DALLAS - With the voters behind them, Texas school districts are marching briskly toward the muni market with billions of dollars worth of bonds designed to help them accommodate growth.
Arlington Independent School District, halfway between Dallas and Fort Worth, will lead the parade with $163 million of construction bonds Wednesday in a negotiated deal led by Raymond James. BOSC Inc., RBC Capital Markets, Stephens Inc., and Wells Fargo Securities are co-managers.
First Southwest Co. is the district's financial advisor, with McCall, Parkhurst & Horton as bond counsel.
Arlington ISD's bonds will mature serially through 2039 and are rated triple-A with a guarantee from the Texas Permanent School Fund. Underlying ratings are AA from Standard & Poor's and Aa1 from Moody's Investors Service.
"In our opinion, the district's moderate debt and planned debt issuance constrain the rating," Moody's analyst Oscar Padilla noted.
The deal comes to market less than two months after nearly 70% of the district's voters approved a record $663 million all-or-nothing bond package, the largest in Tarrant County history. Statewide, voters approved more than $5.5 billion of school construction bonds. The pace of the increase in statewide school enrollment in Texas is about the equivalent of adding a Fort Worth independent school district annually.
With the bond proceeds, AISD will soon begin construction on several projects, including a $46 million career and technical center, a $25 million athletic complex, a $32 million fine-arts center, a $2.5 million agricultural science facility and $60 million in multipurpose activity centers.
A day after Arlington ISD's deal, Pflugerville Independent School District in the suburbs of Austin is expected to offer $334 million of bonds approved by voters May 10.
The first two series — $213.7 million of fixed-rate bonds and $47.5 million of tender bonds — are expected to price June 26 through negotiation with senior manager Citigroup. A $72.8 million refunding issue is scheduled for July 14 if interest rates remain low, said Kenneth Adix, chief financial officer for the district.
The tender bonds are soft puts designed to take advantage of lower rates on the short end of the yield curve, Adix said.
"Hopefully, they'll be well received," Adix said of the overall deal.
The bonds will carry triple-A ratings with backing from the Texas Permanent School Fund. Underlying ratings are Aa2 from Moody's Investors Service with a stable outlook. The district's previously issued debt is rated AA-minus with a stable outlook by Standard & Poor's.
The first series of upcoming bonds will mature serially through 2039. Co-managers on the deal are Bosc Inc., Jefferies, Piper Jaffray & Co. and Baird.
Dan Wegmiller, managing director of Specialized Public Finance Inc., is financial advisor, working with Adix, chief financial officer for the district.
The law firm of Andrews Kurth serves as bond counsel.
After this deal, the district will have $565.2 million of outstanding debt, according to Moody's.
"Given the sizeable current issuances, we expect the district's debt burden to remain high over the near to medium term," Moody's analysts James Hobbs and Gera McGuire noted in their June 6 report. "The district's direct debt burden is high at 7.2% and calculated from the district's fiscal 2014 taxable value. With expected growth in taxable values we would anticipate the district's direct debt burden to fall to roughly 6.5%."
Over the last 10 years the district has experienced only two year-over-year declines, in fiscal 2010 and 2011, due to the downturn in the national economy and local housing market.
"Rebounding from the declines, the district's taxable value climbed to a sizeable $7.4 billion for fiscal 2014, which reflects a solid 6% growth over fiscal 2013," the Moody's analysts wrote.
"We anticipate near-term growth in the district's large tax base and enrollment given ongoing development occurring within the district as well as its close proximity to the city of Austin," they added.
Voters in the district authorized a record $287 million by a better than two-to-one margin May 10.
District officials told Moody's that they plan to use all available authorization with this month's issues and the refunding bonds in July.
"The outlook is stable reflecting our belief that sound fiscal management practices at the district will continue and the district's financial position will remain stable over the near-term," Moody's said. "The stable outlook also incorporates expected near-term growth in taxable value as well as enrollment."
Pflugerville ISD's last bond election was in 2007, which provided funding for a fourth high school. The district is projected to continue to grow by approximately 400 students per year.
After hiring an architectural firm that identified $482 million in facility needs, a citizen's committee was developed its bond proposal to the PISD board. The board approved a $287 million proposal on Feb. 24 that would not require a property tax increase.
The bond proceeds will finance replacement of the oldest elementary school in the district, provide new technology districtwide and build a regional stadium that will host athletic and fine arts competitions.
Also scheduled this week is $100 million from the United School District that includes part of Laredo and its suburbs. That deal is pricing through negotiation with Wells Fargo Securities.
While secured by the triple-A PSF, the bonds carry underlying ratings of Aa2 from Moody's Investors Service and A-plus from Standard & Poor's.
The district has $198.6 million of outstanding general obligation unlimited tax and $1.7 million outstanding general obligation limited tax debt, according to Moody's.
"The Aa2 rating reflects the district's sizeable tax base, stable financial position supported by healthy reserves, and manageable debt burden," analyst Charles Martin wrote. "The rating also considers increasing tax base concentration in the oil and gas industry, a below average socioeconomic profile and significant near-term borrowing plans."
