The county executive is proposing the county go to the bond market to borrow more than $6 million to pay for four capital building projects.
County Treasurer James M. Jewell said the executive's proposalto borrow instead of spending cash is aimed at creating an end-of-the-year financial cushion which would protect Harford's bond rating.
The proposal calls for issuing bonds to cover the county's estimated share of some of the costs of building three new schools between 1991 and 1993.
If County Executive Eileen M. Rehrmann's bill proposing that the county borrow the money in the bond market is passed bythe County Council, it would mark the first time in eight years the countyhas increased its long-term bond debt by borrowing on the bond market for capital projects.
The county has borrowed money in the bond market in those eight years for water and sewer projects. But those bonds have not increased the county's long-term debt because theyare paid off through user fees.
The projects and amounts the county would have to borrow through the bond market are:
* $3 million for the county's share of construction costs of the new Fallston Middle School.
* $368,535 for planning costs of the proposed Belcamp-area elementary school.
* $1,980,315 for the county share of building costs of the proposed Route 543 elementary school.
* $944,699 for improvements to the Bel Air Library.
In addition, the bill would transfer $111,000 originally budgeted for a new county central administration building to the Route 543 school project.
Legislation to borrow money for the projects and to shift the central administration building money was introduced at a council meeting Thursday night.
A public hearing on the proposal will be conducted at 6:30 p.m. Feb. 19 in the council chambers at the County Courthouse, Bel Air.
The county must save enough money by July to protect its coveted AA bond rating, which ensures the county pays a low interest rate in the bond market.
The bond rating was awarded the county by Moody's andStandard & Poor's bond rating houses.
To protect that rating, thecounty must have a minimum of $4.5 million left as surplus, or 3 percent of its budget, at the end of the fiscal year, June 30.
But Rehrmann estimates the county will not have any surplus money at the end of the fiscal year, unless cuts are made in the county's operating and capital budget. She has already imposed an indefinite hiring and purchasing freeze to accomplish that goal.
Jewell has said Harford's bond rating would be better protected if the county ends the year with a 5 percent budget surplus -- about $5.9 million. Jewell said herequested the authority to pay for the projects with bonds so cash would be available for the school board to begin building the FallstonMiddle School this summer.
In addition, the school board must have proof that the money will be available for the 1991-1992 projects being reviewed now by the state Interagency Committee, which oversees all school construction in Maryland. The IAC does not consider givingstate money to projects that do not have a financial commitment from a county. If the IAC delayed approval of the projects until the following budget year, the county would lose one year of construction money and be behind in its proposed building schedule.
"The surplus is no longer there. If we waited until July to request the bonding authority, the soonest I can have money available would be in October. That wouldn't meet the IAC's timetable. We could lose one year of state construction funding," said Jewell.
He said the county could likely issue bonds in October, if the council approves the Rehrmann request.
By obtaining the bonding authority early, Jewell said, the county can obtain what are called bond anticipation notes -- basicallyletters of credit -- as a way to finance the projects short-term prior to an actual bond issue.
With the United States and other nations at war against Iraq and the current economic situation, Jewell said it was difficult to speculate on what interest rate the county might have to pay on bonds issued in October.
Jewell has said that a drop in the county's bond rating could cost the county between $500,000 and $1 million in interest charges on a $10 million bond issue to be paid back over 20 years.