DALLAS — This week’s Texas municipal market features a nearly $740 million sale by Dallas Area Rapid Transit, three counties issuing debt in multiple tranches, and a few school districts all set to price bonds.
DART plans to offer $739.5 million of senior-lien sales tax revenue bonds Thursday through a negotiated sale led by Merrill Lynch & Co. The debt comes to market on the heels of an upgrade to AAA from Standard & Poor’s. Fitch Ratings downgraded its underlying rating on the regional transportation authority to AA-minus at the same time. Moody’s Investors Service maintained its Aa3 rating on the credit.
Standard & Poor’s analysts attributed the bump up to the highest rating to a rapidly growing service area, strong tax collections resulting in revenue that’s four times debt service, and sound management.
Meanwhile, Fitch analysts said the downgrade reflects rising costs due to light-rail construction, as well as potential costs increases to fund remaining projects that will lead to an additional $529 million in debt issuance beyond the $2.9 billion limit authorized by voters. Fitch also said the decision to take debt out longer to 40-year maturities further hinders DART’s credit.
Proceeds from this week’s sale will fund the authority’s light-rail expansion and refund about $350 million of commercial paper.
Brazoria County is coming to market with an $18 million, two-tranche sale on the heels of two upgrades. Officials plan to issue $10 million of general obligation refunding bonds and $8 million of road bonds in negotiated sales with First Southwest Co. as senior manager.
Last month, both Fitch and Standard & Poor’s raised the underlying credit of the Gulf Coast county to AA from AA-minus due to continued economic expansion and a strong financial performance. Moody’s rates the county’s credit at Aa3.
Fitch said the upgrade reflects tax-base diversification and “prudent fiscal management that has enabled the county to increase its unreserved general fund balance to a very healthy level while managing a rapid population growth.”
Standard & Poor’s cited the county’s expanding economy, with easy access to the Houston metropolitan area, strong wealth and income levels, and “proactive budget management” in the upgrade.
Estrada Hinojosa & Co. is the financial adviser to the county and Allen Boone Humphries Robinson LLP is bond counsel.
Montgomery County will offer $45.3 million in three tranches at some point this week through a negotiated sale led by First Southwest.
The Central Texas county plans to issue $23 million of certificates of obligation, $12.2 million of road bonds, and $10.1 million of limited-tax refunding bonds. RBC Capital Markets is the financial adviser to the county, and Fulbright & Jaworski is bond counsel.
The rapidly growing county just north of Houston carries underlying ratings of AA from Standard & Poor’s and Aa3 from Moody’s. Montgomery County’s population is up more than 40% since 2000. The once mostly rural area is now home to about 415,000 residents.
Triple-A rated Collin County plans to bring a two-tranche issue worth about $57.8 million to market Tuesday. Proceeds will fund upgrades to various roads, construction of additions to detention centers, and the refunding of some outstanding bonds.
The North Texas county will offer $41 million of unlimited-tax road bonds competitively and $16.8 million of limited-tax refunding and permanent improvement bonds through a negotiated sale with RBC Capital Markets as underwriter.
First Southwest is the financial adviser to the county and Vinson & Elkins LLP serves as bond counsel.
Collin County, which is adjacent to Dallas to the northeast, has experienced a population boom for several decades. The current population of about 740,000 is nearly triple the 1990 figure. And officials estimate almost 100 new residents move into the county each day.
The county’s fiscal 2008 taxable assessed valuation of $68.64 billion is nearly 40% higher than five years ago.
County administrator Bill Bilyeu said the decision to issue the debt in two separate sales was to achieve the most savings possible with the refunding component. All the bonds to be sold are structured as serials with final maturity in 2028.
As the school year draws to a close, a few Texas school districts are planning to bring bonds to market this week wrapped by the state’s triple-A rated Permanent School Fund.
RBC Capital Markets is lead underwriter for all four issues.
The Corpus Christi Independent School District plans to offer about $22.2 million of refunding bonds and and the Killeen Independent School District expects to price a $9.1 million refunding.
The Everman Independent School District will issue $24 million of school building bonds and the Navarro Independent School District will price $6.5 million of general obligation bonds.
Southwest Securities Inc. is the financial adviser to the Corpus Christi district, which carrries an underlying rating of AA-minus from Standard & Poor’s. Analysts said the rating reflects the Gulf Coast district’s large and growing property tax base, sound financial management, and “moderate carrying charge with rapid amortization of principal outstanding and state support for debt service.” Officials have kept the unreserved general fund balances consistently above 15% of expenditures over the past five years, according to analysts. The district serves about 38,650 students.
Standard & Poor’s also assigned an A-plus underlying rating to the Killeen ISD deal, citing a growing and diversifying property-tax base, and good financial management. Analysts said enrollment within the Central Texas district, which serves Fort Hood, the largest Army base in the country, has climbed steadily the past five years to about 38,400 for the latest school year.
Just south of Fort Worth, Everman ISD serves about 4,800 students at eight campuses.
Superintendent Jeri Pfeifer said proceeds from this week’s sale will fund construction of a new junior high school to accomdate growth.
She said enrollment has increased by about 5% annually the past four years and the district should top 5,000 students next year.
This week’s sale is the second phase of a $45 million bond package authorized by voters in November.
Navarro ISD is 40 miles northeast of San Antonio and serves about 1,500 students in four schools.