The School Board of Orange County, Florida, issued $165.4 million in certificates of participation to finance renovations to educational facilities.
The certificates mature between 2033 and 2034, yielding between 3.09% and 3.11%. They pay interest at 5%. The securities received a rating of AA from Fitch Ratings and Aa2 from Moody’s Investors Service.
Moody’s analysts wrote that their rating is “driven by the district’s economic profile, which includes a very large and expanding population with somewhat below average resident income relative to the median for Aa-rated school district.”
The issuance comes amid a dispute between the county and Walt Disney World, its largest taxpayer; it highlights the risks that can emerge when one taxpayer makes up an outsized portion of district revenue.
Disney alleges that its properties are overvalued by the country, and that it is entitled to a refund of overpaid property taxes, which are estimated to be between $6 million and $13 million annually, according to the official statement accompanying the sale of the certificates. Preliminary estimates of liability to the district are between $60 million and $130 million, according to Fitch. The district says in the bond documents that it has set aside approximately $90 million for potential tax refunds to Disney.
However, the district adds that it does not expect any Disney refund to impact its ability to make debt payments. The school district will use the proceeds from the sale of certificates to finance renovations at two high schools and a middle school.
Orange County is the fifth-most populous in Florida and includes the city of Orlando. The certificates are limited obligations of the Orange County School District, secured by lease payments made by the district to the county.
BofA Securities, Inc served as lead underwriter on the issuance, purchasing the certificates for $191 million. The price reflected a premium of more than $26 million. PFM Financial Advisors LLC acted as municipal advisor.