Three billion-dollar-plus requests top local bond slate in Texas
Voters across Texas will consider a record $11.2 billion of local bond proposals on Saturday.
The 86 proposals come from 64 issuers: including 50 school districts, 11 cities, two community college districts and one county.
Their bond requests slightly exceed the $11.03 billion that were on the ballot in November 2017, of which $9.93 billion were approved. State law funnels local bond elections into two dates each year, in May and September.
Voters will decide the outcome as the Texas Legislature is considering lowering a cap on property tax increases allowed by local government and a shifting some support for school districts from property taxes to a proposed higher state sales tax. Lawmakers must decide those issues by the end of May.
On the previous statewide bond election date in November, $8.7 billion appeared on the ballots, with no proposal hitting $1 billion. In this election, three proposals exceed $1 billion. Texas holds bond elections in May and November each year.
The marquee proposal of $1.76 billion comes from the Cypress-Fairbanks Independent School District, which includes part of Houston and ranks as the state’s third-largest. The record proposal comes five years after the fast-growing district won approval of a $1.2 billion issue. Cy-Fair enrolled 116,249 students in the current school year.
With direct debt of $2.5 billion, CFISD carries underlying ratings of Aa1 with a stable outlook from Moody’s Investors Service, and AA with a stable outlook from S&P Global Ratings. The district’s bonds, like those of most Texas school districts, carry triple-A ratings because of a wrap from the Texas Permanent School Fund.
Damage from 2017's Hurricane Harvey has not greatly troubled the district financially.
“Hurricane Harvey's flooding did impact a large number of structures within the district's boundaries in August 2017, but the tax base showed resiliency with a 6.4% increase in fiscal 2019 taxable values to reach $51.9 billion,” Moody’s analysts noted. “In the five-year period through fiscal 2019 annual growth in assessed value averaged a solid 7.8%.”
The largest share of Cy-Fair’s proposal is $969 million for facilities renovations and additions. Along with two new schools, the district plans to add a performance center and an instructional support center.
Passage of the package would require a tax increase of 3 cents per $100 valuation. That would come out to a maximum of $40.50 on a $200,000 home, according to district estimates.
School districts in the Houston area account for more than $3.7 billion of bonds on the ballot, with other large proposals of $807 million from Conroe ISD, $335 million from Goose Creek Consolidated ISD, $267 million from Brazosport ISD, and $250 million from Cleveland ISD.
The Goose Creek proposal comes a year after voters rejected a $376.9 million issue. District officials heeded disapproval of a $50 million multi-purpose center in May 2018 and included critics of that proposal on this year’s bond committee.
Among school districts across the state, Cy-Fair is not alone in breaking the $1 billion barrier. In North Texas, the Prosper ISD on the northern fringe of Dallas’s suburban boom is seeking a record $1.35 billion.
Prosper’s proposal is nearly double the $700 million approved by voters in 2007, which financed eight elementary schools, two middle schools, two high schools, a football stadium and natatorium, a support services and transportation center, and land purchases for future schools.
Since holding a $10.6 million bond election in 1997, the district’s voters have approved $15 million in 2001 and $135 million in 2003.
For a recent pricing of $8 million of bonds, Prosper ISD received underlying ratings of Aa3 from Moody's Investors Service with a stable outlook. S&P confers its A-plus rating with a stable outlook, while Fitch Ratings pegs the district at AA-minus in an April 23 rating.
“Reports have indicated that Prosper ISD is the fastest growing school district in Texas,” Fitch analysts wrote. “The district has a 2019 population of approximately 87,000 according to the Municipal Advisory Council of Texas. The 2019 district average daily attendance of nearly 14,000 is expected to continue its robust growth.”
Straddling Denton and Collin counties, the Prosper bond proposal is emblematic of the explosive growth north of the Dallas-Fort Worth area.
