Dallas school district to sell remainder of bond

Healthy growth in housing means bond could be paid off early, reduced taxes, or new bond ahead

Workers finish the new entrance to Oakdale Heights Elementary School. The improvements were paid for with bond proceeds.

Photo by Jolene Guzman
Workers finish the new entrance to Oakdale Heights Elementary School. The improvements were paid for with bond proceeds.

DALLAS — Dallas School District will sell the remainder of its $17 million maintenance bond in December with an early payoff -- and room to issue more bonds, with voter approval, before payments end.

The district issued about $9.7 million in 2015 and will issue $7.3 million in December.

When passed by voters, the eight-year, $17-million bond was slated to cost $1.74 per $1,000 of assessed value on properties.

Healthy growth in assessed value in the district from a resurging housing market has reduced that rate significantly.

This year, property owners will pay $1.45 per $1,000 of assessed value, said Lauren MacMillan, senior vice president of Piper Jaffray, the firm helping the district with the bond sale.

In the initial bond sale, the firm projected an assessed value growth rate of 1.5 percent for 2016, increasing to 2.5 percent for the current tax year, based on a pattern of growth in the years prior.

Alex Bowers, an associate with Piper Jaffray, said growth bottomed out at 1.66 percent in 2015.

Since then, the picture has changed.

“In the good news front, you guys have been growing very fast,” Bowers said. “There’s been a lot of assessed value growth on the rolls on the last few years.”

In current tax year, 2017-18, the growth rate is 6.28 percent. The year before, it was 4.12 percent.

Piper Jaffray recommends the district stick with conservative growth estimates, even with the recent building recovery.

“For the current issue, we recommend keeping that going. It’s always easier to explain why it came in lower than higher, so we are recommending 2.5 percent growth rate for the life of the bond,” Bowers said. “We think that is very conservative. We are willing to have a conversation with the district if you thought it was going to grow more than that.”

Board member Michael Blanchard asked that the firm look at what would happen with 3.5 or 4 percent growth-rate assumption.

“I think using a 2.5 percent assumption on our assessed value growth is probably going to be too conservative by far,” he said, “if you look back at our historical growth going back through the last 15 years.”

He said it took from the 2008 housing crash to 2012 to see a growth rate of less than 3 percent.

The growth rate for the current year is more than 6 percent — and a lot of building is occurring, Blanchard added.

“If we assume 3.5 or even 4, which I think is more realistic over the short term, what would that do in terms of our total interest cost and what is the premium?”

MacMillan said the bond could be paid off a little sooner if a higher growth rate is factored in, given that those assumptions are accurate.

“That’s why we like to use really conservative growth assumptions, because then if the actual assessed value comes in higher, the levy rate will come in lower,” MacMillan said. “Where if we got really aggressive on our growth assumptions and the growth didn’t meet what we had been projecting, then the levy rate would come in higher and that kind of upsets people.”

With that said, she said the firm could plug the higher rates to see how that would affect the pay off.

“We tend to be really conservative on that and we love to take direction from the district,” MacMillan said. “You know the district better. You obviously know what is going on here.”

Tuesday, the board chose an option that assumes 5 percent growth rate for in tax years 2019 and 2020, 4 percent in 2021 and 2022, and 3 percent in years after that. Under this scenario, the bond mature in 2024, but the rate drops significantly in 2023 and 2024, leaving the district the option of going to voters in a 2021 election to ask to continue collecting the $1.74 per $1,000 of assessed value for building maintenance.

“We’ve created a lot more room in those last two years for a new issue,” MacMillan said. “The new issue timeline would still be November 2021 or May 2022, for the election and you would essentially be campaigning on that $1.74 rate.”

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