League says opponents of bond package say approval would double Austin district's "debt load"

A Voters Guide prepared by the League of Women Voters of the Austin Area says opponents of an $892 million bond issue for the Austin school district say that "the Austin ISD’s debt load doubles with these new bonds."

The four-part bond package appears on the district’s May 11 ballot. Early voting began in late April.

League volunteer Nan Clayton, a former member of Austin’s school board, told us by phone that the debt warning reflects what league members heard in the community, though she said she couldn’t recall precisely who aired the claim.

We identified a basic methodology that supports the doubling statement, though district officials said a doubling might not occur--or, if it does, the threshold would be crossed no sooner than 2018.

Bond opponent Roger Falk of Austin, a member of the Travis County Taxpayers Union, pointed us to figures posted online by the Texas Bond Review Board indicating that as of Aug. 31, 2012, the district owed $750.6 million in outstanding principal with plans to pay $372 million in related interest.

If voters OK the sought bonds, Falk said, the district’s outstanding principal would more than double.

School district officials said it’s not that simple.

By email, spokesman Antonio Lujan said the district believes its debt load will not double.

"Yes, it would be the case if the district issued debt all at once for the $892.2 million" before voters, Lujan wrote, attributing his reply to unidentified financial advisers. "However, the estimate does not take into account the amount of debt that is retired annually by the district each year. The district uses a layering approach that allows the district to manage its debt load based on its cash-flow needs. For the purposes of estimating the tax impact, the district assumed an aggressive schedule for bond issuance of 5 years with a maximum projected outstanding debt load of $1.5 billion in 2018."

Lujan added that the bonds, if authorized, might end up being issued over seven to eight years, which also would affect the district’s outstanding debt load. By email, he noted that another $242 million in bonds authorized by voters in 2004 and 2008 also would be issued in the time window.

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Leo Lopez, the district’s executive director of finance, elaborated, saying by phone that the district’s approach to financing projects--a mix of short-term commercial paper and occasional bond sales--keeps its debt lower than if it sold bonds alone. The use of short-term loans saves money, he said, with the current interest rate on such paper 0.18 percent. Also, he said, the district makes regular repayments; for instance, the plan is to repay $46.6 million in principal and $30.2 million in interest in August 2013.

The pace of the proposed bonds being issued would be driven by factors including the speed of construction projects, Lopez said. "We’re not going to go and issue bonds when we don’t need the money," he said.

Lopez didn’t quibble, however, when we said it still looks like the prospective district debt of $1.5 billion in 2018 would amount to double the district’s outstanding principal, as of Aug. 31, 2012, of about $750 million.

A financial analyst for the bond review board, Rob Latsha, said by phone that it’s reasonable to make that comparison, though he cautioned that he hadn’t personally confirmed the district’s aired $1.5 billion figure.

Latsha said it’s helpful to keep in mind that a district definitely owes its outstanding principal, while anticipated interest amounts can change depending on how the body pays it off.

Latsha also said it makes sense that the district would build its outstanding principal over several years. It would take the Austin district "a while to digest this new issuance," he said.

Indeed, Latsha said, the district currently plans to have its outstanding principal knocked down to $444 million as of Aug. 31, 2018, though that assumes no debt is issued in the meantime and the district sticking to its current repayment schedule, he said.

Lopez, the district official, summed up by email: "In general we agree with the statement that the debt load would not double, but if it did, that would not occur until 2018, However, it is fair to say that there are a lot of events that have to transpire in order for the 5-year issuance schedule to occur, and there are lot of assumptions about construction spending, property value growth, and facilities needs built into the ‘peak debt’ year of 2018. Austin ISD may never see $1.5 billion in outstanding principal all at once, due to construction delays, defeasance (early payoff) of existing bonds, shifts in enrollment, etc."

Our ruling

According to the league, opponents of the district’s bond package say voter approval would double the district’s debt load.

The district’s outstanding principal could total $1.5 billion by 2018, compared with $750 million as of the end of August 2012, though the district says it might take up to three years more. Then again, the district says, the doubling might not even occur depending on construction schedules and repayment/financing terms to be determined as time passes.

Doubling isn’t a certainty. We rate the claim as Half True.