'A' stands for a lot Minute changes in bond ratings can add millions to interest payments.

October 31, 1995

MOST TAXPAYERS don't know have the foggiest notion how the New York bond agencies rate their county government's general obligation bonds. Carroll officials are now fighting to maintain the county's double A rating.

This arcane system -- that relies on single, double or triple letters as well as plus and minus signs -- determines the creditworthiness of local and state governments. The differences between a single A rating and a triple A rating has a sizable impact on taxpayer pocketbooks.

If the county's ratings decline, taxpayers will have to pay more to the investors who buy Carroll's general obligation bonds. The more the county pays in interest, the less there is to spend on other public services from education to road maintenance. In the current operating budget, about $9.5 million -- or about 6 percent -- of the operating budget of $155.5 million is devoted to debt service. Put another way, each Carroll family pays about $290 a year to service the debt.

The problem is that the county is approaching the level of accumulated debt that could jeopardize its current high rating. Fear of losing that rating is the reason the county dispatched a five-person delegation -- including all three commissioners -- to the Big Apple last week to discuss the county's proposed $24.2 million borrowing level.

Carroll is fortunate. The rating agencies have given the county their second highest rating -- double A -- for the past several issues, enabling the jurisdiction to save millions in interest costs over the life of the bonds. However, Carroll's increased borrowings makes these bond rating agencies nervous, particularly when they see a leveling in total tax revenue. Unless tax revenues increase with the debt burden, the county could see a drop in ratings.

The county is actually in a good position to maintain its ratings. In the past year, the commissioners have raised the county's "piggyback" tax from 50 percent to 58 percent of the state income tax. They also raised impact and permit fees. As long as the credit analysts believe the county's tax revenue is growing sufficiently to pay for the larger amount of debt, the county will be able to preserve its bond rating. That's in the best interests of all Carroll taxpayers.

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