DALLAS - The Maricopa County, Ariz., Community College District will use proceeds from today's competitive sale of $220 million of general obligation bonds to complete more than half the work promised to voters in 2004.
The sale is the third tranche from $951.3 million of debt authorized by 76% of voters at an election in November 2004. Proceeds are dedicated to the district's 10-year capital plan to increase classroom capacity, upgrade technology at the 10 campuses in the system, and acquire land for future expansion.
The 10-year capital improvement program calls for the addition of one million square feet of new space for classrooms, laboratories, and related facilities, and renovating another 600,000 square feet of existing space.
The district issued $190.3 million of the GO bonds in 2005 and $240 million in 2007. All the proceeds from the 2005 sale have been expended, and all but $39 million from the 2007 sale have been expended or dedicated.
The 2004 authorization is scheduled to be exhausted with tranches of $250 million in 2011 and $51 million in 2013.
"We'll have 60% of the bond projects completed by the end of 2009," said Debra Thompson, vice chancellor for businesses services at the district.
Thompson said she expects significant interest from investors in the bonds, which carry unenhanced triple-A ratings from the three major agencies.
"It's an uncertain market, but the district is a solid credit with a history of strong financial management," she said. "We get a lot of investor attention whenever we take our bonds to the market, and we're confident that will be the case with this debt."
With the sale, the district will have $727.4 million of outstanding GOs and $15.9 million of revenue bonds.
Gust Rosenfeld PLC is the district's bond counsel. Financial adviser is RBC Capital Markets Corp.
The bonds have a maximum maturity of 15 years, with an average life of about 9.5 years. Principal retirement is rapid, with 74.8% retired within 10 years.
The college district is a political subdivision of the state. Even though it shares the geographic boundaries of Maricopa County, it is a separate and distinct legal entity.
The district issues bonds on a cash-needed basis rather than when specific projects are scheduled, Thompson said, which allows many projects to be under construction at the same time. At any given time, she said, dozens of bond-financed projects might be under way at a number of campuses.
"We issue bonds in advance of when the money is needed rather than reimburse ourselves for previous expenditures," Thompson said. "This is all going forward."
The effort to add classroom space at the district's 10 campuses across Maricopa County is driven by the county's vigorous if slowing population growth and the need to upgrade existing facilities to modern educational standards, Thompson said.
In addition to the 10 accredited colleges in the system, the district also operates two learning centers and two charter high schools.
"The capital program is primarily driven by growth, and we are also renovating our existing classrooms and other facilities that were built in the 1960s or 1970s but never upgraded," she said.
The district has one of the largest tax bases of any community college district in the country, although its total assessed value is expected to decline over the next few years due to an increase in the unemployment rate and other economic stresses in the county.
The district serves Maricopa County, the fourth-largest county in the U.S. with almost four million residents. Cities in the county include Phoenix, Mesa, and Scottsdale, which make up more than 60% of the entire population of the state.
Maricopa's current net-secondary assessed valuation, which supports the district's GO debt, is $58.3 billion, up from $30 billion in fiscal 2005. The assessed valuation grew 36.5% in fiscal 2008, from $36.3 billion in fiscal 2007 to $49.5 billion a year later.
However, county officials expect assessed values to drop 1% in fiscal 2010 as residential values fall, due to a large number of foreclosures and a general weakening of the regional economy. Home prices in the Phoenix area were down 34% in December 2008 from December 2007.
The rapid increase in assessed valuations over the past five years has enabled the college district to use less of the property tax to support voter-authorized debt than was expected when the bond program began.
Voters were told in 2004 that it would take a tax rate of 16 cents per $100 of assessed valuation to support the entire $951.3 million bond program, but the current rate is about 10 cents per $100 valuation.
The economic slowdown in Maricopa County - which is seeing record numbers of home foreclosures and an increasing unemployment rate - won't affect the district's finances before the fiscal 2009 budget due to Arizona's mandated two-year lag in property assessments.
A slower economy tends to boost enrollment at community colleges, Thompson said, and that is becoming apparent in Maricopa County.
"We did have a slight drop in enrollment over the past two years, but we've seen more interest as the economy has turned down," she said. "Enrollment was flat in the fall, but we had a 4% to 5% increase in the number of students registering for the spring semester."
The district is the largest provider of health-care job training, and those offerings are becoming more popular in a down economy, according to Thompson.
"We have nurse training programs at nine of our 10 colleges," she said. "Six years ago, only four or five did."
District revenues totaled $734.6 million in fiscal 2008, up 6% from fiscal 2007. Property taxes accounted for 54% of revenue, with tuition and fees contributing 24% of total revenue. State aid and shared taxes provided another 10%.
State aid has been reduced in recent years due to budgetary constraints, with the district losing $2 million in appropriations and $11 million in capital funding in fiscal 2009. Thompson said the district has taken steps to reduce its expenses as a result of the cuts in state aid and in anticipation of more cuts in the future.
"As the state cut its aid to the district, the district cut $10 million in operational expenses," she said. "We've also identified additional future cuts. We're planning in case state aid goes down by as much as 10%."
