In response to economic factors and enrollment slowdown on one campus, the Lone Star College System has delayed the construction of several 2014 bond projects and paid off millions in bonds to save taxpayer money.
The delayed campus facilities include a $5 million oil and gas training center planned at the LSC-Tomball campus. A $21 million general instructional building at the North Harris campus is also on hold, said Amos McDonald, vice chancellor of government and public relations at LSCS.
“We know that job demand [in the oil sector] is down,” McDonald said. “We are still teaching oil and gas on a regular basis, but the demand to build out a center—we don’t see it today. We want to make sure we’re fiscally responsible.”
The college has partnered with oil field services company Baker Hughes in Tomball with a two-year lease to train on the company’s practice oil rig in lieu of the facility, McDonald said. The need for a campus facility will be re-evaluated according to demand in the oil industry in the future.
In addition to a slowdown in the oil and gas sector, slower enrollment has also led to the college system’s construction delays. Enrollment at LSC-North Harris surged from 11,380 to 18,478 students between 2007 and 2011 but dropped to 17,721 in 2015, according to data on the LSCS website.
“[North Harris] hasn’t grown at the same rate as when the bond was originally formed, and we will use those funds elsewhere,” McDonald said.
Funds that would have been used for the North Harris building were instead directed to an East Aldine education center, McDonald said.
LSCS Chancellor Steve Head said the college system monitors market conditions to delay construction on facilities that are not immediately needed and to refinance bond debt when better rates are available.
The district saved $81.35 million over the life of the bonds through refunding and paying off previously issued construction bonds in July. A total of $46.5 million was saved through refinancing bonds at a lower interest rate, and $34.65 million was saved by paying bonds ahead of schedule using the system’s fund balance, McDonald said.
Refinancing and paying off bonds early will result in lower payments on the taxpayer-approved bonds, LSCS Media Relations Manager Bill Van Rysdam said.
“Think of it as refinancing your car loan to a lower interest rate. Your payments will be smaller and save you money,” Van Rysdam said.
McDonald said the college expects a 4 percent drop in state aid for fiscal year 2016-17, and savings in bond repayments help to keep the college system’s tax rate steady.
The board was presented with the 2016-17 budget, including a new tax rate of 10.78 cents per $100 of valuation on Sept. 1, Van Rysdam said. A public hearing will be held on the new tax rate before it can be adopted by the board, he said.
The 2015-16 LSCS tax rate was 10.79 cents per $100 of valuation. The owner of property valued at $100,000 paid $107.90 toward the college system.
“Lone Star College will continue to aggressively manage outstanding bond debt with the goal of saving as much as possible for the benefit of LSC taxpayers,” Head said in a statement.
The college system has held two successful bond referendums in the past 10 years.
Voters approved a $420 million bond referendum in 2008 for facility improvements and expansion within the college system, including a new student services facility and an expanded fine arts building at the North Harris campus. Construction on those projects was completed in 2011, McDonald said.
A successful $485 million bond referendum in 2014 provided funds for projects at all six LSCS campuses, including the $19.2 million Skilled Trades Technology Center at LSC-North Harris and a $15.4 million Center for Science & Innovation at LSC-University Park. Both projects are expected to be completed in fall 2017.
McDonald said LSCS does not have plans for any additional bond packages in the immediate future.
