DALLAS - Rating agencies have restored stable outlooks on the University of North Texas system as UNT prepares to go to market with $222 million of revenue bonds.
Moody's Investors Service left the rating unchanged at Aa2, and Fitch Ratings affirmed its AA rating.
The previous negative outlook was based on accounting irregularities that required UNT to refund $4.7 million for excess payments.
Moody's Investors Service and Fitch Ratings both said they would return the outlook to stable if the issue was resolved, which it has been.
"In addition, the system's managerial and financial transformation process has been implemented in a thorough and timely manner," Moody's lead analyst Mary Kay Cooney wrote.
UNT, the largest public university in North Texas, plans to go to market with $148 million of tax-exempt and $73.2 million of taxable revenue bonds on Sept. 30, according to Moody's.
The university system, which has campuses in Denton, Dallas and Fort Worth, is expanding with a new college of law in downtown Dallas and a medical school in Fort Worth.
UNT's Dallas College of Law was folded in with operations of its downtown and south Dallas campuses. Fall 2015 is the law school's second year cohort and enrollment is on target at 265, according to Moody's. Full accreditation for the College of Law is tied to the first graduating class sitting for the bar in fall 2017. In July 2015, the UNT Health Science Center and the private Texas Christian University, both in Fort Worth, entered into a memorandum of understanding to collaborate on a new allopathic medical school to serve the Fort Worth area. The existing health facility is an osteopathic school.
Full financial and operating details for the new school are not yet available, and the partnership would require multiple levels of approval before final agreement. The partnership envisions the first class of 60 students in fall 2018, eventually reaching full enrollment of 240 students. A portion of funding is expected to come from gifts and medical school operations relying largely on HSC facilities.
Enrollment growth at UNT's original Denton campus led to two construction projects opening this fall. A 500-bed residence hall will bring the on-campus housing stock to 6,100 beds, and an extensive expansion at the Student Center will increase the existing union space by over 50%.
Design-build planning is underway for projects funded by tuition revenue bonds, approved by the 2015 Texas Legislature.
"Philanthropic support has not kept pace with that of other Aa2-rated universities, with the average FY 2012-14 gifts of $14 million annually, compared with the Aa2 median of over $60 million," Cooney wrote. "Each campus is responsible for its fund raising efforts, with targeted campaigns for specific identified projects."
Fitch analyst Tipper Austin said UNT enjoys healthy demand from the rapidly growing Dallas-Fort Worth area.
"The system is somewhat diversified, with different missions and offerings at its three component institutions," Austin said.
UNT's resolution of its state funding missteps led to a major transformation of its accounting processes that contributed to a clean audit. That cleared a path to the bond market for this issue.
UNT system repaid $4.7 million in excess state paid benefits to the Texas State Comptroller in February, a year after the system notified the state auditor's office of accounting irregularities that were identified by the system's internal auditor .
In a disclosure on the Municipal Securities Regulatory Board's EMMA system in August, UNT said that the repayment has satisfied its outstanding obligation.
Under a law passed by the 2015 Texas Legislature, all of the Texas higher education institutions are required to conduct a similar internal audit review by August 31, 2016.
