High-quality early childhood education programs have been proven to create positive learning outcomes among children – especially those living in low income communities – and help prevent the need for special education and remedial services between kindergarten and 12th grade. In Salt Lake County, Utah, many children from low-income families have limited access to quality early education. To address this problem, the county launched a Social Impact Bond in 2013 that would provide high impact and targeted curriculum to preschool-aged children from low-income communities. These services are intended to increase school readiness and academic performance, and thereby reduce the need for special education at a later age. Additionally, the school district, the state, and other government entities would realize large cost savings due to the reduction in remedial services. The county hopes to serve 3,500 preschool children by 2018.
- Year Launched2013
- Service Delivery Term (Years)5
- Motivation for ProjectChildren from low-income families have limited access to high-quality early childhood education.
- Project Objective(s)Increase school readiness and academic performance; Reduce the need for special education services
- Individuals Served3500
- GeographySalt Lake County, UT
- Issue AreaEarly Childhood Education
- Initial Investment ($ millions) [Note 2]7
-  This category captures the initial private investment raised to support the project that has the potential to be repaid if the project achieves its pre-determined outcomes. Many projects, particularly those in the supportive housing and health arenas, leverage existing public resources, such as subsidized housing and health insurance, to achieve program impact; the value of these resources is not included in these dollar values but are discussed in more detail in Sections 7, 8 and 9 of this report.
- Service Provider(s) [Note 1]Granite School District; Park City School District; Guadalupe School; YMCA of Northern Utah; Children's Express; Lit'l Scholars
- Payor(s) [Note 2]United Way of Salt Lake; Salt Lake County (cohort 1)/ State of Utah (cohorts 2-5)
- Transaction Coordinator(s) [Note 3]United Way of Salt Lake
- Evaluator [Note 4]Utah State University
- Validator [Note 5]None
- Project Manager [Note 6]United Way of Salt Lake
- External Legal Counsel [Note 7]Holland & Hart LLP; Mannatt
- Technical Assistance Provider(s) [Note 8]Voices for Utah Children; Granite School District
-  Delivers program interventions to target population over the course of the PFS contract
-  Makes payments when pre-determined outcomes have been met
- Roles and responsibilities may include: design and structure of PFS project and financing model; capital raise; stakeholder management; on-going performance management
-  Design and implement plan for determining whether outcomes have been met
-  Verify accuracy of data used in evaluation plan, or evaluation plan itself
-  Intermediary during service delivery phase, and/or fiscal sponsor for project funds
-  Provide assistance in drafting, reviewing and negotiating PFS contracts
-  Provide support and expertise to project stakeholders in the project development and/or project implementation phases
Evidence and Program Design
- Service Intervention(s) Model and/or TypeHalf-day preschool: Utah High Quality Prekindergarten Program model
- Evidence base for intervention2 comparative studies [Note 2]
- Has effectiveness of the intervention for PFS project target population been evaluated?Yes
- Has the service provider provided this intervention previously?Partly [Note 3]
- Is PFS project: Scaling an existing intervention by replicating at a larger scale? Demonstrating the effect of a new program model or combination of services? Transplanting an existing intervention(s) to a new target population and/or service delivery setting?Scaling
-  The Utah High Quality Preschool Program was evaluated as part of the U.S. Department of Education’s Early Learning First program. The research design was a two-group comparative design with pre-, mid- and post-assessment, and compared students in 15 classrooms receiving the program with twelve classrooms deemed to be at a similar risk level. The project was conducted over three academic years, 2006-07 to 2008-09, with an independent evaluation each year of the project. Another study funded by the W.K. Kellogg Foundation compared students receiving the Utah High Quality Preschool Program with students not receiving preschool services in the 2012-12 school year.
- The Granite School District developed and has implemented the Utah High Quality Prekindergarten Program since 2006. Some of the independent service providers had been implementing the intervention prior to the PFS program with grant funding through Voices for Utah Children.
- Evaluation Design MethodologyLongitudinal study
- Data Source(s) for EvaluationGranite School District
- Outcomes Tied to Success Payments1) Use of special education and remedial services
- Outcomes Tracked, Not Tied to Success PaymentsMath and reading proficiency; Secondary and post-secondary school completion; College readiness; Connection to health insurance and health care provider
- Length of Evaluation Period12 years
Service Provider Characteristics and Service Delivery
- Single or multiple service providers?Multiple
- Service provider type(s) (nonprofit, government, private)Public, Nonprofit, Private and Charter School
- Service provider OR site selection methodExisting sites, plus expansion sites selected by intermediary
- Service Provider Experience with PFS InterventionPublic and nonprofit providers had already been implementing program with grant support
- Referral Method for PFS Target PopulationDe facto enrollment for all students at PFS program sites
- Did the project have a ramp-up phase? (Y/N; brief description)No
PFS Contracting and Governance
- Operational Oversight Structure [Note 1]United Way of Utah as project intermediary manages day-to-day operations of program and reports to School Readiness Board
- Frequency of meetings and/or reportsn/a
- Executive Oversight Structure [Note 2]School Readiness Board housed within Governor’s Office of Management and Budget includes Dept. of Workforce Services and Board of Education representatives, appointees of State Charter School Board, and state House of Representatives and Senate leaders
- Frequency of meetingsQuarterly
- Investor role in project governance?None
- Frequency of reporting to investorsQuarterly
- Non-standard Contract Termination Events [Note 3]None
- Appropriations Risk Mitigation Strategy [Note 4]Annual appropriation earmarked through legislation and reserved in restricted fund
-  Committee or working group involved in regular and/or day-to-day monitoring of project progress
-  Oversight and decision-making body for PFS project
-  Events that allow stakeholders to exit their contractual obligations, beyond those typically found in loan agreements and contracts
-  Means by which to mitigate risk that funding is not available for investor repayment
- Senior Investor/ Lender and Total Senior Investment ($MM)Goldman Sachs ($4.6)
- Subordinate Investor/ Lender and Total Subordinate Investment ($MM)J.B.& M.K. Pritzker Family Foundation ($2.4)
- Deferred Fee Source and Total Deferred Fees ($MM)[Note 1]None
- Recoverable Grant Source and Total Recoverable Grants($MM)[Note 2]None
- Non-recoverable Grant Source and Total Non-recoverable Grants ($MM)[Note 3]None
- Guarantor and Guarantee ($MM) [Note 4]None
- Illinois Dually-Involved Youth Project
-  Deferred fees are delayed payments for the services provided by service providers, transaction coordinators and/or project managers. Deferred fees are one way of structuring projects so that more stakeholders have a financial interest in ensuring project success.
- Philanthropies can use either their regular grant making protocols, or protocols for program-related investments (PRIs), to contribute to PFS capital stacks. If a foundation does not use a PRI, their investment may be structured as either a loan or a recoverable grant. The distinction between the two is in the expectation of repayment. A loan, even if from a philanthropic source, is expected to be repaid, and structured accordingly. A recoverable grant does not bear the same expectation of repayment.
-  Non-recoverable grants are traditional grants contributed to capital stacks; if the project is successful and generates full repayment, the non-recoverable grants can remain with the service provider or project manager, or be recycled by the original funder.
Basic Repayment Structure
- Initial Investment ($Millions)7
- Maximum Repayment Funds Committed by Payor ($Millions)Not available
- Full service delivery term (years)4
- Full repayment period (years)12
- Interim outcomes reported? Tied to payments?Yes/Yes
- Sustainability/ Recycling of FundsNone specified
Detailed Repayment Terms
- Trigger for initial repayment of principal [Note 1]Any difference between predicted and actual use of special education services for treatment group
- Threshold for full repayment of principal~90% avoidance of special education for students deemed at-risk
- Threshold for full repayment of principal plus maximum success paymentsNot available
- Repayment timingSenior: annually, years 3-10; Subordinate: after senior investment repaid
- Return to Investor [Note 2]5% + municipal money market rate, with a maximum rate of 7.26% [Note 4]
- Success Payment to Other Stakeholders? [Note 3]No
-  Initial repayment does not equate to full principal return. Investors may recover only part of their principal if projects do not meet a certain level of success.
-  There is no standard methodology for calculating investor return. These numbers are what is publically reported, and comparing from one project to another may not be an apples-to-apples comparison for the reason of potentially different calculation methodologies. Calculation methodologies may be provided in investor agreements, which are not available publically and were not available for this report’s analysis.
-  For the first cohort of students, investors will be repaid an additional $1,040 per student year for avoided special education services after principal has been fully repaid.
-  Success payments for other stakeholders such as project managers and service providers create a financial incentive for project success.
- Project Development Costs Not Covered by PFS Capital RaiseTransaction coordinator fees; Technical assistance provider
- Funding source(s) for project development costs, if anyUnited Way of Salt Lake
- Project Implementation Costs not covered by PFS CapitalEvaluation; Project Intermediary
- Funding sources for implementation costs not covered by PFS capitalState of Utah