Interest Total PrincipalCoupon Interest Total 2015 $ 500,000.003.00% $ 300,000.00 $ 800,000.00 $ 500,000.003.05% $ 305,000.00 $ 805,000.00 2016 $ 500,000.003.00% $ 285,000.00 $ 785,000.00 $ 500,000.003.05% $ 289,750.00 $ 789,750.00 2017 $ 500,000.003.00% $ 270,000.00 $ 770,000.00 $ 500,000.003.05% $ 274,500.00 $ 774,500.00 2018 $ 500,000.003.00% $ 255,000.00 $ 755,000.00 $ 500,000.003.05% $ 259,250.00 $ 759,250.00 2019 $ 500,000.003.00% $ 240,000.00 $ 740,000.00 $ 500,000.003.05% $ 244,000.00 $ 744,000.00 2020 $ 500,000.003.00% $ 225,000.00 $ 725,000.00 $ 500,000.003.05% $ 228,750.00 $ 728,750.00 2021 $ 500,000.003.00% $ 210,000.00 $ 710,000.00 $ 500,000.003.05% $ 213,500.00 $ 713,500.00 2022 $ 500,000.003.00% $ 195,000.00 $ 695,000.00 $ 500,000.003.05% $ 198,250.00 $ 698,250.00 2023 $ 500,000.003.00% $ 180,000.00 $ 680,000.00 $ 500,000.003.05% $ 183,000.00 $ 683,000.00 2024 $ 500,000.003.00% $ 165,000.00 $ 665,000.00 $ 500,000.003.05% $ 167,750.00 $ 667,750.00 2025 $ 500,000.003.00% $ 150,000.00 $ 650,000.00 $ 500,000.003.05% $ 152,500.00 $ 652,500.00 2026 $ 500,000.003.00% $ 135,000.00 $ 635,000.00 $ 500,000.003.05% $ 137,250.00 $ 637,250.00 2027 $ 500,000.003.00% $ 120,000.00 $ 620,000.00 $ 500,000.003.05% $ 122,000.00 $ 622,000.00 2028 $ 500,000.003.00% $ 105,000.00 $ 605,000.00 $ 500,000.003.05% $ 106,750.00 $ 606,750.00 2029 $ 500,000.003.00% $ 90,000.00 $ 590,000.00 $ 500,000.003.05% $ 91,500.00 $ 591,500.00 2030 $ 500,000.003.00% $ 75,000.00 $ 575,000.00 $ 500,000.003.05% $ 76,250.00 $ 576,250.00 2031 $ 500,000.003.00% $ 60,000.00 $ 560,000.00 $ 500,000.003.05% $ 61,000.00 $ 561,000.00 2031 $ 500,000.003.00% $ 45,000.00 $ 545,000.00 $ 500,000.003.05% $ 45,750.00 $ 545,750.00 2033 $ 500,000.003.00% $ 30,000.00 $ 530,000.00 $ 500,000.003.05% $ 30,500.00 $ 530,500.00 2034 $ 500,000.003.00% $ 15,000.00 $ 515,000.00 $ 500,000.003.05% $ 15,250.00 $ 515,250.00 Total $ 10,000,000.00 $ 3,150,000.00 $ 13,150,000.00 $ 10,000,000.00 $ 3,202,500.00 $ 13,202,500.00

11. Why VPSA?  Cost (continued)  Strength of local GO’s issued for essential public purposes (schools) helps maintain high credit quality of the program and…..  Helps keep the Authority’s costs low; minimal credit analysis  High ratings mean lower interest rates 10 MMD Yields September 8, 2015 Municipal Market Data General Obligation Yields Aaa Aa A Aa to A Spread 20160.230.270.390.12 20170.610.670.80.13 20201.371.51.750.25 20252.182.392.740.35 20302.642.883.260.38 20352.883.123.50.38 20403.043.283.660.38 20453.113.353.730.38

12. Positive Credit Features  Essential public purpose – schools  Three levels of security provide high degree of confidence  General obligation (GO) bonds of locality  State-aid intercept mechanism  If a payment default occurs on a local school bond, state comptroller can withhold any amounts appropriated to that locality and apply the withheld amount to their local school bond  Prevents default on the VPSA bonds  Sum-sufficient appropriation  If the amount intercepted is insufficient, an appropriation from the Commonwealth covers the shortfall  Literary Fund  General Fund 11

13. Positive Credit Features  The three levels of bondholder security are unique, and result in VPSA’s high credit ratings  This means borrowers in the program – regardless of the localities’ underlying rating realize the benefit from the Authority’s ratings  There has never been a local default on a VPSA Bond 12

