PFMGC Proposal for the Pennsbury School District RFP #2122-011 Merger Feasibility Study (1)

The Pennsbury School District REQUEST FOR PROPOSAL #2122-011 Merger Feasibility Study Project Completion Date: February 28, 2022 by 12:00 PM Introduction: The Pennsbury School District

The Pennsbury School District REQUEST FOR PROPOSAL #2122-011

Merger Feasibility Study Project Completion Date: February 28, 2022 by 12:00 PM

Introduction:

The Pennsbury School District issues this Request for Proposal from financial/educational consultants to conduct a reorganization feasibility study on the Pennsbury School District merging with the Morrisville School District In addition to a full merger, the study will evaluate a model of Morrisville sending all or some students to Pennsbury School District on a tuition basis

The goal in requesting this study is to determine if the merger or tuition relationship is in the best

interest of both school districts, including, but not limited to, if instructional opportunities would be enhanced for all students at a similar or reduced cost to taxpayers

The completed RFP shall be delivered electronically to the Pennsbury School District, to the attention of Chris Berdnik, Chief Financial Officer, at cberdnik@pennsburysd.org, on or before September 24, 2021,

at 12:00 PM

The District reserves the right to reject any and all proposals for any reason as it deems fit The District reserves the right to negotiate further with one or more proposers Respondent shall be expected to furnish the District with additional information as may reasonably be required The District will not be liable for any costs incurred in the preparation of proposals or attendance at an on-site visit

Name of Agency Submitting this Proposal _

Pennsbury School District

Request for Proposal #2122-011

Merger Feasibility Study

Proposal

September 24, 2021

September 24, 2021 Chris Berdnik Chief Financial Officer Pennsbury School District

134 Yardley Avenue

PO Box 338 Fallsington, PA 19058 Dear Mr Berdnik,

On behalf of PFM Group Consulting LLC (PFM), I am pleased to present this proposal with our proposed scope and fee for the merger feasibility study for the Pennsbury and Morrisville school districts

PFM’s Management and Budget Consulting practice is led by former public sector practitioners who are committed to high-quality service delivery for K-12 school districts Through our work with school district clients and the Pennsylvania Department of Education, we have developed core skills in financial, operational, and structural planning for Pennsylvania schools Through our work with the Department, we have evaluated the impact of boundary changes on school districts, including their academic, operational, and financial effects

As the leader of PFM’s K-12 schools consulting practice, I will serve as Engagement Manager for our work The former budget director for the City/County of Philadelphia, I focus on finance and operational improvement for school districts around the country I

am joined by colleagues on our K-12 schools team who have led projects with a wide variety of Pennsylvania school districts Our proposed staff for Pennsbury also includes support from subject matter experts with extensive experience in Pennsylvania: Carol Saylor (a former superintendent), Bob Schoch (a former school business manager with experience in school boundary analyses), and Phil Mowry (a former school district facilities director)

PFM is fully dedicated to providing the resources necessary to complete the study, report, and all necessary follow up communication with representatives from both school boards and administrations, as well as members of the local communities At PFM, serving public sector clients is our first and only priority, and we are dedicated to that work We are enthusiastic about the possibility of collaborating with the Pennsbury and Morrisville school districts and their communities to deliver this important and challenging assignment for you through our independent and impartial analysis

If you have any questions or require any further information, please do not hesitate to contact me at 215-557-1487 or kapland@pfm.com

Sincerely,

Dean Kaplan

Table of Contents

I Background and Experience 3

II Proposed Scope of Services 4

III Project Timeline 9

IV Project Team 10

V Relevant Experience 14

VI Fee Proposal 19

I Background and Experience

Public Financial Management, Inc was founded in 1975 on the principle of providing sound independent financial advice to local and state government agencies Today the firm is the nation’s leading independent municipal advisor to local governments, and our staff work with government leaders every day as partners

to help make public sector institutions the best-managed enterprises in America

Headquartered in Philadelphia, but with a national practice, PFM’s Management & Budget Consulting (MBC) group works with school districts, cities, counties, and states with a focus on long-term financial management and operational improvement MBC has a specialty practice in K-12 school finance with a dedicated team that understands the intricacies and complexities of school budgeting and operations Our team for the feasibility study you have requested consists of professionals who have experience supporting school districts and state education departments nationwide with fiscal planning and budgeting, as well as other services such as organizational efficiency and effectiveness reviews, policy and program analysis, and workforce strategy and negotiation support We are proud to help our clients meet financial challenges with a broad array of services, delivered with professionalism and independence

