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Stories Added - July 2009
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LISD trustees OK sale of $8M bonds for high school project
Polk County Enterprise - July 2009
LIVINGSTON — Trustees for the Livingston Independent School District approved the sale of a second installment of $8 million in construction bonds during a special meeting Monday. The sale is expected to close July 29, said Brian Grubbs, Vice President of Public Finance for Southwest Securities. This second installment leaves $2.5 million in bonds authorized but not issued that could be used to fund unforeseen issues or, hopefully, provide furniture and equipment for the building. Grubbs advised the board re-evaluate the remaining authorized amount next summer. Grubbs added that LISD’s backto- back bond rating improvements are a rare achievement. LISD has an underlying A-plus rating by Standard & Poor’s and a AAA rating based upon insurance provided by Assured Guaranty.
Analysts cited LISD’s very strong historical financial position, limited but stable economy, growing property tax base, adequate wealth and income levels, good management practices and moderately high debt levels in setting the bond rating. Since the Permanent School Fund has exhausted its ability to guarantee any more bond projects for Texas schools, districts are required to use private insurance companies, bond consultants have told LISD officials in earlier meetings. The average true interest cost of the bonds is 4.9755 percent, which is still below the economic model used in planning the bond package, according to Grubbs. Grubbs added that Southwest Securities will prepare the necessary application to seek state Instructional Facilities Allottment (IFA) funds for the coming year.
A pool of $75 million has been allocated and districts will compete for funds based on financial need. “That would be gravy and we would apply that to the bonds that are being issued today and next year,” Grubbs said. LISD will receive state funds from the Existing Debt Allotment for the next two years since the legislature passed House Bill 3646, Grubbs said. “The uncertainty of the EDA has gone away. That’s helping your district and a lot of other districts,” he added. Southwest Securities reports LISD will receive an estimated IFA payment of $502,044 in the 2009 fiscal year and $5,267 from EDA. In 2010, the IFA payment will be about $64,072 and remain at that level over the next 10 years. Next year’s EDA payment will be $81,353 and grow about $5,000 per year throughout the life of the bonds.
So far the impact on the Interest and Sinking (I&S) rate has been less than the pre-election estimate of 31 cents, Grubbs reported. Prior to the bond election, LISD had an I&S rate of 7 cents per $100 valuation to retire debt from construction of Livingston Junior High. In 2008-09, the first series of bonds were sold bringing the I&S rate to 36 cents, a 29-cent increase. Financial advisors predict the 2009-2010 I&S rate to rise an additional 2 cents to 38 cents.