DALLAS — The Port Arthur Independent School District plans to offer $75 million of unlimited-tax bonds next week to begin construction of a new elementary school and complete renovations across the Gulf Coast district.
RBC Capital Markets is the financial adviser to the district, which is in the far southeast corner of Texas. Creighton, Fox, Johnson & Mills PLLC serves as bond counsel.
The underwriting syndicate for next week’s negotiated sale includes Morgan Keegan, Southwest Securities Inc., Merrill Lynch & Co., Citi, Siebert Brandford Shank & Co., and Estrada Hinojosa & Co.
Most of the bonds are structured as serials reaching final maturity in 2039. About $1.5 million of the debt will be capital appreciation bonds maturing in 2012 through 2015.
The bonds will be insured by Assured Guaranty Corp. rather than coming to market backed by the state’s triple-A rated Permanent School Fund, which has been suspended guarantees until at least September due to the declining value of the fund.
Mark Porterie, executive assistant to the superintendent, said the district isn’t eligible for the PSF bond-guarantee program anyway because declines in enrollment put the debt-per-student ratio higher than the state-mandated maximum of $1,250.
Following the sale, Port Arthur ISD will have $49.5 million of authorized but unissued debt from a $189.5 million bond package approved by voters in November 2007. Porterie said officials anticipate bringing the rest of the debt to market next spring.
Enrollment within the district’s 15 campuses has fallen by roughly 1,400 students since 2003 to about 9,275 for the current year. Officials project slight growth in the student population over the next five years reaching about 10,000 by 2013.
Unlike many areas of the Lone Star state, the city of Port Arthur has a declining population. The city is now home to about 55,700 down about 3.6% from an 57,755 as of the 2000 Census.
Ahead of a sale by the district last year, David Tiffin, vice president with RBC, said increasing the $1,250-per-student debt maximum “is something we may have to address through the Legislature,” because rising construction costs and rapid enrollment growth at some school districts across the state have rendered that figure somewhat irrelevant and outdated.
Moody’s Investors Service assigned its A3 underlying rating to the upcoming sale and affirmed the rating on $243 million of debt, including the pending sale.
Fitch Ratings rates the district’s underlying credit at A-minus, while Moody’s said the A3 rating reflects the district’s “growing, but concentrated tax base, improving financial position, and above-average debt burden.” Analysts also said flat enrollment trends are moderating the district’s operational pressures.
The district’s locale, on the the west shore of Sabine Lake directly adjacent to the Gulf of Mexico, provides an attractive location for petrochemical companies to operate, according to analysts.
The 2009 taxable assessed value rose 12.8% to $5.21 billion from about $4.62 billion the previous year with much of that attributable to new construction, according to Moody’s. The current assessed value is 163% higher than the $1.98 billion in fiscal 2000.
Analysts said the district’s “potential for rapid assessed valuation will increase revenue streams significantly; yet, current and future levels of industry concentration will require careful planning to avoid pressures associated with future petro-chemical volatility.”
The 10 largest taxpayers within the district account for an unusually large 64.7% of the tax base, with one refinery accounting for 28% and another for 14.5%. Moody’s said one planned a $7 billion expansion of its facility over the next few years, but “market conditions are compelling” the company to push the completion date back to 2012 from a prior estimate of 2010.
