Texas Border Business
Texas Border Business
Following voter approval of a $335 million bond in May, McAllen ISD is moving forward with the first phase of borrowing to finance school modernization, safety improvements, program expansions, and other capital projects.
Investors priced the district’s bonds on Aug. 11, and McAllen ISD is scheduled to receive the proceeds at closing on Sept. 8. The first sale is expected to provide up to $100 million for school construction and improvement projects.
“We are excited because, once these funds are in place, we will move closer to making these vast improvements in our district a reality,” Superintendent Dr. René Gutiérrez said. “We are preparing to realize a vision that will benefit future generations of children.”
The district had planned its bond program assuming an interest rate of 5.05%, but the first borrowing was priced at 4.587%.
“By coming in below the estimate, it lowers the long-term cost of the program for our taxpayers,” Gutiérrez said.
Under the financing arrangement, investors who purchase McAllen ISD bonds are lending money to the district. In return, the district is obligated to repay the principal along with interest according to the bonds’ repayment schedule.
That principal and interest will be paid from the Interest and Sinking, or I&S, portion of McAllen ISD’s property tax collections. The I&S fund is specifically used to repay voter-approved debt. The bonds have a final maturity in 2056, although individual bonds within the issue may mature earlier.
The district said the $335 million program will not increase its overall property tax rate. McAllen ISD is keeping its total rate at $0.9322, the same as last year. The district paid off all its previous voter-approved debt in May, allowing it to take on the new debt without increasing the overall tax rate. Individual property tax bills can still change based on appraised property values.
Rather than borrowing all $335 million at once, McAllen ISD plans four phases over the next three to four years. The strategy is intended to ensure the district borrows money as projects require it instead of paying interest on funds that remain unused.
The bond program includes $117.69 million for school modernizations and Career and Technical Education expansions; $40.39 million for wellness, safety and security; $35 million for fine arts multipurpose buildings; $38.73 million for classroom additions and growth; and $103.19 million for capital improvements such as HVAC systems, roofs, paving, drainage and LED lighting.
Projects will extend across elementary, middle and high school campuses and are expected to be completed within five years.
Moody’s Ratings affirmed McAllen ISD’s Aa2 underlying credit rating in July. The bonds also qualify for the Texas Permanent School Fund Bond Guarantee Program, providing an AAA rating that helps the district obtain lower borrowing costs.
