DALLAS - Trustees of the Tulsa County, Okla., Independent School District No. 3 have endorsed a 10-year plan to finance school improvements with proceeds of up to $300 million of lease revenue bonds supported by annual tranches of general obligation debt.

If the trustees officially adopt the program, the lease revenue bonds would be issued by a local trust authority.

The authority would use the proceeds to build new facilities and upgrade existing schools, and lease them to the district. The district would issue GOs annually for debt service on the lease revenue bonds, and acquire the facilities when the lease revenue bonds mature.

The concept was approved unanimously on Monday night, but the size and structure of the financial program have not been determined, said Stephen L. Smith, the district's financial adviser.

"A number of companies have studied the district's needs," he said. "The next step for the [school] board is to determine what projects should be funded, prioritize each project, and determine the size of the financing that is needed to accomplish those projects."

Smith said he expects the revenue bond proposal to be between $230 million and $290 million. Decisions by the school board on the size and structure of the proposal are expected soon, he said, with an election this fall seeking voter approval for the multi-year GO program.

The lease revenue bonds would be issued by the Broken Arrow Economic Development Authority or some other local agency, Smith said. The term on the lease revenue bonds would be 10 years or less.

The district serves the Tulsa suburb of Broken Arrow. It is the sixth-largest district in the state, with an enrollment of more than 16,000 students.

The district's GO debt is rated Aa3 by Moody's Investors Service and AA by Standard & Poor's.

Smith said the lease revenue plan would allow the school district to complete needed upgrades quickly rather than spreading the work over 10 years or more.

Oklahoma law limits school district debt to 10% of assessed valuation, he said, which would permit annual GO tranches of approximately $10 million to $12 million.

"The biggest advantage to the school district is that the local trust authority can issue all the bonds up front, and it is not a debt of the district," Smith said. "As the district pays off its existing GO debt, it can issue bonds to replace them without raising the property tax rate."

Building and upgrading facilities over two to three years limits the district's exposure to construction inflation, he said. The current system of financing school improvements with annual GO bond tranches is not cost effective, according to Smith.

"Broken Arrow cannot keep using the same old one- and three-year bond issues and expect to catch up on over $400 million in basic infrastructure and classroom needs that exist at the current school sites," he said. "That doesn't even begin to address the question of new schools."

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