Annapolis sold about $5.9 million in long-term construction bonds yesterday to Alex. Brown & Sons, which offered the lowest interest rates of three bidders.
The City Council voted unanimously to approve the sale of the bonds, which will finance construction of the Gotts Court Parking Garage, renovations to the Truxtun Park swimming pool and various other public works projects.
Baltimore-based Brown, which will pay 6.469 percent interest on the 20-year bonds, beat out Merrill Lynch Capital Markets, offering a rate of 6.482 percent, and a joint bid from Ferris Baker Watts Inc. and First National Bank of Maryland, which bid 6.484 percent.
The city borrowed $5,905,000 and will repay the principal along with $4,815,390 in interest over the next two decades.
Sale of the bonds raises the city's total long-term debt to about $41.7 million, $16 million of it interest, said William S. Tyler, the city's finance director.
Tyler said the city's excellent financial health paid off in theform of high bond ratings and lower interest rates. Other municipalities received comparable bond ratings yet paid as much as 7 percent interest.
The city has managed to retain its bond ratings, receiving an A+ from Standard & Poor's Corp. and an A-1 from Moody's, marks generally considered the best possible for small cities like Annapolis.
Investors consider bond ratings a crucial measure of a municipality's financial health because lower ratings mean greater financial risk.
Tyler said Annapolis' financial health came as a result of good budget planning, including a freeze on most departments' spending,and increases in garbage fees and water and sewer rates to offset potential deficits.
Tyler and aldermen said yesterday that the city had fared even better than expected.
Speaking of the interest rateon the bonds, Tyler said, "I think this reflects the financial condition of this city and the good fiscal management that has been applied to running it."