DALLAS – Court approval of a plan to repay 100% of the defunct Dallas County Schools’ $113 million of debt is a positive credit factor for bondholders, according to Moody’s Investors Service.

“We expect a small loss on a present value basis given the time value of money,” said analyst Nathan Phelps.

dallas county school bus
Dallas County Schools invested unsuccessfully in cameras mounted on the sides of school buses.

DCS, which will cease operations on July 31, has defaulted multiple times with the most recent coming June 1 on $5.8 million in general obligation limited tax debt.

Moody’s rates the outstanding GO bonds B3 with a negative outlook. The district’s promissory notes are rated C.

Under the court ruling, the general obligation bonds will be repaid from property tax revenue in the district, which provided bus service for Dallas Independent School District and neighboring districts. Voters approved the dissolution of DCS last year after its financial profile deteriorated, partially due to an underperforming bus-stop arm camera enterprise.

DCS’ plan calls for the repayment of the general obligation debt and other obligations by levying an ad valorem tax of up to $0.10 per $1,000 of assessed value. Beginning in 2019, the committee overseeing the dissolution of DCS must deposit funds collected by Dallas County in a separate account to repay the bonds.

“Dallas County’s large tax base of $224 billion looks to yield an annual property tax levy of $21 million to repay the $113.1 million in GOLT debt and other obligations,” Phelps noted.

Principal and interest on the GOLT bonds should be retired by March 30, 2023.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.