County Selling More Bonds During Recessionary Strife

'Pay As You Go' Philosophy Goes By Wayside

January 30, 1991|By Darren M. Allen | Darren M. Allen,Staff writer

The name is bonds.

Government bonds.

And Carroll is turning to selling them in larger numbers than ever before as this once-rural county grapples with growth in the middleof a deepening recession.

General obligation bonds -- and other sources of state-backed borrowed money, such as industrial bonds -- are hardly new to Carroll, but their use here has been limited until about five years ago.

Carroll has racked up the smallest debt load in the five-county Baltimore-metro area and one of the smallest in thestate. But Carroll's debt load has been on the rise over the last 10years.

"We can't afford pay-as-you-go this year," said Steven D. Powell, the county's management and budget director. "We're looking at relying on more bonding."

Issuing bonds -- government certificates which state the amount of a loan, the interest to be paid, the time for repayment and collateral pledged -- on the open market through a broker is an option the county turns to when it cannot pay for projects through cash or grants.

The county pays interest, usually about6 percent to 8 percent, on state-guaranteed general obligation bondsapproved by the legislature. The bonds mature in from one to 30 years.

In the 1960s and '70s, the county largely was able to pay cash for schools, roads, buildings and other capital projects, but the 1980s changed that.

The county has accumulated a debt of about $51 million -- more than $25 million of that since 1981. By this time next year, the debt is expected to grow by another $18.7 million.

With cutbacks in federal and state aid, and the recent drop in county taxrevenues, the need to borrow money to pay for schools, roads, bridges and buildings has increased.

With a current debt of $51 million,the county is legally able to borrow about $250 million more. But what's on the table for the coming budget year is far below that, and county officials say Carroll will never be that much in debt.

The county carries a Moody's Investors Service Inc. rating of Aa on its bonds, about average for the metro area. Baltimore County's Aaa is the highest; Baltimore city's A1 is the lowest. The state carries a Aaa rating, Moody's highest.

Borrowing money has been an uncomfortable option for the county in the past, as previous commissioners kept bonding to a minimum.

"There is no reason you have to keep up the pace of building," said former Commissioner President John L. Armacost. "We've bonded enough in the past. You should fund capital projects only if you really need them, and you should be able to pay for them asyou go."

Over the years, Carroll has borrowed less than nearby counties. For instance, Washington County -- with a population similar to Carroll's -- had a debt load of $45 million in 1989, the last year for which complete figures are available. During that year in Carroll, the debt load was $35.5 million.

In Anne Arundel County, the amount of bonded debt in 1989 was $865.3 million; in Baltimore County, $1.1 billion; in Baltimore City, $1.2 billion; in Frederick County, $133 million; Harford County, $70.5 million; and in Howard, $584.3million.

While the current commissioners say they aren't about togo wild looking for money on Wall Street, they say that bonds might be the only way to pay for expensive capital improvements to handle the 30 percent population growth in the last 10 years.

CommissionerJulia W. Gouge has been advocating bonding since at least last year,when the county borrowed about $15.5 million for projects ranging from schools to loan assistance for Carroll County General Hospital.


Year.. .. Amount.. .. .. Amount and purpose of new bonds

1981.. .. $25.05 M.. .. .. . $678,000 for watershedbonds

1982.. .. . 22.79 M.. .. .. .. $7,595,000 for IDA, schools

1983.. .. . 28.68 M.. .. .. .. .. .. .. .. (no new bonds)

1984.. .. . 27.43 M.. .. .. .. .. .. .. $1,350,000 for IDA

1985.. .. . 25.81 M.. .... ..$303,000 for watershed bonds

1986.. .. . 24.17 M.. .. .. $11,720,000 for capital projects, schools

1987.. .. . 34.34 M.. .. .. .. .... .. .. .(no new bonds)

1988.. .. . 32.13 M.. .. .. . $8,270,000 for schools, transportation

1989.. .. . 35.49 M.. .. .. $11,115,000 forcapital projects, schools

1990.. .. . 48.84 M.. .. .. $5,470,000 forcapital projects, schools

1991.. .. * 51.60 M.. .. . $15,500,000 forhospital, capital projects

NOTES: IDA = Industrial Development Authority; fiscal years begin July 1; amount equals prior debt plus new debt minus payments made on existing debt.

SOURCE: County finance office.

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