While MBC has experience working with some of the largest school districts in the nation, we are particularly focused on our home state of Pennsylvania The MBC K-12 practice has worked on multiple engagements with school districts across the Commonwealth, ranging in size from the School District of Philadelphia to the Duquesne School District We serve as technical advisors to financially and academically distressed school districts under the Pennsylvania Department of Education’s oversight program, and we have also worked directly with school districts through other engagements

While there have been relatively few school district mergers in Pennsylvania in the last several decades, there have been proposals to split districts and others to realign school district boundaries to move areas from one district to another These situations require analysis very similar to school merger studies, including reviewing similarities and differences in academic programs, analyzing availability of physical space to accommodate students, determining required changes in staffing for programs, and estimating fixed costs that may remain for central administration and other services As described later in this proposal, PFM and our business manager subcontractor have worked on a variety of these engagements, including the proposed split of the Blairsville-Saltsburg School District, the proposed transfer of the Highspire section

of the Steelton-Highspire School District to the Middletown Area School District, and other engagements Our K-12 team understands the unique needs of contemporary school leaders who must allocate limited resources to meet the increasing needs of students, manage shifts in community demographics, and ensure that all learners are prepared for college or career We pride ourselves in being able to provide independent advice that gets to the core of our clients’ needs, based on their desired scope of work The size and structure of our firm allow us to provide personal service while drawing on a deep bench of subject matter experts As former public officials, we understand the realities of public sector management in a way that only a firm focused on government and non-profit clients can As financial and operational specialists, we understand the balance between education, financial, and operational demands in a way that many law firms or other municipal advisors do not We believe our strengths match the goals of the Pennsbury and Morrisville school districts for the feasibility study, and we look forward to discussing this project with you further to tailor the work product to what you need

II Proposed Scope of Services

Overview

PFM understands that the consolidation of academic programs is interrelated with the evaluation of the financial stability of any new combined school district Our experience working with school districts in the Commonwealth of Pennsylvania provides us with insight to understand the range of options and issues for the academic and operational configurations under a full merger or a variety of tuition agreements Shared services opportunities and possible operational efficiencies can also heighten the potential for success of

a merger or tuition agreement It is essential to prepare an organizational plan that evaluates the likelihood

of long-term financial stability and academic success of the consolidated school district in order to support the decision-making for the leaders of the Pennsbury (PSD) and Morrisville (MSD) school districts and the Feasibility Committee that will help guide the evaluation of the consolidation options

PFM’s proposed scope and approach is based on our involvement with similar operational and financial analyses for Pennsylvania school districts, including multiple boundary change assignments As highlighted in our proposal below, we would work with the leadership of the Pennsbury and Morrisville school districts to tailor this process to meet the specific goals and areas of emphasis that are relevant for your communities

Typically, our engagements follow the structure outlined below For each of the components, we have provided additional detail in the rest of this section

• Stakeholder Engagement: We will work with the Pennsbury and Morrisville school districts to

identify stakeholders to join the Feasibility Committee As a starting point, in the section below

we have included a list of potential stakeholders who represent relevant perspectives In addition,

we will work with the school district administrations to identify a schedule of meetings for both the Feasibility Committee and the two school boards to keep all parties informed on the progress of the study and its findings

• Research: We use your academic, operational, and financial data to develop an understanding

of your programs and budget drivers We also incorporate publicly available information in our analysis through sources such as the Pennsylvania Department of Education and the American Community Survey Finally, we understand that local context is vital to understanding trends, so

we will conduct interviews with your administrative staff and potentially other stakeholders

• Academic and Operational Analysis: In addition to a financial analysis, we will review

academic and operational information to evaluate the potential impacts from the consolidation scenarios For each section, we will evaluate differences between the school districts in the current state, and also identify potential issues that could arise with consolidation Whenever appropriate, we will highlight places where the issues may be different depending on the full merger or tuition arrangements

• Financial Scenario Development: We will use our Excel-based financial model to create

projections for the full merger and the tuition scenarios Baseline projections for Pennsylvania school districts often show a deficit after a number of years, and a clear plan of action is required

to balance the budget and invest in your priorities (this is particularly true given the impact of time ESSER funds through 2024) We will work with you to identify whether the 10-year projection timeframe should include any initiatives such as tax increases or investments in facilities, curriculum, or technology

one-• Reporting: We can deliver the findings and recommendations of our feasibility study in a format

that is most useful to the administrations, the school boards, and the Feasibility Committee; in many cases this takes the form of a narrative written document

