DALLAS -- The Texas Bond Review Board today is expected to approve the sale of more than $200 million in bonds and commercial paper to build prisons and mental health facilities, according to the agency's executive director, Albert Bacarisse.
The largest issue, for $141.87 million in general obligation bonds, will be used primarily to build state prisons and add emergency jail beds throughout the state as Texas continues to cope with severe jail overcrowding.
The Texas Public Finance Authority will handle the sale for the state department of criminal justice. Plans call for selling the 20-year bonds competitively on July 20. Masterson Moreland Sauer Whisman Inc. is the financial adviser.
The debt issuance is part of an aggressive state prison building program that aims to add 70,000 beds in two years, roughly doubling the system's capacity. Some of the money will also go to an emergency plan adopted by the state earlier this year to take state prisoners out of county jails, which have been severely overcrowded.
As part of the emergency plan, the Bond Review Board is expected to approve today a $36.23 million bond issue for a 1,500-bed state prison in Henderson, Tex. The proposed lease purchase deal would be similar to the structure used to finance private prison facilities, the application summary from the Bond Review Board said.
Under the plan, the East Texas Criminal Justice Facilities Finance. Corp. would issue fixed-rate, tax-exempt mortgage revenue bonds to finance the jail construction in Henderson. The corporation would then enter into a lease purchase agreement with the state department of criminal justice, which would pay rent sufficient for debt service on the bonds.
Municipal Capital Markets Group is the underwriter for the sale, which is scheduled for July 13. The serial bonds will mature beginning in 1995 and ending in 2014.
Also on today's agenda is the approval of $26.16 million in general obligation commercial paper to be issued for the state department of mental health and mental retardation facilities.
The Texas Public Finance Authority will issue the debt to finance mental health and mental retardation facilities in Laredo, Rusk, and El Paso, Tex., in addition to renovations at other state facilities.
The authority's general counsel, Sandra Hauser, said the state agency will probably sell the commercial paper in two issues, one later this month and one in about 18 months when more money is needed. The size and the sale date of the first issue could be determined in about a week, she said. Merrill Lynch & Co. is the senior manager.
Under the commercial paper program, the state issues short-term debt to get better interest rates and to retain flexible issuance schedules during construction. The commercial paper, which matures in 270 days or less, is used for the two-year to three-year construction period and then is converted to longer-term debt, Hauser said. The debt is scheduled to be amortized over a 20-year period, and the liquidity provider is the Texas Treasury.
The Texas Bond Review Board oversees state-level debt and is composed of representatives of the top elected officials in Texas.