DALLAS — One of the largest and fastest-growing Texas school systems is coming to market later this month with its latest tranche of debt to fund construction of more campuses to deal with a recent influx of more than 3,700 students annually.
The Northside Independent School District in suburban San Antonio plans to offer $90 million of unlimited-tax school building bonds through a negotiated sale following upgrades to AA by both Fitch Ratings and Standard & Poor’s.
The underwriting syndicate for the issue includes Southwest Securities Inc., Frost National Bank, Morgan Stanley, and Banc of America Securities LLC.
First Southwest Co. is the financial adviser to the district and Fulbright & Jaworski LLP is bond counsel.
The bonds, which are also backed by the state’s triple-A rated Permanent School Fund, are structured as serials reaching final maturity in 2038.
This sale, which is set to price the week of June 23, is the second from a $693 million authorization approved by voters in May 2006. Officials plan to issue some variable-rate refunding bonds later this summer and come back to market with another similar-sized tranche of new-money debt next summer.
Northside ISD’s enrollment has increased 42% the past 10 years to more than 85,500 for the most recent school year. Officials project continued growth with the total student population topping 100,000 within five years.
In the past five years, the district has added almost 11,000 students, built 18 new schools, and renovated numerous facilities. And another 15 schools are expected to open in the next three years. The district serves a total population of about 431,000 in Bexar, Medina, and Bandera Counties, northwest of downtown San Antonio.
Fitch upgraded its underlying rating on the district to AA from AA-minus, citing “consistently strong financial management and performance within a rapid enrollment growth environment, continued strong taxable assessed valuation growth,” and a large and diverse employment base.
Standard & Poor’s raised its rating on the district to AA from AA-minus, as well, due to inclusion in the expanding and diversifying San Antonio economy, a deep and diverse property-tax base, and high reserves among other factors.
The higher ratings also apply to the district’s $1.25 billion of debt outstanding, following the sale.
Analysts said the district’s taxable-assessed value averaged annual growth of 13% the last five fiscal years, including a 20% increase in fiscal 2008 to $27.29 billion.
“The distict’s management has done a terrific job dealing with the rapid growth and has been able to amass very large fund balances,” Fitch analyst Jose Acosta said. “They’ve also been able to set aside some additional funds for opening costs associated with all the new schools.”
In the upgrade note, Fitch said the district plans to use nearly $8 million of the designated general fund reserves for the opening of three new schools and a provisional 5% pay raise.
Then for fiscal 2009, officials plan to add back 4 cents to the operations and maintenence levy without voter approval that is allowable under new state law.
Fitch analysts said the district expects these “super pennies” to generate $22 million in additional local and state revenue helping to offset more than $19 million in new-growth expenditures and another $19 million in teacher pay hikes.
Moody’s Investors Service assigned a Aa2 underlying rating to the coming sale. Analysts said while new residential construction continues across the district, which is only about 50% developed, national retail chains along with several commercial centers are now coming to the area.
In addition, Microsoft Corp. is building a 470,000-square-foot data center within the district further fueling growth, according to Moody’s.
