DALLAS — Less than two years after voters rejected a $395 million bond issue, Colorado’s affluent Douglas County School District will issue $79.6 million of general obligation refunding bonds while struggling to cut costs.

The district, which covers the once-booming southern suburbs of Denver, is not alone in facing stiff economic challenges, but the current straits represent a dramatic reversal of the growth years that came to an abrupt halt in 2008.

Douglas County school officials, who once struggled to build fast enough to keep pace with growth, now project modest enrollment increases or a decline in some areas. Building permits in the district fell 70% from December 2006 to 2008, while certificates of occupancy plunged 65%.

“These startling trends are critical indicators that have impacted the forecasting of future student enrollment, especially given the relationship of housing activity and expected student enrollment as depicted in the student growth-curve model,” the district noted in a capital plan report.

Despite the harder times, the district retains solid ratings of AA-plus from Fitch Ratings and Aa1 from Moody’s Investors Service for the upcoming issue.

“Voters’ recent rejection of a large bond authorization will not hamper the district’s ability to serve its growing enrollment base given existing capacity available through flexible year-round instructional schedules,” Fitch analysts said.

The debt, expected to price this week, will include $79.4 million of current interest bonds and $135,000 of capital appreciation bonds in a single series. RBC Capital Markets is the only underwriter. The law firm of Sherman & Howard is bond counsel. With maturities through 2023, the new issue will refund bonds with final maturities in 2030. Officials expect to see net present-value savings of $2.6 million, about 3.3% of the refunded bonds.

Overseeing the issue is David D. Hart, who is resigning as the district’s chief financial officer as of June 15. Hart was previously manager of revenue for the Denver. He joined the district in July 2007.

In April, the school system also announced the hiring of Elizabeth Celania-Fagen as superintendent after a national search. Celania-Fagen, who was superintendent of the Tucson Unified School District in Arizona, managed a budgeting process that cut spending by $40 million this year. Celania-Fagen replaces interim superintendent Steven Herzog, who was previously chief operating officer.

A year after voters rejected a district bond proposal for the first time in 19 years, they elected a slate of Republican school board members who ran in opposition to incumbents and candidates backed by the teachers’ union. The GOP challengers claimed the union was shielding its members from the district’s falling revenue and that trustees had cut services such as buses instead of teacher pay or positions.

Now, the newly elected school board is preparing to charge students for bus service at the rate of 50 cents per one-way trip. Families with several children could see a significant rise in school costs in the district, which includes large rural areas.

The board will decide next week whether to approve the bus fee after holding a public hearing and a survey that showed 51% of the district’s residents preferred the fee to cutbacks in service.

If Douglas County approves the fee, it would be the first district in Colorado to do so, but others are considering similar approaches amid falling revenue.

Douglas County schools face a $43 million shortfall in the fiscal year beginning July 1 after trustees cut $33 million, or 7%, of this year’s $453 million general fund budget. Harsh measures were enacted after voters in 2008 refused to allow an operations and maintenance property-tax override along with the bonds.

The district still needs $12.5 million of savings to retain a fund balance for the 2011 fiscal year, according to Fitch. Under a revised fund-balance policy, the district increased its reserve from 5% to 7% but included a letter of credit that accounts for 3% of the overall reserve.

“Fitch does not consider the LOC as a sufficient replacement for a balance sheet reserve, and views the policy change, in effect requiring a 4% reserve, a satisfactory but weakened level,” analysts wrote.

All Colorado K-12 school districts are facing reduced budgets due to sharp state revenue shortfalls, officials say. The budget for 2010-11 that was signed into law by Gov. Bill Ritter includes a $370 million cut for K-12 education, including a rescission of $110 million. Public schools make up 43% of the state’s budget.

The state is rescinding $10 million to $12 million from the Douglas district.

“We expect the state to fund Douglas County School District at $31-$36 million less for the next school year,” the district said in a public statement. “Due to the past budget reductions and the current state revenue shortfall, the district is expected to reduce its budget by approximately $100 million over a four-year period.”

To raise additional revenue to cover operation and maintenance, school districts must get voter approval under a provision of the state constitution known as the Taxpayer Bill of Rights, or Tabor.

Approved by Colorado voters in November 1992, Tabor restricts taxes from increasing beyond population growth and inflation without voter approval.

Eight years after Tabor, voters approved Amendment 23, which increases per-pupil funding and total state funding for special-purpose education programs by at least the rate of inflation plus one percentage point for the next 10 years and by at least the inflation rate after that. The amendment also established the State Education Fund and exempted it from Tabor restrictions.

Despite Amendment 23, total state funding for education is dropping from $5.6 billion this year to $5.45 billion next fiscal year due to the financial crisis. Under the Amendment 23 formula, funding should have increased to $5.8 billion.

And matters could grow much worse for the state and its school districts if voters approve one or both proposed constitutional amendments on Colorado’s November ballot. Amendment 60 would override Amendment 23 and restore the Tabor tax limits, cut current property tax mill levies in half by 2020, and apply a 10-year limit on future property tax increases.

Amendment 61 would require voter approval for all loans, even short-term commercial paper, and require that all local debt be repaid within 10 years. On the state level, it would ban all borrowing, even revenue anticipation notes used to smooth cash flows to school districts during the fiscal year.

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