DALLAS - The Douglas County School District Re. 1 goes to market today with a $140 million general obligation issue to finance new schools and school improvements to meet the needs of its rapidly growing student population.
Today's sale is open to local bidders and any leftover bonds will be available for institutional sales on Tuesday.
The sale marks the first issue from a $178.2 million authorization approved by voters last November to finance 10 new schools and additions to nine existing facilities.
The district in April 1999 sold the last $62 million of a $117 million bond authorization approved by voters in 1997.
According to U.S. government reports, Douglas County is the fastest-growing and wealthiest district in the country, with a median family income of $77,450 per year. The district for the last five years has grown by about 2,500 students annually.
The bonds will be sold in a negotiated deal led by Dain Rauscher Inc. Other underwriters for the sale are A.G. Edwards & Sons Inc. and Hanifen, Imhoff.
Although the deal has received favorable ratings from the ratings agencies, the district may decide today to insure it.
"We are currently evaluating exactly what insurance will buy us," said Dain Rauscher managing director Terry Casey. "The bonds have already earned some pretty high ratings from all three ratings agencies."
Moody's Investors Service gave the bonds its Aa3 rating, while Fitch rates them as AA. Standard & Poor's upgraded the credit quality of the deal to AA-minus from A-plus on Wednesday.
"Previous deals by the district have been insured, and this bond issue has qualified for insurance with all four major insurance companies," Casey said. "But it's a great market in terms of rates now, especially if you're a strong credit."
Casey said he expects this deal, with a long coupon of 2021, to earn interest rates at 5% or below.
"It's a pretty compelling story," he said. "They are in great shape as far as wealth, and all indications are that they'll continue to get stronger. The one negative factor, really, is that because of the rapid growth the district has experienced, it's been difficult for them to adequately plan and handle debt pressures. Debt is high here -- a necessity because of growth."
He pointed out, however, that despite the district's outstanding debt, the county's growth has enabled it to decrease its mill levy while continuing to meet debt service.
"The district has consistently cut its mill levy for each of the last four years as a function of rapid growth of both residential and commercial properties," Casey said.
The district's mill levy dropped in 2000 to 47 mills from 49 mills. Its outstanding debt stands at about $251 million, although total overlapping debt from special districts set up by the county to help handle rapid growth is $936 million.
Despite the debt level, ratings analysts believe that the strength of the district make the bonds a good investment. The district's debt burden is $5,650 per capita.
"This is a very strong credit in terms of wealth and planning for growth," said Fitch associate director Jeffrey Burger. "Our only concern was in terms of the additional debt burden the district will take on with this issue, but that debt burden has steadily decreased over the last few years."