14. Key Features - VPSA’s Pooled Bond Program  Bonds sales conducted two times each year – Spring & Fall  Local GO Bonds only  Maintains credit quality  Requires minimum credit analysis  Local school bonds sold to the VPSA are excluded from referendum requirement  Financing terms can range from 10 to 30 years  Amortization is typically level debt service or level principal  Delayed principal and other structuring features are possible 13

15. Refunding Opportunities  Savings opportunities for the pool are rigorously monitored  Refunding issues are regularly undertaken by the Authority  Savings are passed through to local participants through a debt service credit IssuePar Amount Series Refunded Savings Distributed Localities Involved March 2005$230.6mm5$8.7mm61 February/March 2009$114.2mm4$6.9mm33 October 2009$481.3mm7$28.7mm29 September 2010$85.5mm2$3.4mm15 February 2012$282.2mm6$21.9mm25 May 2014$227.3mm3$19.9mm20 February 2015$466.6mm7$55.4mm24 Total$1,421.1mm$144.9mm 14

16. Other VPSA Financing Programs, continued  Stand-Alone Bond Program  VPSA serves as the conduit issuer for a locality  Useful for highly rated localities that do not benefit from the VPSA’s credit enhancements (i.e., have a rating higher than that of the Authority)  Bond rating based on that of the local borrower 15

17. Other VPSA Financing Programs - continued  VPSA Technology Grant Program  Five year notes  Authorized through the Appropriation Act – DOE formula  Finances computer based instructional and testing system for Standards of Learning (SOL) and high speed Internet connectivity  Typically Spring sale  Repaid from an appropriation from the Literary Fund  VPSA School Security Equipment Grant Program  Five year notes  Authorized through the Appropriation Act  Awarded on a competitive basis  Up to $100,000 per division with a 25% local match  Applications available on DOE website and due August 1, 2016  Repaid from an appropriation from the Literary Fund 16

18. VPSA Process  VPSA establishes sale calendar (January/July)  Application packages distributed to localities  Applications reviewed; questions resolved  VPSA Board of Commissioners meets; approves applications; authorizes issuance of bonds  Ratings applied for  Bond documents (POS/NOS), sizing finalized  VPSA sells bonds and formally accepts bond sale agreements from localities  Closing documents drafted and reviewed by VPSA bond counsel  Bond closing – bond proceeds wired to locality accounts in SNAP 17

19. Key Responsibilities of the Borrower/Borrowers’ Counsel  Obtain School Board approval of application to VPSA  Submit application for participating in Fall/Spring Pooled Sale  Project information  Obtain Board of Supervisors approval of bond resolution  Review and verify preliminary numbers  Resolutions/ordinances filed with Circuit Court  Bond Sale Agreement returned to Authority with tax questionnaire  Draft closing documents submitted to VPSA/bond counsel  Account registration forms to SNAP for bond proceeds  Comply with Proceeds Agreement 18

20. Key Responsibilities…(continued)  Post – issuance  Localities’ obligations set out in Use of Proceeds Agreement  Arbitrage rebate  Change in use/private use of tax-exempt financed facility  Spend-down requirements  Practice Continuing Disclosure!!  Are you a MOP?  www.emma.msrb.org www.emma.msrb.org  State and Local Government Toolkit  www.msrb.org/MSRB-For/Issuers/Issuer-Toolkit.aspx www.msrb.org/MSRB-For/Issuers/Issuer-Toolkit.aspx  Learning about Municipal Bond Issuance 19

21. Future Challenges and Opportunities  VPSA well positioned for future with its programs  Direct Literary Loans and/or Interest Rate Subsidies – unlikely  Interest rates expected to remain low  Commonwealth ties to Federal Government  Sequestration reduced the amount of QSCB/BAB subsidy, but not significantly 20

22. 21 VPSA Financing Team Virginia Public School Authority - Virginia Department of the Treasury Janet Aylor Director of Debt Management (804)371-6006 janet.aylor@trs.virginia.gov Jay Mahone VPSA Program Manager (804) 225-4928 Jay.mahone@trs.virginia.gov Financial Advisor Davenport & Company Jamie Traudt Ty Wellford VPSA Bond Counsel McGuire Woods Arthur Anderson T.W. Bruno Melissa Palmer Senior Financial Analyst (804) 225-4926 Melissa.palmer@trs.virginia.gov http://www.trs.virginia.gov/Debt/vpsa.aspx