DALLAS — As a son of migrant laborers who worked his way through college and graduate school, San Antonio Independent School District chief financial officer Larry Garza knows the value of educational opportunity.
"The door to success is one that you can open, but you have to stay in school to open it," Garza tells students.
So, when his district was ready to issue $99.7 million of bonds, Garza invited five seniors from the district's Sidney Lanier magnet school to take part in the process as part of their banking and finance studies.
"I come from a very humble background, so I understand what an opportunity like this means," Garza said. "To be honest with you, some of these kids have never been in a setting like this. We brought them into the school boardroom."
The students from Sidney Lanier, a magnet school for banking and finance, watched the Aug. 27 pricing of one $48.8 million tranche of the bond sale, with presentations from the underwriter, the financial advisor and the bond counsel, among others.
"They got it from the ground up," Garza said. "Now, they have a better framework to understand how public finance works."
School board member Olga Hernandez, a retired SAISD employee and graduate of the district's Thomas Jefferson High School, gave students an overview of the conjunction of politics and finance involved in a bond transaction.
"I told them it was very difficult to pass a bond because the majority of the voters in bond elections in our district are 60 or older, and there is a very low turnout," Hernandez said. "The people who are the voters don't have kids in the district anymore."
Voters approved the bonds in 2010. But planning for the bond election began in 2006, Hernandez said.
"We knew that it was going to be difficult, so we had to put something in the bond proposal for the community," Hernandez told the students. "It couldn't be just for the kids. So, we included all-weather tracks in our schools in the proposal, and we put lights on them so people could have recreational opportunities at night, as well."
To encourage the students to ask questions about the pricing, John Hall, director at the time with underwriter Baird, handed out Pizza Hut gift cards for each query.
"I told them: Don't be scared to ask questions," he said. "I admitted something very personal. It didn't really register until I was 30 and had gone to law school that I realized that people in business often want to help you and want to engage you, but people can't read your mind."
Hall also told them that he was the first member of his family to go to college.
"I kind of took it as an opportunity to show them that this subject of public finance involved a lot of regular people, that it was something they could easily aspire to," he said.
Indeed, Garza's goal in allowing the students to witness the complexities of a major bond issue was to make the business seem accessible, even to students from underprivileged backgrounds.
"I came from a high school in Corpus Christi just like their demographic," Garza said. "When I was their age, my parents had elementary school educations. They were migrant workers, but they stressed to us the importance of school."
During high school, Garza and his brother Oscar decided they would both go into business, supporting each other through the process.
"We said, 'We need to be able to make money to survive,' so we decided to go into business," Garza said. "I usually had two jobs, but I was able to get out of college in three years and went on to earn my masters."
For students whose families struggle to make ends meet in the lower income bracket, just being handed a business card from a banker or finance professional is a big deal, Garza said.
"The industry definitely needs to do more to mentor students who may not come from a privileged background," said Gabriel Gonzales, a Lanier senior who took part in the project. "These children are already deprived of the currency and the material things that more privileged students have and will most likely be deprived of the knowledge needed to get themselves privileged in their futures."
Raul Villasenor, the district's co-financial advisor from First Southwest Co., related the bonds' interest rate structure to issues the students might be considering, such as buying a car, Garza said.
After taking part in the project, the students said they would be able to explain to fellow students in general terms how the bond market works. However, the terminology of the industry and the marketing concepts proved some of the stumbling blocks.
"I feel like I could explain about the process but not in specific details," said Fernanda Deleon, a senior at Lanier. "One thing I could mention is the group of different members involved in the sale of these bonds came from different companies working together. Teamwork was observed during this sale."
Even though the students are specializing in business and finance at the magnet program, "the finance vocabulary that we heard that day are some words we have not learned in our class," said senior Dominique Morales.
"While I am not completely sure if this career choice is necessarily best for me, I could certainly see myself making a career in this field," said Gonzales. "I think the challenge I would have is working with numbers every day."
Garza admitted that even he had not witnessed an actual bond pricing until that day.
"I've been here 28 years and I've never been through one of these issues," Garza said. "My bosses always took care of this. I had never been a participant. We were all curious."
From Garza's perspective, the pricing went very well in a market starved for new issues.
The district sold $49.9 million of bonds with a mandatory put after four years at a yield of 1.15% on Aug. 26 and followed that up the next day with another $48.8 million of bonds with a mandatory put after three years, at a yield of 0.83%. The students took part in the second issue.
The bonds carry underlying ratings of AA from Standard & Poor's and Aa2 from Moody's Investors Service. With a guarantee from the Texas Permanent School Fund, the enhanced rating rose to triple-A.
"We had an oversubscription on the first day of about five times and on the second day about two-plus," Garza said. "We were wanting a bump and we got it."
When the bonds mature in 2044, the high school students will be pushing 50 and possibly at the height of their own careers in the bond industry.
As students at Lanier, they have already been taught to think beyond today.
"Mentoring students from different backgrounds can influence them to reach for the 'X,'" said Lanier senior Deleon. "The letter 'X' represents high school graduation and beyond."