New Census data said the Dallas-Fort Worth metropolitan area had the largest nominal population gain in the U.S. for the third consecutive year, nearly 37% higher than the second-ranked Phoenix metropolitan area.
“This credit-positive growth reflects the region’s urbanization trend and population influx to major metropolitan areas in the State of Texas (rated Aaa/stable),” Moody’s said.
Population in the cluster of counties that make up the Dallas-Fort Worth area grew to approximately 7.5 million in 2018, up more than 130,000 residents from 2017.
Collin County’s estimated population is 969,603 with a growth rate of 2.88% in the past year according to the most recent U.S. census data. Collin County is the sixth largest county in Texas.
Many of the region’s 20 Fortune 500 companies are based in Collin County, including Toyota’s recently relocated U.S. headquarters. Texas Instruments in nearby Richardson recently announced plans to add a $3 billion chip production plant.
“Rapidly growing Frisco (Aaa/stable), a large suburb 30 miles north of the City of Dallas (A1/stable), saw its property and sales tax collections rise by a healthy 24% and 14%, respectively, between fiscal years 2016 and 2018,” Moody’s wrote. “Over that period, the city’s population rose by more than 20,000 residents, a 14% increase.”
With nearly $13 billion in approved new home construction in 2018, 43% higher than any other metropolitan area, the Dallas-Fort Worth area continues to lead the nation in homebuilding.
“The resulting increases in property tax revenues will provide municipalities with added ability to expand services and enhance infrastructure without depleting financial reserves,” Moody’s said
Against that backdrop, cities and school districts in Collin County are asking voters to approve $3.4 billion of bonds, some of it overlapping.
Another school district on the county’s frontier, Celina ISD is seeking a record $600 million. The district, which saw home starts triple in one year, expects to start enrolling 1,000 new students per year in five years. Princeton ISD, a small Collin County district whose enrollment is expected to double in 10 years, is pitching a $237 million bond to keep up with growth.
Nearby, the more established Allen ISD is asking voters to approve $423 million for new schools, renovations, transportation and safety upgrades. Wylie ISD, also in Collin County, has $193.7 million on the ballot for renovations and additions.
The Collin County seat of McKinney and two of the county’s largest cities, Plano and Frisco, are also requesting bonds to finance growth.
McKinney, with about 180,000 residents, has five bond proposals totaling $350 million. Unlike school districts, cities can break up the proposals into individual packages, lessening the possibility of complete defeat.
If the bonds are approved, McKinney plans $100 million for roads, $91 million for parks and recreation, $50 million for a municipal complex and $75 million for public safety.
Plano, the epicenter of the Collin County boom, is seeking $45 million for streets, parks and municipal facilities while neighboring Frisco wants voters to approve $284 million for similar projects.
One of the major players in the region’s job training, Dallas County Community College District, is also making headlines with a $1.1 billion bond proposal.
DCCCD’s last bond program was approved by Dallas County voters 15 years ago in 2004 for $450 million, and the 2019 bond program proposal is only the third in the district’s 53-year history. The general obligation bonds would be sold over a period of six years to fund new facilities, resources, talent and technology to support student success, the community, businesses, and workforce and economic development.
The district plans to use $235 million for industry-aligned workforce projects and programs, $332 million for student-related instruction and success programs, and $535 million for the Dallas Education and Innovation Hub.
“DCCCD serves as the North Texas region’s primary provider for the area’s talent supply chain,” said Chancellor Joe May. “These general obligation bonds represent an investment in the region’s workforce and economic development, which sustain the state, as well as our students and the communities we serve.”
In West Texas, the Pecos-Barstow-Toyah ISD is placing $400 million of bonds on the ballot while in the Lower Rio Grande Valley, the Edinburg Consolidated ISD seeks approval of $220 million.
In the Austin area, Hutto ISD has the largest bond proposal at $194 million.
North of San Antonio, the fast-growing suburb of New Braunfels is listing four proposals worth a combined $117 million.