DALLAS — After a plethora of school bonds were sold in September, there’s been a dearth of new school debt issuance for the past six weeks in Texas as economic turmoil escalated nationwide.
Now one school district needs to price an issue to qualify for state funding, while another postponed a sale to await the backing of the state’s triple-A rated Permanent School Fund.
The Bryan Independent School District plans to issue $28 million of unlimited-tax school building bonds today through a negotiated sale led by RBC Capital Markets.
First Southwest Co. and Specialized Public Finance Inc. are co-financial advisers to the central Texas district. Fulbright & Jaworski LLP is bond counsel.
The bonds, which will backed by the PSF, are structured as serials reaching final maturity in 2028. Proceeds will fund replacement of an older elementary school and renovations to existing campuses.
Chief financial officer Amy Drozd said this is the first sale from a $38.5 million bond package approved in May.
“Normally, we would’ve waited until 2009 for this sale, but we recently received word from the state that we qualify for the [Instructional Facilities Allotment] and that requires a sale by Dec. 15,” she said. “So even though the market is not quite where we’d like, it is better than three weeks ago, and we felt it best to do it now.”
Drozd said the district receives $500,000 from the state through the IFA program, which provides funds specificially for debt service.
The district serves about 15,000 students at 20 campuses.
The Northside Independent School District was set to bring $80 million of general obligation bonds to market this week, but will now postpone the sale until the first week of December.
The Texas Education Agency “has set new rules for the PSF because the funds have lost so much, and we needed to give them more notice of the posting of a POS and notice of posting a bond-purchase agreement, before they can give us the PSF backing,” said Oscar Cardenas, assistant superintendent for budget and finance. “We looked at the timeline and figured we could go to market Thanksgiving week, but decided to be patient and just go out the following week.”
He said the backing of the PSF is worth about 10 to 15 basis points for a district’s interest costs.
In June, both Fitch Ratings and Standard & Poor’s upgraded the underlying rating of the district to AA from AA-minus. The upgrades reflect “consistently strong financial management and performance within a rapid enrollment growth environment, continued strong taxable-assessed valuation growth,” and a large and diverse employment base.”
The district serves a total population of about 431,000 in Bexar, Medina, and Bandera Counties, northwest of downtown San Antonio.
The taxable value averaged annual growth of 13% the last five years, including a 20% increase in fiscal 2008 to $27.29 billion, according to analysts.
The upcoming sale is the third from a $693 million authorization passed in May 2006 by voters, who have approved more than $1.9 billion in debt since 1995. The district has about $1.25 billion of debt outstanding.
RBC is lead manager for the negotiated sale. First Southwest is financial adviser and Fulbright & Jaworski is bond counsel.
The rapidly growing suburban district has been adding about 3,000 students annually and will use proceeds from this tranche for one middle school and three elementary schools.
Northside ISD’s enrollment increased 42% the past 10 years to more than 85,500. Officials had projected the total student population topping 100,000 within five years, but Cardenas said growth has abated somewhat and officials are scaling back on enrollment projections.
In the past five years, the district has built 18 new schools and renovated numerous facilities. Another 15 schools are expected to open in the next three years.
On the other side of San Antonio, Floresville Independent School District expects to issue $13 million of GO bonds at some point this week with RBC as lead underwriter.
Voters approved a $63 million bond package in May 2007 for a new elementary school and renovations to other facilities. Officials expect enrollment to climb about 3% annually to nearly 5,000 students by 2016.
Bexar County plans to offer $32.5 million of pass-through revenue and limited-tax bonds via a negotiated sale. Banc of America Securities heads the underwriting syndicate. SAMCO Capital Markets is the county’s financial adviser.
In June, Standard & Poor’s upgraded the county’s credit for the first time in 12 years to AA-plus from AA due, in part, to operating surpluses each of the past four years. The county includes San Antonio and is now home to more than 1.5 million people.