Understanding the District's Bond "Issues"
Craig Rathmann, Rauscher Pierce Refsnes, Inc.
The District is authorized to finance the acquisition or construction of water supply and distribution, wastewater collection and treatment, and storm drainage facilities (the "System") with the proceeds of bonds which the District sells at competitive sale to bond underwriters. These facilities provide the District with the means to drain storm water from the land located within the District's boundaries, and to provide District residents and other customers with drinking water and the ability to flush their toilets.
Since the District lies within an unincorporated area of Fort Bend County, the District is the legal entity which is empowered to provide such services. The District is limited by Texas law to the activities in which it may engage, including the uses which it may make of any funds which it borrows. Therefore, once the District's water, sewer and drainage system is complete, the District will typically only sell additional bonds to rehabilitate or upgrade the system.
The District pays principal of and interest on the bonds which it sells with the proceeds of the District's debt service tax. The District levies the same tax rate on all property located within the boundaries of the District. The interest payments which the District pays on the bonds are exempt from federal income taxation -- they are "tax exempt" bonds. Tax-exempt bonds bear interest at rates which are significantly lower than taxable instruments.
The District's Board of Directors has worked diligently over the years to minimize the District's borrowing costs. Recognizing the need to minimize the taxes which District taxpayers pay while, at the same time, providing the services to which District residents and other customers are entitled, the Board has sold bonds at times when interest rates have been most favorable. They have refinanced District debt when savings might be achieved and have worked very hard to improve the District's credit.
The Board has succeeded in this to the extent that the District has been able to obtain municipal bond insurance on recent District bond issues, and the District is now able to obtain very high ratings on its bonds and minimize borrowing costs, including interest payments.