$61 million bond sale victim of timing and rising rates Increase raises payback by $300,000 more yearly

March 14, 1996|By Dan Morse | Dan Morse,SUN STAFF

What a difference a couple of weeks makes $300,000 worth of difference for the Howard County government.

The culprit: Wall Street's bleak performance last Friday, last Friday's darkday on Wall Street,which saw sharply rising interest rates right before yesterday's scheduled bond sale to finance Howard County projects.

Needing money for new schools, roads and other projects, Howard officials yesterdaysold $61 million worth of bonds yesterday to Prudential Securities Inc.

The county will pay that back over the next 20 years at an annual interest rate of 5.34 percent. Had the county sold the bonds two weeks ago, it could have enjoyed a much lower interest rate, county officials estimate perhaps as low as 4.84 percent.

That difference, about a half a percent, amounts to about $300,000 each year in interest payments. "It's frustrating," said Ray Wacks, county budget administrator.

Such bond auctions are planned months ahead of time so that large firms in New York can place their bids at the same time.

County officials were hoping a recent upgrade by Moody's Investors Service Inc. to an Aaa rating would give Howard more favorable rates. Instead, the market proved to be a much larger factor.

Still, the county did better than in its bond sale last year, when overall interest rates were higher and its bonds received a rate of 5.57 percent. In fact, yesterday's rate was the lowest in about 20 years for the county, said Pat O'Connell, president of Evergreen Capital Advisors in New Jersey, the county's financial adviser.

Mr. O'Connell said Howard with its relatively wealthy residents is considered financially sound by Wall Street.

If interest rates drop, Mr. Wacks said, the county could have the opportunity to refinance the bonds.

In addition to the $61 million worth of public improvement bonds, the county also sold $3.25 million worth of metropolitan district bonds yesterday. The metropolitan bonds, which fund water and sewer projects, drew a 5.75 percent interest rate.

Pub Date: 3/14/96

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