By KYLE KERSEY
Coming on the heels of exceptional credit ratings from Fitch Ratings and Moody’s Investors Service, two of the big three credit rating agencies in the country, Pima Community College issued revenue bonds for the funding of the Centers of Excellence Projects on Jan. 16.
Fitch awarded Pima the default rating of AA and the revenue bonds at AA – both with a stable outlook – Moody awarded Pima an equivalent rating.
According to Moody’s, “The Aa3 reflects Pima County Community College District’s (PCC or the district) excellent strategic positioning given its prominent role as a low-cost provider of higher education and vocational training in the increasingly economically vibrant Tucson, Arizona, metropolitan area.”
The revenue bonds are to generate no more than $65 million, with the projected debt service amounting to $4.4 million. Debt service is the amount of money the college will have to pay investors in interest on the bonds, according to Pima spokeswoman Libby Howell, t. This is $100,000 less than initially projected and a direct result of the high credit ratings.
The vast majority of the money generated by the bonds, $43 million, will go directly to the development and expansion of the Applied Technology Center of Excellence at the Downtown Campus. The remaining funds will go toward the Centers of Excellence in Public Safety and Security and Health Professions.
New or greatly expanded features at the Applied Technology Center of Excellence include heavy diesel technology, robotics, automation, optics and photonics.
The money from the bonds will seep into other projects, such as the renovation of food services and book stores, real estate purchase opportunities, and construction costs relating to the Tucson Inn. According to the revenue bond budget breakdown, PCC hopes to apply leftover contingency funds to the expansion of the Aviation Technology Center.
“Revenue Bonds are a type of municipal bond that is secured by the revenue that the project they’re funding will generate,” Howell said. “In this case, it will be the tuition revenue that comes from the Centers of Excellence that they’re going to fund.”
Revenue bonds don’t impact taxes, therefore they do not require voter approval like regular bonds. However, they do require passage by the PCC Governing Board, which was approved in September.
The amount of time the college has to pay back the bonds (bond term) is 20 years, with an estimated fixed interest rate of 3.6 percent. Howell said the college believes it will make its 20-year goal.
“Them giving us a good rating had a big impact on making [the bonds] more marketable,” Howell said. “The day we issued the bonds, we were fully subscribed, which means we had more buyers than shares in the bonds to sell. That’s the difference that having that good credit rating makes. They’re very desirable to investors because they know (the bonds) are reliable. This institution has a good history and manages its finances well. So it’s likely they’re going to get the return on the bonds that they expect.”
“Pima has worked hard to strengthen our financial position, allowing us to make significant, much-needed investments in our programs and facilities,” said David Bea, Pima executive vice chancellor of finance and administration: