They say the trailblazer – the first one to hack his way through the underbrush – gets cut up and bloody while making a path for those who follow.
Wise County blazed a trail in its unique arrangement with Weatherford College. On Nov. 4, 2008, county voters approved a plan to buy land and build a building that would be leased to the college for use as a branch campus. That $20 million, 118,000-square-foot campus opened last summer and is serving students on U.S. 380 between Decatur and Bridgeport.
But there was still some work to do.
House Bill 2474, authored by Rep. Phil King, won near-unanimous approval in the recently-completed session of the Texas Legislature. The bill, which was signed into law by Gov. Rick Perry June 14, will make it less costly for counties to work with college districts to build facilities in the future by helping ensure that they can get the best interest rates on their bonds.
It won’t help Wise County right away, but it creates a path for counties, school districts and colleges to follow.
“This will undoubtedly save other counties millions of dollars,” Precinct 2 Commissioner Kevin Burns said. “I guess you could say we were being a good neighbor by investing the time and money it took to get this passed.”
Burns and others made repeated trips to Austin to testify before the Higher Education and Finance committees.
“It’s unique,” he said. “It’s not the first branch campus, but the first that has extended funds like that to build a building. Once the committees heard our story, they were behind it. I’m glad the bill went through.
“To put on a suit and go testify is a strain for me. The hair on the back of my neck doesn’t stand up anymore, but it used to.”
Caleb Troxclair of Rep. King’s office said the purpose of the bill was to help lock in a lower interest rate on the bonds for Weatherford College’s Wise County branch.
“It provides the college and the county with a new tool,” Troxclair said. “The bill will allow all counties and college districts to take advantage of this financing structure in the future.”
Burns said it’s his understanding that Hood County wants to work on a similar deal for Weatherford College there. Other counties will undoubtedly look at the arrangement.
“This legislation helps other counties that want to do that,” he said. “It won’t benefit us immediately.”
Wise County’s 30-year bonds can be refinanced in 14 years, but at some point prior to that, it will likely make financial sense to pay a penalty and re-finance the bonds early.
“We’ll get an analyst to look at it and wait until it’s financially sound,” he said. “When we do, it will save us an enormous amount of money.”
BOND MARKET REALITY
Burns said county officials got a dose of Wall Street reality when they attempted to market the bonds for the campus.
“We couldn’t get a bond rating in New York City, and we couldn’t get insurance to protect the bondholders,” he said. “Because of the credit crunch at that time, they said they wouldn’t do it.”
The bond rating firms said they needed a deed of trust – something more like a normal real estate transaction – to protect the bondholders, Burns said.
“That way, if we defaulted they could sell the building. But under state law we could not do that.”
Hence the effort to change state law.
The new law says that “Bonds payable from revenue and issued by the governing body of a county or school district to finance the purchase of land or the construction of a facility to be used for a branch campus, center or extension facility … may be secured by a trust indenture, a deed of trust, or a mortgage granting a security interest in the applicable land or facility.”
It also restricts what the proceeds of the junior college district branch campus maintenance tax may be used for.
Those funds can be used only “to operate and maintain a junior college district branch campus and support its programs and services in the area of the political subdivision that levied the tax; and … to make lease payments to the political subdivision for facilities used exclusively by the branch campus that are owned by the political subdivision.”
The change only applies to bonds issued after the bill became law June 14.
It took Wise County diving into the bond market to see what needed to be done.
“We didn’t have a bond rating as a county yet,” Burns said. “Now we’ve got one – it’s AA- and the minus comes off this year. The college is A rated, but we couldn’t get anything off of their rating because the deal works off of a memorandum of understanding between two governmental agencies.
“It’s not a tax revenue bond, and it’s not a lease revenue bond. It’s a little bit of both.”
From now on, bond buyers’ investment will be secured by a deed of trust, meaning such bonds will be more secure and can merit a lower rate. That will save local taxpayers millions of dollars.
“I didn’t expect to be trotting out a portfolio in New York City,” Burns said. “I expected to be driving a maintainer.
“But we need to keep this money here and in education, not be sending it out to investors.”