County Raises Money Aimed At Capital Projects

November 24, 1991|By Carol Bowers | Carol Bowers,Staff writer

Harford County ventured into the bond market Tuesday for the first time in eight years to raise money for capital projects.

The countyborrowed a total of $22 million: $13.1 million for eight capital projects, including two new public schools, and $8.9 million to pay for water and sewer system improvements.

For eight years, the county used available cash to pay for capital projects, such as schools or building renovations, instead of borrowing money for those projects.

The county did borrow money during those eight years for water and sewer projects, but those bonds did not increase the county's long-term debt because they are being paid off with user fees.

Harford will pay 6.03 percent interest for 20 years, or $7,794,328.91 on the $13.1 million it borrowed for capital projects.

On the $8.9 million borrowed to pay for water and sewer projects, the county will pay 6.02 percent interest over 20 years, or $5,366,170.12 in interest.

In a special session that began at 1:30p.m. Tuesday, the County Council voted to approve the bid to sell $13.1 million in general obligation bonds made by the Baltimore-based investment banking firm of Alex. Brown & Sons Inc., the lowest of three bidders on the bond offering.

The council also awarded Alex. Brown & Sons Inc. the bid to sell $8.9 million worth of bonds to pay forseveral major water and sewer projects. The firm again offered the best interest rate -- 6.02 percent.

"I did the Toyota jump when I saw those interest rates," said James M. Jewell, the county treasurer.

Interest rates are determined in part by ratings given by national investment firms, usually Moody's Investors Service and Standard & Poor's Corp., both based in New York.

The high "A" range bond ratings are important because they mean the county pays a lower interest rate on money borrowed on the bond market. Although each bond-rating house uses a different system to determine the quality of the investment, all ratings are given by single or multiple letters, and just asin classrooms, A's are better than C's.

The decision to sell bonds was among the first moves County Executive Eileen M. Rehrmann announced when she took office last December.

The executive's proposal to borrow this year instead of spending cash was aimed at creating anend-of-the-year financial cushion to protect the county's high bond ratings.

To protect that rating, the county needed to 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, 1991.

A recent audit of the county's finances show the county ended that for the fiscal year that ended June 30, 1991 the county had a $9.9 million surplus.

Jewell said he believed the cushion and an AA-rating the county earned from Fitch Investors Service, a new bond rating house, improved investors' view of the quality of Harford's bonds. Harford's other other bond ratings -- Aa from Moody's and A+ from Standard & Poor's -- remained unchanged.

That bond sale money will be used to pay for 11 sewer projects, including $300,000 for the expansion of the Sod Run water treatment plant.

Among the 14 water system improvement projects the county has planned, $2 million will be spent to plan and engineer a new water treatment plant needed when the county connects to a Baltimore City aqueduct, known as the "Big Inch," which runs through the county.

Jewell said the money borrowed for water and sewer projects would be repaid through higher water and sewer hookup fees already approved by the council and a new system fee that will be charged to developers.

Despite the $13.1 million in additional debt that will be paid back out of the county's general fund, Jewell said the county's annual payments to pay off its general debt would remain unchanged, in the $5 million to $7 million range.

HOW WILL BOND MONEY BE SPENT?

* County's share of building Fallston Middle School -- $4.5 million

* County's share of building Route 543 elementary school -- $2 million

* Planning money for Belcamp Elementary School -- $369,000

* Building a larger gym at Route 543 elementary -- $500,000

* Seedmoney for planned Higher Education and Applied Technology Center in Aberdeen -- $750,000

* Renovations to county offices at 18 Office St., Bel Air -- $750,000

* Construction of new building at HarfordCommunity College -- $99,900

* Capping closed Tollgate Landfill -- $4.2 million.

Source: Harford County Treasurer's Office

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