Fort Bend ISD's $270M Sale Is the Headliner This Week In Texas

DALLAS — A few Texas school districts will look to price bonds this week as the state continues to await a ruling on increasing capacity for its triple-A rated bond guarantee program — the Permanent School Fund.

In March, the Texas Education Agency suspended the program because the value of the fund “had declined to the point that outstanding guarantees … exceeded capacity under the federal regulations.” Education commissioner Robert Scott initially hoped the bond guarantee program would be available again as early as September after the seasonal retirement of bonds in August added some capacity to the fund.

But last week, the TEA said the credit enhancement won’t be available to wrap bonds coming to market until the Internal Revenue Service issues a ruling on a proposal to increase the fund’s capacity. 

The Treasury Department had the matter on its 2007 agenda but has yet to issue a decision. TEA spokeswoman DeEtta Culbertson said it’s not clear when a ruling may come.

Still, some Lone Star State schools systems are coming to market without the triple-A wrap, as enrollment growth necessitates building new facilities.

The Fort Bend Independent School District will offer $269.9 million of unlimited tax school building bonds at some point this week.

Coastal Securities Inc. and RBC Capital Markets are co-senior managers for the negotiated sale. First Southwest Co., Morgan Keegan & Co., and Estrada Hinojosa & Co. are co-managers.

Southwest Securities Inc. is the financial adviser to the suburban district southwest of Houston. Vinson & Elkins LLP is bond counsel.

The district is adding about 1,400 new students each year and is now the seventh-largest school system in the state with about 68,000 students. It has opened 27 new campuses since 1994, and officials project a total enrollment of more than 88,000 by 2015.

Fort Bend ISD carries underlying ratings of AA from both Fitch Ratings and Standard & Poor’s.

Following this week’s sale, the district will have about $78 million of authorized but unissued bonds and nearly $1.02 billion of debt outstanding. Officials plan to bring the remaining authorization to market within the next 12 months.

Voters approved a $428 million bond package in November 2007 and a $300 million bond referendum in 2003. The majority of proceeds from the most-recent bond package will be used to build eight new campuses.

The El Paso Independent School District plans to issue about $21.1 million of unlimited-tax refunding bonds at some point this week on the heels of an upgrade to AA-minus from A by both Fitch and Standard & Poor’s.

Southwest Securities and Estrada Hinojosa are co-managers for the negotiated sale. First Southwest is the district’s financial adviser and Fulbright & Jaworski LLP is bond counsel.

The Series 2009 bonds, which take out Series 2002A bonds, mature in 2010 through 2013.

Treasury manager Walt Byers expects the upgrade to result in better interest rates for the district and anticipates present-value savings of about $300,000 from the refunding.

Analysts said the upgrade is due to the district’s “consistently stable financial profile, relatively low debt levels, and a sound regional economy with good near-term growth prospects.”

One mitigating credit factor is the capital pressures associated with a projected surge in enrollment, according to Fitch.

El Paso is now home to about 665,000, which is 18% higher than the 2000 Census figure of 563,662. More than 1.2 million people live across the Rio Grande in Ciudad Juarez, Mexico.

The area is set to see a huge influx of new residents in the coming years, as Fort Bliss is expected to receive more troops as part of the federal government’s Base Realignment And Closure initiative. Some estimates have about 21,000 troops with another 25,000 family members relocating to Fort Bliss by 2012. School officials had projected an increase of up to 10,000 new students under the BRAC plan. Although Byers said that figure now seems a bit high.

The taxable-assessed value of the sprawling, 250-square-mile district increased to $14.21 billion for fiscal 2009, up 46% from $9.7 billion five years ago.

The district exhausted a $230 million bond package approved in May 2007 last year and doesn’t have any authorized but unissued debt.

The Elkhart Independent School District is bringing $16 million of unlimited-tax school building bonds to the competitive market Thursday.

Standard & Poor’s assigned an A-plus rating to the sale, citing the district’s “expanding property tax base, significant support for district operations and debt service from the state, very strong financial position, and limited capital needs.”

Southwest Securities is the financial adviser to the district and Fulbright & Jaworski is bond counsel.

Proceeds from the bonds, which are structured as serials maturing in 2012 through 2039, will fund construction of a new high school.

The district serves about 1,350 students and enrollment is up about 10% the past five years. The total population within the East Texas district is about 6,400.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER