Alpine high school bonds receive favorable rating

ALPINE – The Alpine Independent School District has received a very high Double-A-Minus rating for a bond sale approved last week that will carry an overall interest rate of two-point-963 percent. The highest rating possible would be a Double-A-Plus.

Voters approved the issue in the 2018 General Election to yield $22.588 million to build a new high school building and other improvements.

Erick Macha, a director at Hilltop Securities of Dallas representing bond underwriter Deposit Trust Company, told the School Board they are buying $20.245 million in bonds. Coupled with a premium of $2,613,681.60, the yield will be $22,858,681.60.

The difference between the yield and the $22.588 million to fund the project will go to various fees and commissions to the underwriters.

Macha presented a chart of interest rates showing the present rate is near the 20-year low of 2.8 percent for the 30-year issue.

S&P Global, in its primary credit analysis, said the school district “has consistently maintained a very strong financial position with operating surpluses in each of the last five audited fiscal years, resulting in its available fund balance increasing to $6 million dollars, or 54 percent of fiscal 2018 expenditures.”

The Texas Education Agency recommends a minimum unrestricted fund balance of about two-and-a-half months of operating expenditures, plus enough to cover anticipated cash-flow deficits.

Although the district may spend some of its $2.6 million of committed reserves on capital expenditures in support of projects funded with the series 2019 bonds, we expect the district will maintain its very strong available reserves and have positive operations net of capital expenditures,” the statement says.

In fact, the district has used the fund balance to pay for recent projects. One is a pick-up/drop-off drive behind the elementary school, now nearing completion. In the past, parents have had to park curbside, sometimes at a distance from the school, and walk their kids to the school over congested roads. 

The fund balance is also funding two new bays on its bus barn to accommodate larger over-the-road activity buses, improvements to the Career and Technology Education program, and air conditioning of gyms on all three campuses.

The bond proceeds will finance a new high school building to replace the existing 1970s building, something the district has been trying to do since before a $22 million issue was soundly defeated in 2011. A larger $29.5 million issue narrowly failed in May last year.

The new high school will include a new two-story academic building and library just north of the existing high school building, security improvements, renovations to the band hall, a women’s locker room and others.

Problems cited with the old building include: combustible and hazardous materials in its construction, lack of a fire sprinkler system, smoke hazards, security measures, insufficient electrical infrastructure, outdated air conditioning, exceeding code for fire area separation, and it does not meet accessibility requirements.

Once the new building is completed, the older building will be razed and that area will be free for additional development in the future, including a second gym. The gym was included in the May 2018 issue but was removed in November to reduce the total cost of the package. 

In his presentation, Macha said property values have increased by 42 percent since 2017.

Rates are low and values are up,” he said. “This is a good time to borrow and less so to invest.”

He said the bonds should result in an increase in the Interest and Sinking Fund rate of “right at” the 26 cents per $100 valuation predicted by Finance Director Tucker Durham. 

The bonds are callable after 2028, meaning any time after that, the district can pay off bonds or refinance.