DALLAS — The Austin Community College District will trim plans for its expansion into Hays County after losing a chance to issue Build America Bonds, officials said.
Voters in the Hays Independent School District, south of Austin’s Travis County, agreed to join the community college district in November, as did voters in the Elgin Independent School District east of Austin. But voters in three other districts rejected the proposal to join the college district’s tax base.
While the Austin CCD managed to complete a $33 million BAB issue in mid-December for the Elgin campus, a pending lawsuit in Hays County alleging the district failed to fully disclose information to voters about annexation plans forced it to drop plans to issue $55 million of BABs at the same time for the Hays campus. Loss of the federal subsidy for the taxable bonds cost the district about $20 million in interest costs, officials estimated.
“We do intend to go back upon successful completion of the litigation with a tax-exempt offering,” said Jorge Rodriquez, managing director of financial adviser Coastal Securities Inc. “It will have to be downsized to allow for both the federal subsidy and interest rate movement. Hopefully, we will be in the market in the late first quarter or second should we prevail in the litigation.”
Without an extension from Congress, the BAB program expired on Dec. 31. Nationwide, issuers sold an average of $2.87 billion of taxable bonds a week in 2010, and added more than $13 billion during the first two weeks of December as the deadline loomed, according to ThomsonReuters.
The Austin district originally planned to complete a $45.8 million, 72,000-square-foot campus in the town of Kyle by August, 2013. After the November vote, however, the Kyle campus plan grew to $55.8 million and 100,000 square feet.
After the election, Kyle dentist Ray Wolbrecht sued the Austin CCD, claiming it failed to fully inform voters of the possible tax impact of the annexation.
The college district’s general obligation debt is rated AA-plus by Standard & Poor’s and Aa1 by Moody’s Investors Service. Outstanding debt totals $68 million of GO bonds and $118 million of lease revenue bonds.
The $33 million of BABs sold in December are to be used to build a campus in Elgin to serve 1,200 students. Elgin ISD includes parts of Travis, Lee and Bastrop counties. The new campus will be located on 98 acres of land already purchased by the district.
JPMorgan was the senior underwriter on the December deal.
