Utah's largest public school system heads to the municipal market this week with a $201 million bond deal to finance school buildings in a part of the district that will become a separate entity.
Alpine School District
School board members will be elected in November for the central, west, and south districts, which will operate as independent school systems as of July 1, 2027.
Morgan Stanley is the sole underwriter for the lease revenue bonds issued through the Local Building Authority of Alpine School District to finance a high school and elementary school in the west district. The bonds, which are scheduled to price Thursday, are structured with serial maturities from 2029 through 2045, according to the preliminary official statement. Under a master lease agreement, the west district will assume the obligation to pay off the debt at the onset of the split through annually renewable lease payments.
The lease revenue bonds are rated AA-plus by Fitch Ratings, which revised its outlook to negative from stable, while maintaining a stable outlook on Alpine's AAA issuer rating.
Fitch said the AA-plus rating reflects "an assessment of West School District's general creditworthiness, incorporating projected metrics similar to Alpine School District's, including an 'aaa' financial resilience assessment."
"However, West School District is expected to have a 'weak' long-term liability burden due to the proportional allocation of Alpine School District's outstanding debt to the issuance of the series 2025 lease revenue bonds to support enrollment growth and school building capacity demands," it added.
Alpine spokesman Rich Stowell said an outlook revision had been anticipated.
"Our AA-plus rating reflects our good stewardship over public resources, including the good faith and credit of taxpayers in our district," he said in an email. "The bond sale will allow us to continue investing in essential facilities, further strengthening our relationships with our residents, creditors, and the students we serve."
Moody's Ratings gave the upcoming bonds an Aa2 rating, which is one notch below its rating for Alpine's existing lease revenue bonds and two notches below the district's Aaa general obligation rating. The outlook is stable.
"The additional one-notch reflects the unusual debt structure in which Alpine will service the debt for two years before these bonds transition to the West District, which is a yet-to-be-created district," a Moody's report said. "The Aa2 rating incorporates transition risk as Alpine dissolves and this series of debt is allocated to West."
Alpine has $147.3 million of outstanding lease revenue bonds. With the Series 2025 bonds, the west district's allocation of the debt outstanding when the split takes place is projected at nearly $226.9 million, according to an online investor presentation about the deal.
At the same time, the west district will also assume $39.28 million of Alpine's outstanding general obligation debt, which currently totals $267.68 million, the POS indicated. Allocations will be based on the adjusted assessed value of each of the three districts.
The upcoming bond issue
Deal participants include municipal advisor Stifel, Nicolaus & Company; bond counsel Farnsworth Johnson; and underwriter's counsel Gilmore & Bell.
The Alpine district, about 30 miles south of Salt Lake City, serves about 84,000 students from several northern Utah County communities in 61 elementary, 14 junior high, and 11 high schools, along with seven special purpose schools.
