Regional News

Harris County, Texas, Sees Active Market for Flood Debt

DALLAS — With soaring demand for top-rated, tax-exempt munis, Harris County, Tex., expects strong results Tuesday in its pricing of $205 million of tax-backed refunding bonds, according to the county's financial services director.

"We expect good demand," said director Edwin Harrison. "There's a lot of money out there and a lot of the money that's out there is looking for high-quality paper."

The Municipal Market Data triple-A scale yielded record lows of 2.17% in 10 years and 3.32% in 20 years Friday, following record lows of 2.17% and 3.30% Thursday. The scale yielded 3.69% in 30 years Friday, following Thursday's all-time low of 3.67%.

Muni mutual fund assets have grown this year by almost $54 billion, to a record $518 billion.

Issued in the name of the Harris County Flood Control District, the $205 million of bonds pricing today carry straightforward fixed rates with 30-year maturities.

The county is averse to issuing taxable Build America Bonds, Harrison said, and also avoids using federal funds for toll-road construction.

The new bonds will take out commercial paper used to finance flood control projects in the flood-prone county near the Gulf of Mexico. Houston, the most populous city in Texas, is the county seat and is also home to many of the largest companies in the energy industry.

The $514 million of outstanding debt is rated AAA by Standard & Poor's and Fitch Ratings.

"The district's capital needs are very large but its debt profile remains positive," noted analyst Jose Acosta, who cited its "its very modest direct-debt burden and modest tax rate, enabled by the use of long-term debt supported by the county."

The end of the energy boom in 2008 has thinned Harris County's insulation from the national economic slowdown.

"However, the area's housing market remains relatively healthy as evidenced by steady home prices, which Fitch believes will aid the [local] economy's return to growth," Acosta wrote. "Declining job losses in recent months suggest local economic conditions may be improving."

Created in 1937 to control storm and flood waters and to provide drainage of overflow lands, the district is administered by the county judge and commissioner's court, who approve its budget, set tax rates, and approve contracts on behalf of the district.

The commissioner's court also calls elections and determines when to issue bonds authorized by the county. The district is managed by an executive director who is appointed by the commissioner's court and reports through the county public infrastructure department.

The district maintains a rolling $1 billion, five-year capital improvement plan for work on 15 watersheds, home buyouts, flood plain acquisition, and regional flood control projects. The goal is to fund its annual CIP with $170 million in local funds and $30 million in federal grants.

The local CIP funding begins with the issuance of commercial paper followed by long-term contract tax revenue bonds, supported by county payments.



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