County sells general bonds 'in nick of time'

February 09, 1994

In matters of finance, Anne Arundel County officials learned last week that timing is everything.

County officials sold $70 million worth of general obligation bonds to C. S. First Boston Corp. on Thursday, one day before the Federal Reserve Board raised interest rates.

"We got in there in the nick of time," John Hammond, the county's financial officer, told the County Council Monday night.

The county received an interest rate of 4.7 percent, compared with the 4.9 percent rate it received at its last bond sale in June. The bonds will finance $37 million in general improvements, $17 million in water and sewer projects, and $16 million in solid waste projects.

Fitch Investors Service and Standard & Poor's Corp. both gave the bonds a favorable AA-plus rating, just one notch below the highest AAA rating. Moody's Investors Service gave the bonds the same Aa rating it gave the county in June. That was a notch below the Aa1 rating the county's previous bonds had received.

A high credit rating is important to municipalities that sell bonds to pay for construction projects because it leads to lower interest rates.

Moody's told the county that its bond rating was lowered for any debt incurred after the property tax cap went into effect because the county's ability to collect revenue to back the bonds was hampered.

The tax cap, which limits the yearly increase in total revenue the county can collect to the rate of inflation or 4.5 percent, was passed by voters in November 1992.

Any outstanding county bonds issued before the tax cap was adopted still retain Moody's Aa1 rating.

Before Thursday's sale, Moody's noted in its rating report that measures taken by county Executive Robert R. Neall to cut costs, including a hiring freeze and a government restructuring that eliminated 313 positions, strengthened the county's fiscal situation.

HTC

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