DALLAS — The Tomball Independent School District is bringing $53.4 million of unlimited-tax school building bonds to market this week, following an upgrade of its underlying credit to AA-minus from A-plus by Standard & Poor’s.

Fitch Ratings already rates the district at AA-minus and Moody’s Investors Service rates the credit A1. Upgrades indicate the credit quality of an issuer is improving, often lead to lower costs of borrowing for future debt issuance, and may negate the need for bond insurance due to the underlying strength of the credit.

This is the third sale by the suburban Houston district from a $198 million bond package approved by voter in May 2007 for three new elementary schools, a new high school, 35 new buses, and renovations to existing facilities. Two of the elementary schools are to be built in the Woodlands to accommodate the rapid population growth of that area.

Tomball ISD plans to issue the remaining nearly $60 million over the next two fiscal years, according to analysts.

Officials don’t plan to insure the bonds, which are structured as serials maturing in 2011 through 2034.

Earlier this year, the state suspended its triple-A rated school bond guarantee program — the Permanent School Fund — until September at the earliest due to the declining value of the fund. Most of the Lone Star state school districts that have brought bonds to market of late have been rated in the double-A category or higher.

Morgan Keegan & Co. leads the underwriting syndicate for the week’s negotiated sale by the Tomball ISD. RBC Capital Markets is the financial adviser to the district and Andrews Kurth LLP is bond counsel.

The district serves a total enrollment of about 9,760 at 13 campuses about 20 miles northwest of downtown Houston. Officials expects to add another 3,000 students over the next five years.

Proceeds from this week’s sale will fund upgrades to the district’s agricultural facilities, renovations to a transportation facility, a new district warehouse, ancillary offices and maintenance-shop building, and approximately half of the expenses for the new high school, according to chief financial officer Jim Ross.

Standard & Poor’s said the district’s “historically very strong financial position and healthy property tax-base growth” led to the upgrade.

“Hopefully, [the upgrade ] will mean improved interest rates for borrowing,” Ross said.

Analysts also said the higher rating, reflects the district’s access to the Houston metropolitan area economy, “very strong income and wealth levels, and good financial management.”

Fitch assigned the AA-minus rating to the district’s $207 million of debt outstanding and said “unlike most Texas school districts, the district currently maintains additional financial flexibility with its operations and maintenance tax rate.”

School officials have the ability to raise the current rate of $1.01 per $100 of assessed value to as high as $1.04 per $100 without voter approval and expect to do as much over the next few years, according to Fitch.

The district’s tax base averaged 11% annual growth the past five years to $4.7 billion for fiscal 2009.

A decade ago, the district had a total enrollment of 7,000 and the taxable-assessed value was $1.97 billion.

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