DALLAS - The Houston Independent School District welcomed an upgrade from Standard & Poor's last week, but it's waiting for a second opinion from the courts before it can go to market with $400 million of general obligation bonds approved last November.
The one-notch upgrade to AA-plus made Houston ISD only the second district in the state, along with Lewisville Independent School District, with that underlying rating. There are no triple-A school districts in Texas, but most carry triple-A rated debt through guarantees by the Texas Permanent School Fund.
Moody's Investors Service has not rated the deal yet, but assigns a Aa2 on previous GOs. Fitch Ratings does not rate the district.
Litigation has stymied Houston ISD's ability to sell any of its $850 million of debt voters authorized last November.
Nearby Waller Independent School District is facing similar lawsuits from the same attorney on similar grounds. In both cases, plaintiffs claim racial discrimination in proposed use of the bond proceeds and violation of state open meetings laws.
One suit accuses the Waller ISD of using $17 million of "Robin Hood funds" from state equalization payments to build a new stadium while giving a historically black elementary school on the Prairie View A&M campus short shrift.
Delay beyond March 14 in issuing the debt approved in May 2007 could cost Waller ISD its triple-A backing from the Texas Permanent School Fund and potentially kill the deal.
Both the Houston and the Waller districts need clearance from the Texas attorney general's office to go to market. But the office has said it cannot authorize the sales until all litigation is cleared up.
Attorney Ty Clevenger, who started with a single lawsuit against Waller ISD from county Justice of the Peace Dewayne Charleston, has expanded his arena to include state and federal court actions, appeals to the Texas Supreme Court, and a constitutional challenge to Texas' Expedited Declaratory Judgment Act designed to prevent lawsuits from blocking securities sales indefinitely.
Vinson & Elkins attorney Patrick Mizell, who represents both districts, is seeking a writ of mandamus from the state Supreme Court ordering the attorney general's office to approve the bond sale for Waller ISD.
Accusing Clevenger of using "crafty lawyering" to stop the bond issue, Mizell's petition urged the court to uphold the Expedited Declaratory Judgment Act designed to "stop the age-old practice of allowing one disgruntled taxpayer to stop the entire bond issue by simply filing suit."
Delays are costing the taxpayers hundreds of thousands of dollars in increased construction costs, Mizell's brief to the Supreme Court states.
In a letter to Mizell, Clevenger said Waller ISD has ignored his efforts to negotiate a settlement, and "on our end, we are fast losing any interest in negotiation. We're quite close to killing this bond outright and, given the district's complete lack of good faith, we're increasingly inclined to do just that.
"There is no question that the district needs new school facilities, and there is no question that it will need bond money to do that," Clevenger noted. "My clients want that to happen just as much as anyone else. But they have no confidence that the current administration or the current board will do the right thing - none whatsoever."
In Houston, school officials have issued public pleas to end the legal challenges so that construction can begin.
Superintendent Abelardo Saavedra went to the 45-year-old Frost Elementary School last week to show the repairs that were needed.
"After three months, it is time that the will of the voters be heard," Saavedra told a crowd at the school, according to news reports. "We are asking those very few people who are opposing us with legal maneuvers to stop."
