DALLAS - The Houston-area Lone Star College System had its underlying credit raised to AAA from AA-plus by Standard & Poor's as it prepares to come to market with $150 million of general obligation bonds.
Analysts cited the community college system's "record of strong financial performance, low direct debt, and sizable and expanding tax base."
"They saw we are a solid, unified group," said vice chancellor of administration and finance Cynthia Gilliam. "Our chancellor and board chairman helped me make the presentation [before the rating analysts] to show how important it is - from the board level on down - to provide good management and stay ahead of facilities maintenance while providing high-quality instruction and show we're tops in what we do."
Gilliam said the administration is adamant about maintaining strong financial policies, including a minimum fund balance of 16% of operating expenses.
Analysts said management forecasts revenues and expenditures for a two- to three-year period and completed a facilities master plan two years ago.
Standard & Poor's said additional credit strengths include the college's inclusion in the Houston-area economic base, stable enrollment trends, a diverse revenue mix of state funding, local property taxes, and student tuition, and "significant revenue-raising flexibility that offsets any potential pressure from enrollment-driven capital needs," analysts wrote.
Moody's Investors Service rates the system's underlying credit Aa2.
Proceeds from the upcoming sale, which may price through negotiation as early as next week, will fund projects at each of the system's seven campuses.
Gilliam said summer enrollment is up 8% from a year earlier and trends show the fall student population rising by 15% to 16%. About 51,500 students were enrolled last fall and officials anticipate the total student population will reach 70,000 by 2015.
"Of course, anything can happen, but it's certainly possible that we'll see another double-digit gain" in enrollment this fall, Gilliam said.
The sagging economy helps.
"Historically, time and again, when the economy declines more people look to community college," Gilliam said, adding that 75% of all college freshman in Texas are currently attending community colleges.
RBC Capital Markets is the financial adviser to the system, which was established in 1973 and changed its name in January 2008 from North Harris Montgomery Community College District. Vinson & Elkins LLP is bond counsel. The underwriting syndicate was being assembled, Gilliam said.
The coming sale is the second slice of a $420 million authorization voters approved in May 2008.
Gilliam said officials expect to issue the remaining $120 million of bonds from that authorization late next summer.
The sprawling college system covers more than 1,400 square miles and serves all of Montgomery County and portions of Harris, Liberty, and Waller counties. There are 11 independent school districts within the system's boundaries and the total current population is estimated at 1.5 million, more than double the roughly 700,000 in 1998.
