DALLAS — Expecting a budget shortfall of about $15 million for fiscal 2010, trustees of the Fort Worth Independent School District announced a financial emergency this week as they take steps to plug the gap.

Officially declaring the district is in a “financial exigency” clears the way for the board to begin cutting jobs if they decide to go that route.

“The last thing we ever want to do is cut teaching jobs,” said Cheryl Kennon, the district’s executive director of management and budget. “Hopefully the state will do something, but we can’t wait until [the legislative session ends in] May. And even if we decided to cut just one teaching position, we’d have to file the exigency [with the Texas Education Agency]. ”

Kennon said she’d like to see passage of recent bills filed in the Texas Legislature that provide more flexibility in the tax rates districts can levy, but added “no one knows what they plan to do right now.”

The Legislature in 2006 mandated Texas school districts lower their maintenance and operations tax from a maximum of $1.50 per $100 of assessed value to $1 per $100 over two years.

Many school officials have decried the lower rate, claiming it handcuffs their ability to keep pace with enrollment gains and update aging facilities.

Officials have the ability to add back $0.04 without an election, and Fort Worth ISD, just as about 100 other districts, chose to do so. A district also can seek voter approval to add back another $0.13 to $0.17 to the rate and Fort Worth officials are mulling such an election.

Kennon said the district has begun “tiering programs by evaluating what works best and what doesn’t work” in order to narrow the budget deficit.

She said the district plans to shorten its fiscal year to 10 months ending June 30 from 12 months ending August 31 in an attempt to lessen the deficit to about $11 million.

Last year, the school district adopted a budget that included a $43 million deficit and tapped its general fund to make up the shortfall.

In September, the district completed the first major project outlined in a $594 million bond package approved in November 2007 with the renovation of the athletic tracks of 15 middle schools and construction of one new track.

Plans also call for construction of six new schools and upgrades to existing campuses, many of which are more than 50 years old. In addition, the district hopes to shutter some of the more than 900 classrooms in portable buildings that it currently uses.

The district has been under increased scrutiny for much of the decade. Some proceeds from a $398 million authorization passed in 1999 were mishandled, and a former maintenance employee and a contractor were eventually found guilty of defrauding the district.

Standard & Poor’s assigned a AA underlying rating to the first tranche of the 2007 authorization — $232.1 million of school building bonds sold in February 2008.

Analysts said credit concerns include the revenue-raising constraints due to state’s mainteance and operation tax-rate restrictions, “the challenges associated with shifting demographics and growth pockets, and a sizable capital improvement plan, resulting in a significant increase in the district’s annual debt service requirement and net debt ratios.”

Debt service is projected to climb to $53 million this year and then to $80 million following future issuance from the 2007 authorization.

The district carries an underlying rating of Aa2 from Moody’s Investors Service.

First Southwest Co. is the financial adviser to the district and Kelly Hart & Hallman LLP is bond counsel. 

 

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.