LOS ANGELES — A Billings, Mont. school district dealing with explosive enrollment growth resulting from the Bakken Oil Fields boom plans to price $80.9 million in general obligation bonds Jan. 14.
Voters approved a $122 million bond measure Nov. 5 to pay for school expansion to deal with overcrowding after Yellowstone County School District No. 2 experienced a 25% increase in enrollment to 11,522 at its K-8 schools over the past five years, said Leo Hurdetz, chief financial officer for Billings Public Schools.
District officials said they are expecting enrollment to grow by another 300 students over the next three years.
"The oil boom on the border of Montana and North Dakota is affecting the entire eastern side of Montana," Hurdetz said.
The Bakken and Three Forks oil fields that span 14,700 square miles in parts of Montana, North Dakota and South Dakota have spurred tremendous economic growth in those states since drilling began in 2008. More than 4,000 oil wells have been drilled in the Bakken and Three Forks since 2008, according to the school district's preliminary offering statement.
Oil and gas production employs over 20,000 people directly and indirectly in Montana, according to a study conducted by the Montana State University-Billings Center for Applied Economic Research in 2012 that was cited in the POS.
The highest the state's unemployment rate reached during the recession was 5.2% and it's now down to 3.9% annualized through August, said Bridget Eckstrom, a senior vice president in the Bozeman, Mont. office of D.A. Davidson.
"The state never really experienced a downturn," Eckstrom said.
Billings, located 200 miles west of the Bakken oil field, is the largest city in a 350-mile radius. CHS Inc., Phillips 66, and Exxon also each have oil refineries located just outside of Billings city limits and have plans to expand their refineries, according to the POS.
"Drilling in the Bakken occurs in rural areas that do not currently have the necessary commercial infrastructure to support the rapidly growing population," according to the POS.
The population of Billings, the state's largest city, grew from 89,847 in 2000 to 100,170 in 2010, Eckstrom said. It is expected to grow another 20,000 by 2020.
The school district plans to spend $30 million constructing two new middle schools, spend $26 million on major renovations to two elementary schools, and $36 million on deferred maintenance projects.
The district plans to issue $41.4 million in a second series as early as summer 2015. Officials made the decision not to issue the entire amount at once taking into account how quickly contractors would be able to complete the projects, Hurdetz said.
True interest costs of 4.5% were anticipated in the projections on the entire $122 million that will be issued over two years.
The bonds will likely command about 3.75% true interest costs saving taxpayers $20 million over original estimates based on how Montana State University's $60 million issue priced Dec. 18, Eckstrom said.
The bonds received an Aa3 rating from Moody's Investors Service and AA-minus from Standard & Poor's.
"We were conservative in our interest rate projections, because we are issuing over two years and not all at once," Eckstrom said. "Taxpayers should see savings, because we are locking the majority in over the next two weeks."
The underwriter is marketing to retail investors in Yellowstone County and Montana, who like the double tax exempt status, as well as mutual funds and insurance companies for a mix of in-state and out-of-state, she said.
D.A. Davidson will work with a syndicate to sell the bonds. Dorsey & Whitney LLP is bond counsel.
The school district has experienced positive growth in the tax base and should see the benefits of that over the next two years, Eckstrom said. , The bonds will be issued as 20-year term maturing in 2034 with level debt service.
