DALLAS — The Beaumont Independent School District plans to offer $116.6 million of unlimited-tax school building bonds this week in one of the few larger deals in Texas.
Most of the issuers on this week’s docket carry underlying ratings in the double-A category or better, as the flight to quality continues. And one financial adviser said “it seems only the deals that absolutely have to get done or sales by highly rated issuers are coming to market nowadays.”
Southwest Securities Inc. leads the underwriting syndicate for the negotiated sale by the Gulf Coast school district.
RBC Capital Markets is the financial adviser to the district and Creighton, Fox, Johnson & Mills PLLC and Oliver W. Sprott Jr. are co-bond counsel.
This is the third issue by the district from a November 2007 authorization of $388.6 million for nine new elementary schools, one middle school, a student center and district wide renovations.
Prior to that election, district voters had approved only one bond package in the past 30 years. As recently as 2002, voters rejected a bond referendum despite the district identifying more than $300 million of needs at that time. The district’s 30 schools average 50 years old.
Total enrollment of about 19,400 is down from almost 21,000 in 2001. The district uses more than 200 portable classrooms to alleviate overcrowding in some schools.
Beaumont ISD carries underlying ratings of AA-minus from both Fitch Ratings and Standard & Poor’s and A1 from Moody’s Investors Service.
Analysts said credit strengths include a stable economic base despite the significant presence of the petrochemical sector, strong tax-base growth, strong reserve levels, and moderate overall debt.
Elsewhere, Fort Bend County expects to price $73.5 million of limited tax and refunding bonds. The Clear Creek Independent School District plans to offer about $65.9 million of school building bonds and Carrollton has $39.7 million of general obligation improvement and refunding bonds on the schedule.
Standard & Poor’s upgraded the North Texas town of Carrollton to AAA ahead of the sale. Moody’s rates the city at Aa2 while Fitch rates it at AA-plus.
Standard & Poor’s analysts said the upgrade reflects “management’s strong general fund reserves, augmented by additional reserves in various funds, significant revenue-raising flexibility, and pro-active budget-cutting efforts in periods of revenue softness.”
The city’s diversified economic and employment base, very strong wealth and income levels, and participation in the DFW metroplex economy also help the credit.
The Clear Creek Independent School District, which is about 25 miles south of Houston, is rated AA by both Fitch and Standard & Poor’s.
The Texas school bonds that are expected to price this week won’t be backed by the state’s triple-A rated Permanent School Fund because the bond-guarantee program was suspended last month due to the declining value of the fund.
Jeff Kohlenberg, Clear Creek ISD’s director of finance, said this sale exhausts a bond package approved by voters in May 2007.
“We felt the rate environment is good right now and our ratings are good enough to get this deal done now with a good interest rate,” he said.
Moody’s assigned its Aa2 rating to the Fort Bend County sale, while Standard & Poor’s assigned a AA-plus rating.
Analysts said the county’s participation in the Houston-area economy has resulted in continued property tax-base growth and diversification, which strengthens the credit. The county’s above-average wealth levels and sound financial performance also bolster its credit. Fort Bend County is adjacent to Harris County, which includes Houston.
Uvalde County is bringing $25 million of combination tax and revenue certificates of obligation to the competitive market today.
Southwest Securities is the financial adviser to the county, which is home to 27,200 residents about 75 miles west of San Antonio. Fulbright & Jaworski LLP is bond counsel.
Proceeds will fund construction of a new county jail, new rodeo arena, a parking lot, and road improvements. The certificates are structured as serials maturing in 2010 through 2034. Bond insurance will be considered at bidder’s option.
County auditor Alice Chapman said this is the first debt sale by Uvalde County that she can recall.
“I’ve been here 20 years and we’ve never done something like this in that time,” she said. “The county judge has been here longer than me and he said he cannot remember the county doing something of this magnitude.”
Standard & Poor’s assigned an A rating and stable outlook to the sale. Analysts said the county’s credit strengths include a stable economic base, healthy property tax base, and low debt burden, coupled with limited long-term financing plans. Mitigating credit factors include adequate income levels with.