Anatomy of a New School District Bond
A couple week ago, some organizers were surprised to see a Philadelphia Board of Education 'special action meeting' pop up on the Board's facebook page. The meeting had a very simple description: "This is a special action meeting to consider the authorization of the issuance of General Obligation Bonds." I wasn't totally surprised by this because I'd seen the District announce its intention to sell some bonds in the Municipal Securities Regulatory Board database called EMMA (my favorite research database these days).
The heart of the new issuance sounds like this:
THE SCHOOL DISTRICT OF PHILADELPHIA General Obligation Bonds, Series A of 2021 - $262,845,000* (Tax Exempt Fixed Rate) General Obligation Bonds, Series B of 2021 (Green Bonds) - $49,270,000* (Tax Exempt Fixed Rate) The proceeds of the Series A Bonds, if issued, are expected to be used by the School District to pay: (i) the costs of certain capital projects to be undertaken by the School District; and (ii) the costs of issuance of the Series A Bonds. The proceeds of the Series B Bonds, if issued, are expected to be used by the School District to pay: (i) the costs of certain capital projects to be undertaken by the School District which are designed to be environmentally beneficial by reducing energy usage in School District buildings; and (ii) the costs of issuance of the Series B Bonds.
There's a bunch of things to say about this, some of which are relevant for the bond issuance campaign that might happen locally. Fitch's has an interesting gloss with a few notable points about Philly, the district, and the context of the bonds. They say the BB+ (just above junk rating) for the district reflects "SDP's constrained budgetary environment, with limited independent ability to fundamentally alter its fiscal profile." Yeah bro, it's a school district! In a super-regressive taxation system embedded in racial capitalism!
They say that the City of Philadelphia has a better rating (A-) due to improved economic conditions and the money from federal programs like ESSER makes the school district an okay bet, but the buyer should beware: "the district faces long-term spending pressures including increasing charter school payments and employee compensation costs." They also mention charter schools in the context of the district's financial situation "School enrollment has been declining, pressured by growth in charter schools." Charters are the worst! Particularly since they issue their bonds through the Philly Authority for Industrial Development (PAID). They take from the district and never give, yuck.
But Fitch's stays somewhat optimistic about Philadelphia as a whole:
Jobs expansion had been steady and strong prior to the outbreak of the coronavirus, but comparatively low wealth levels and modest population increases persist, limiting growth prospects. The city's 2020 Census population is 1.6 million, up 5% from the 2010 Census.
Groovy. Philadelphia's in a pretty good spot. Property values have gone up. Population's gone up. Things are still a struggle and we rely on education and healthcare as industry but it's getting better, which is a good indicator if the city were to issue a bond for education. When it comes to the district, they say it "has accumulated a modest level of financial reserves in recent years, bolstered by increased commitments from the city for new and recurring revenues." Double groovy for those playing the private credit game--which, as socialists, we understand to be a broken and repulsive one.
What I want
This issuance is small, private, and appears not to have any connections to the movements. For socialists, that's all wrong. Credit is necessary for getting big projects done in a money economy. We haven't had a significant enough revolution to unseat money from the social structure, to say the least. We don't even have public institutions that issue credit to for public entities like school districts and buildings.
And yet, just to be crystal clear: what I want are no cost, no fee, long-term loans issued by a public entity. Even if we get better state and federal funding (like from the court case heading to trial now in PA), capital programs like infrastructure projects require large-scale borrowing. For that we need institutions whose purpose is to provide that credit.
There have been glimmers of such an entity recently, getting us enticingly close. Philadelphia has public bank legislation slowly creeping through City Hall, but who knows what this bank will be able to do or when it might be able to do it. One iteration of the infrastructure bills moving through Congress at the moment called for a national infrastructure authority, but it got edited out. And of course, there was the Municipal Liquidity Facility at the Federal Reserve. Any of these would have been a step in the right direction.
If you want a sense of why, take a look at the number of tax-exempt bonds that go towards education in this country and the stats on school buildings nationally. It's a stark contrast. Nearly 30% of muni bonds go to education. This is the predominant stream of revenue for school district capital projects, the loans districts need to fix their buildings. The National Infrastructure Report Card, which comes out every year, gives the US a D+ rating for school building infrastructure.
That D+ is effectively a grade for the private credit allocation system we use to finance school buildings. No amount of dressing-up or reforms to this system will work, even ones that sound righteous.
Antiracist private muni finance is not a thing
For example, the investment firm taking point on the district's new issuance is Seibert Williams Shank & Co. This firm markets themselves as progressive: they're woman-owned, the CEO is one of the few Black women executives on Wall Street, they focus on projects that 'benefit' communities color, and stand in solidarity with comrades at BlackRock and Goldman Sachs in their efforts to win racial justice in the muni market space. Wow.
But this firm, diverse though its leadership may be, is peeing on our collective leg and telling us it's raining. They're just as capitalist as other capitalists, engaging in their same shady work that saps our society of its collective product rather than investing it robustly, democratically and nourishingly for everyone.
For instance, if they really wanted to fight for racial justice, they would waive fees in this bond issuance, whose proceeds will go fixing up buildings that serve the diverse working class. These fees are quite high and contribute to the indebtedness of a district ravaged by racial capitalism's worst forces over the last fifty years. They are basically enriching themselves with this situation. I'm curious what they would say to that demand of no fees if Philly organizers, politicians, and policy wonks asked them...
The right kind of bond
What that leaves me with is the hope for the right kind of bond. I want a solidarity bond. A movement bond. A bond whose terms and conditions won't have to be undone on our way to transforming this society. I want a bond that won't continue to bind us in the bad system that led us to the problems we have. I want a non-reformist bond. Honestly, if anything were different about this bond--its process, its terms, the way its negotiated, the way its structured (any or all of these)--I would be happy to support it.