Having once again received the trifecta of AAA ratings from the three major bond rating agencies, the Maricopa Community Colleges are readying to sell $151 million in General Obligation Bonds to finance a variety of construction projects throughout Maricopa County. The sale, set for the end of May 2013, will mark the fifth time the District has gone to the bond market to borrow new funds for construction projects since 2004, when voters passed a $951.4 million bond referendum.
Each time the District has proposed borrowing money, its creditworthiness has been evaluated by the three major rating agencies: Moody's Investors Service, Standard & Poor's and Fitch Ratings. The District is one of only a few community college districts in the United States whose general obligation bonds have achieved the highest possible ratings from all three agencies.
At its April 26 meeting, the Governing Board authorized the sale of $151 million in bonds, the last group of bonds to be sold from the $951 million bond election approved by voters in 2004.
"We're proud to once again receive these Triple-A ratings," said Chancellor Rufus Glasper.
"It's not only a strong vote of confidence in our financial administration, it also means that taxpayers will continue to be able to reap the benefits. Coupled with our solid track record on bond issuances, these ratings mean that when the bonds are sold at the end of May, they should sell at a low interest rate, which means savings to taxpayers could be substantial."
In its report, Fitch Ratings said they expect "the district will maintain a strong financial position." Standard & Poor's cited "the district's continued exceptionally strong and stable financial performance." In reaffirming its rating, Moody's pointed to "the district's large and developed tax base" and "prudently managed, strong financial operations."
Background on the 2004 Bond Program
The District issues bonds on a cash flow, not a project basis, meaning that bonds are issued to finance the cash flow of dozens of projects for a period of time, not to fund the full completion of specific projects. In other words, any particular project might be funded by more than one series of bonds. This approach allows the District to phase in many projects at the same time and manage workload with minimal staff impact.
To finance this activity, the District has issued 84% of the total amount authorized through four series of General Obligation bonds: Series A for $190.3 million was issued in 2005; Series B was issued in 2007 for $240 million; Series C was issued in 2009 for $220 million; and Series D was issued in 2011 for $150 million. Interest costs on the bonds have been around or below 4% on all series due to the District's high credit rating and a generally favorable interest climate. All proceeds from Series A, B, and C have been expended and all but approximately $74 million in Series D proceeds have been expended or are encumbered. Series 2013 was requested in order to provide necessary funding for the final two years of the program.