DALLAS — Dallas County, Tex., will take a rare dip into the debt market next week with the sale of $62.5 million of 10-year certificates of obligation to help finance construction of a new jail tower and the replacement of the county’s existing forensic sciences building.
The county rarely resorts to borrowing money, said Matthew M. Boles, managing director of RBC Capital Markets in Dallas, the county’s financial adviser.
“The county funds projects on a pay-as-you go basis, and doesn’t borrow to the extent that many Texas counties do,” he said. “These are short-term certificates that will help facilitate that policy.”
Ryan Brown, director of budget and evaluation for Dallas County, said this issuance should be the county’s last debt sale for some time.
“State law wouldn’t allow us to cash-flow this project,” he said. “We are required to have the money for the entire project in the bank before we are allowed to issue a construction contract.
“Once this project is completed, Dallas County will be out of the large building business for some time,” Brown added. “We’ll be back on a straight cash-flow basis.”Proceeds from the certificates will help build a new four-story, 2,300-bunk jail tower next to the county’s existing jail west of downtown Dallas, and build and equip a new facility to house the county’s Institute of Forensic Sciences.
The new jail will replace a smaller county jail being torn down to make way for the first of three highway suspension bridges over the Trinity River designed by Spanish architect Santiago Calatrava. The Texas Department of Transportation bought the property from the county for $36.5 million, which will also be used for the construction of the replacement tower.
The tower will also replace an existing jail on top of the county courthouse and a nearby former hotel being used as a minimum-security facility. Construction on the jail tower will begin this summer and take about two years to complete.
The new jail addition is expected to cost $55 million. The forensics sciences building will cost about $33.6 million.
Boles said the county would go to market next Monday, with a combined retail and institutional period. The results will be presented to the county commissioners on March 21 for their approval.
“It’s fairly rare to see Dallas County paper coming onto the market,” he said. “It tends to get a very good audience. We’re looking for a good sale.”
Vinson & Elkins LLP is serving as the county’s bond counsel.
The underwriting team includes First Southwest Co., Siebert Brandford Shank & Co., Estrada Hinojosa & Co., Southwest Securities Inc., and UBS Securities LLC.
Dallas County’s current outstanding debt is $176 million, which Boles said was low for a county with a population of its size — 2.3 million — and an assessed taxable property valuation of $135.4 billion.
“That’s an extremely low level of long-term debt, and the county commissioners would like to keep it that way,” Boles said. “The county is very, very fiscally conservative, and it is very well run.”
The county’s debt is rated Aaa by Moody’s Investors Service and AAA by Standard & Poor’s. Boles said the certificates are in the process of being reviewed by the rating agencies, and he expects the county’s triple-A ratings to be affirmed.
The debt is technically styled as combination tax and parking garage revenue certificates of obligation, but very little parking garage revenue will actually be used, Boles said. The county only pledges a total of $1,000 to debt support from the revenues generated by county-owned parking garages in downtown Dallas.
“Texas law requires a pledge of a specific tax or a specific revenue to the debt, so the commissioners arbitrarily chose one of their operations that is actually profitable,” he said. “The debt will be paid from the property tax revenues in the county’s general fund.”
