InstantNewsKaty.com

Katy ISD trustees continue to wade through financial information in an effort to decide whether to proceed with another bond issue in 2009 or delaying it until 2010.

The board is trying to decide whether waiting until 2010 will bring a more favorable financial environment in which to sell bonds. Board members are weighing the benefits a one-year delay against the possibility of inflation increasing the cost of school construction.

During Monday’s board meeting, Superintendent Alton Frailey again reminded trustees that they need to make a decision relatively soon.

“We need to make a decision soon on whether or not to proceed with a bond issue next year or wait until 2010,” Frailey said.

During the meeting, Chief Financial Officer Bill Moore provided trustees with an overview of the current bond market. As things now stand, Moore explained, the market does not look favorable for bond sales.

“Only a few bonds are being sold to the retail market,” Moore said.

He added the district’s financial advisor told him there have been four bond sales on the advisor’s desk for two months waiting to find a market. The advisor expects a “thaw” in the financial market later in 2009.

Moore said those few bonds being sold are at interest rates of 6 – 6 ½ percent, as opposed to the 4 – 4 ½ percent range earlier in 2008. Most financial experts do not expect the market to stabilize before mid-2009.

“The infusion of government money will take a while to trickle down,” Moore told trustees. “There’s still a lot of uncertainty out there.”

Trustee Tom Law asked for Moore’s best call on the 2009 bond market.

“So for the next six months to a year, this wouldn’t be a good time to go to the bond market?” Law asked.

“If there even is a bond market,” Moore replied.

Chief Operations Office Thomas Gunnell told trustees that waiting for the bond market to improve would come at a cost, as inflation is expected to cause prices to continue to rise.

Gunnell said the base cost for a new high school was estimated at $126,597,460 at the beginning of 2008. Adding in a 14 percent inflation rate for this year, that cost has already gone up to $144,321,104. Adding in the predicted five percent inflation rate for 2009, the cost rises to $151,537,160.

That, Gunnell pointed out, came out to a $17.2 million cost to push back construction one year for the district’s seventh high school. He added the same inflation rate would also impact Elementary School 33 and Junior High 7, all of which were planned for the next bond issue.

The district would see some cost avoidance by not staffing the new schools, Gunnell said. He said pushing back the opening of the new elementary school to August 2012 would result in a cost avoidance of $1,861,619; delaying the opening the new junior high until August 2012 would save $3,196,426 and holding off opening the new high school until August 2013 would save the district $5,525,549.

Whether or not the cost savings on staffing would offset the projected construction increases is still uncertain.

Trustee Joe Adams asked if there was any thought the cost of building materials could go down. Gunnell said there may be some short-term decreases in material costs, they are expected to increase over the long-term.

Trustees are expected to make a decision in January on when to proceed with the district’s next bond issue.