ASSET AND RISK MANAGEMENT
This chapter reviews the asset and risk management functions of the Alamo Community College District (ACCD) in the following sections:
- A. Cash and Investment Management
- B. Employee Benefits
- C. Insurance Programs
- D. Fixed Assets
- E. Bond Issuance and Indebtedness
E. BOND ISSUANCE AND INDEBTEDNESS
ACCD issues revenue bonds to finance the purchase, acquisition, construction, renovation and equipping of district facilities. Revenue bonds are not secured by the taxing powers of the issuer; rather, they are paid from general and tuition fees, interest income and additional revenues. As of August 31, 2002, revenue pledged as security for revenue bond debt service included $10.4 million of general and tuition fee revenue, $2.1 million of investment income and $1.7 million of auxiliary revenue. As of August 31, 2002, debt of approximately $102.1 million was outstanding from bond issuances dating back to 1985. Exhibit 6-35 provides a summary of ACCD's outstanding bond debt as of August 31, 2002.
Exhibit 6-35 Source: ACCD, 2001-02 Audited Financial Statements.
ACCD Outstanding Bond Debt
August 31, 2002
Bond Series Outstanding Principal Purpose of Issue Source of Debt Service 1985 $494,547 Refund a prior series Pledged revenues 1993 $30,150,000 Refund a prior series Property taxes 1994 $9,160,000 Construct, renovate, or acquire facilities and equipment Pledged revenues 1998 $6,712,590 Refund a prior series Property taxes 2001 $53,615,000 Refund a prior series and construct, renovate, or acquire facilities and equipment Pledged revenues 2002 $1,998,778 Refund a prior series Property taxes Total $102,130,915 FINDING
In December 2002, ACCD refunded $25.6 million of Series 1993 bonds, which resulted in a reduction of debt service of approximately $2.9 million over nine years (2002-03 through 2010-11). A refunding occurs when new bonds are issued to repay principal and accrued interest on older outstanding bonds. Typically, the interest rate paid on the older bonds is higher than the rate on the new bonds, which results in savings. Interest on the old refunded bonds ranged from 5.25 to 5.625 percent while interest on the new bonds ranged from 3.0 to 4.0 percent. Exhibit 6-36 summarizes savings achieved from the bond refunding.
Exhibit 6-36 Source: First Southwest Company Official Statement,
Savings from Bond Refunding
As of August 31 Total Debt Service
Before RefundingTotal Debt Service
After Refunding2002-03 $8,310,888 $7,553,932 2003-04 7,148,748 8,328,640 2004-05 6,769,208 6,220,521 2005-06 6,396,159 5,846,759 2006-07 6,026,834 5,477,573 2007-08 5,757,160 5,212,448 2008-09 2,879,414 2,332,233 2009-10 2,502,613 1,953,300 2010-11 700,000 700,000 Total $46,491,024 $43,625,406 Total Savings $2,865,618
December 2002.COMMENDATION
Alamo Community College achieved debt service savings of approximately $2.9 million after refunding Series 1993 bonds.