In order to achieve the goals outlined by PSD, PFM proposes the following work plan We have based this approach on other successful engagements but have tailored it to our current understanding of the unique needs of your feasibility study We expect that portions of this approach will be modified after discussions with PSD and MSD leadership The plan we have developed is intended to be flexible to meet your needs

as they emerge, and to create a report that clearly analyzes the full range of options under the merger and tuition scenarios and presents a clear path for decision-making for your communities

Refine Project Scope and Kickoff

Written proposal documents can only convey so much of what school district leaders need and want This scope of work is based on our interpretation of your request for services However, we expect that some scope refinement will be critical to delivering the product you expect We view the finalization of the project plan as a collaborative process that will involve input from the PSD and MSD leadership

During our kickoff meeting with the project sponsors, we will review our proposed scope of work with a focus on key activities, milestones, and deliverables, as well as set indicators of project success to ensure that the final report meets all of your needs Our team would also confirm our project liaison and establish working protocols for communication so that you are properly informed about the progress of the analysis

On a parallel track we will develop and share a request for information so that we can begin our analysis of the academics, finances, and operations of the two school districts in advance of our kickoff meeting and subsequent site visits with staff

The outcome of our discussion will be a statement of work that reiterates the project goals for the feasibility study and puts in writing all key issue areas that will be identified and addressed in the plan Finally, it will include an achievable timeline that meets your requirements

Data Request and Staff Interviews

Concurrent with the kickoff meeting, PFM will ask for detailed academic, operational, and financial data from the school districts After receiving the data and holding the kickoff meeting, the team will schedule interviews with PSD and MSD staff based on key operational departments, and program managers For example, this may include elementary and secondary education, student equity, curriculum and technology, child accounting, business office, human resources, transportation, and operations and facilities Our interviews are intended to develop a clear understanding of your current structure with a focus on providing context for trends in operational and financial data, outlining organizational alignment, as well as relevant work processes, technology, and performance metrics In order to provide the perspective of school board members, we would plan to meet with subset of PSD and MSD board members during this process

we will respond to requests from the PSD and MSD school boards to ensure that their questions are addressed during the study In addition, we plan to meet with school board members during the interview process as described in the section above We are committed to working with your stakeholders and elected officials from the outset to develop and execute a process that meets legal, financial, and practical realities while delivering the high-quality information and outputs needed to make this process effective

As technical advisors to the Receivers and Chief Recovery Officers who oversee the implementation of Recovery Plans in several school districts using advisory committees, we have experience coordinating public outreach to communicate complex academic, operational, and financial issues to a broad range of stakeholders including advisory committee members and school boards

In working with you to coordinate our outreach to the Feasibility Committee, we will categorize feedback and direction from the Committee into ideologies as described in the Request for Proposals In this process,

we would combine our experience working with other school districts with input from PSD and MSD administrators to add your local understanding of the context of the communities and your priorities

As a starting point for our proposal, we have included a monthly meeting for the stakeholder group, as this provides sufficient distance between meetings to reach reporting milestones and is logistically feasible We are happy to discuss alternative approaches based on your expectations for the group If requested by PSD or MSD, we can discuss arranging separate public school board meetings in addition to the Feasibility Committee meetings

Academic and Operational Analysis

In order to outline our proposed approach for the analysis, we have created the table below to align the study areas described in the Request for Proposals with potential focus areas for our team Based on our review of the study areas in the proposal, we felt that it was appropriate to add Food Service as a potential study area for the report At the outset of the project, we will work with you to ensure that the focus areas are aligned with your needs from the study We will also discuss potential additions to (or subtractions from) this list as issues are raised by the administration, the school boards, or the Feasibility Committee

Governance •• Policies, procedures, and reporting Transition to consolidation and redistricting, including Board transition and

leadership succession Finance

• 10-year financial projections for the merger and tuition scenarios

• Analysis of millage rate impacts and other locally-generated revenues

• Analysis of state funding impacts

• Consideration of federal funding opportunities and ESSER planning

• Analysis of charter school tuition impacts

Study Area Potential Focus Areas

• Methodologies and alternatives for inter-district tuition Funding Sources • Identify potential sources or strategies to support the transition

Personnel

• Staffing levels and certifications

• Salary schedules and collective bargaining provisions, including comparison

of current collective bargaining agreements

• Existing District administrative standards for coverage, qualification, and other personnel matters

Pupil Enrollment

• Enrollment trends based on current long-term demographics characteristics

• Evaluation of student demographic characteristics from PSD and MSD

• Potential boundary changes for enrollment zones and related impacts

• Evaluation of potential impact on charter school enrollment Facilities

• Summary of existing capital plans and needs

• Analysis of facility capacities

• Potential alignments of school buildings

• Consideration of potential major capital needs during the plan horizon

• Review of custodial and maintenance services and non-capital investment Transportation • Review potential operational impacts from the consolidation

Instructional Programs

• Review of subject areas and programs for the separate districts

• Alignment of curriculum and programs

• Evaluate staffing needs and assignment options

• Evaluation of online/hybrid learning options for PSD and MSD Co-Curricular Offerings • Review of offerings for the separate districts • Identify potential issues with alignment of sports and after school programs Technical School • Analysis of enrollment and cost impacts, if any

Food Service • Review of operations and/or contracts for service, and current eligibility for free and reduced lunch

• Analysis of potential funding or operational impacts under the consolidation Locally Developed

Assurances/Guidelines • Identify potential assurances or guidelines in tandem with school district administrators, elected officials, and stakeholders External Partners

• Understand existing external partnership agreements for contributions

• Review support from higher education institutions, arts and cultural organizations, and other partners which may include dual enrollment, internships, co-ops, and access to other programming

As a result of this portion of the analysis, we are likely to encounter questions that will benefit from further discussion with District leadership and perhaps the Feasibility Committee It will also help us identify and present broader policy issues that the districts will need to consider in ultimately determining what direction

to take, as discussed in the Reporting section, below

Financial Scenario Development

Financial Driver Analysis

Based on the information provided in our requests and supplemented by the staff interviews, our team will outline the key revenue and expenditure drivers of the PSD and MSD budgets Typically, this includes an analysis of the factors that impact these major items, as well as the components that could be impacted by policy decisions from the administrations and school boards We will present the findings from this analysis

to the project sponsors in the context of academic, operational and financial considerations for the potential

consolidation, and we will incorporate the findings from this analysis into our report

Model Development

Using our Excel-based financial model, we will develop a forecast of revenues and expenditures over a

ten-year period for the merger and tuition arrangement scenarios Through our extensive work in the

Commonwealth, we have tailored this model to fit the budget dynamic of Pennsylvania school districts, and

we have streamlined our processes to pull information from a variety of sources to inform the projections

Typical inputs for the model include the historical financial information from your accounting systems, the

adopted budget, enrollment and financial data from the Pennsylvania Department of Education (for

example, average daily membership to support state funding and charter tuition calculations), and

operational data provided by your staff (like charter school enrollment) In our financial projections, we

spend additional time modeling and developing sensitivity analyses for the largest parts of a school district’s

budget In this part of the work, we create detailed tools that allow us to work with you to dynamically

update inputs and recalculate the financial impact for the baseline projections or alternative scenarios

Given the uncertainties in local and state funding over a ten-year horizon, we expect to have considerable

discussion with the project sponsors about assumptions for major revenues and expenditures The timing,

ability to collect and policy changes around tax assessment, the Act 1 index, property tax billing, collections,

earned income tax remittances and other local sources will be a critical component of our work PFM’s

model also includes a detailed state aid projection module that takes into account overall state funding,

your student enrollment (average daily membership) and student demographics, each district’s MV/PI ratio

now and in the future, and other factors to allow dynamic modeling of state aid over time In addition, we

will work with you to incorporate projected expenditures for recurring or periodic investments in capital,

curriculum, and technology In particular, we expect to see a need to regularly reinvest in technology

purchased during the pandemic

Detailed Financial Projections

As indicated in your request for proposal, the merger feasibility study will require detailed treatment of the

financial impact of the consolidation scenarios In addition to the items specified in the document, we have

included other areas based on our experience working with Pennsylvania school districts For each of the

areas below, we develop custom-made modules that are integrated into our financial model The outputs

from these tools and the model will be used in framing our financial analysis for the merger feasibility study

• Projection tool to model assessed

value and collection rate trends for

real estate taxes

• Presentation of millage rate impacts

from the consolidation scenarios

• Projection tool incorporating components of Basic Education Funding formula (ex average daily membership and student demographics)

• Ability to show the financial impact of alternative funding amounts from the

Commonwealth

• Analysis of impacts to components of the Basic Education Funding formula under the consolidation scenarios (ex

revenue impact of MSD students and the Market Value / Personal Income

ratio)

• Dynamic tuition calculations based

on the Commonwealth’s PDE-363