County weighs bond refinancing Last week's favorable rate lower than in earlier sales

December 09, 1996|By James M. Coram | James M. Coram,SUN STAFF

County officials were so pleased by the results of last week's $21 million bond sale, they may have another one soon.

The county achieved an interest rate of 4.97988 percent on its 20-year general-obligation bonds, nearly half a percentage point lower than the average price of similarly rated municipal bonds sold on Wall Street a week earlier.

"There was less than 0.07 percent difference" between the lowest and highest bids among the six investment companies seeking to acquire the bonds for resale Tuesday, said Eugene C. Curfman, the county comptroller. "It was an extraordinary bid for the county."

The lower the interest rate, the less the county will pay to borrow money for its long-term capital projects.

Had the bids Tuesday been closer to the previous week's municipal bond index rate, the county would have had to pay $88,252.20 more a year in interest on the bonds -- $1.77 million more over the 20-year life of the bonds.

Proceeds from the bonds sold last week will be used to reimburse the county for capital projects funded in fiscal 1995 and to pay costs incurred in the fiscal 1996 and 1997 budgets.

The interest rate was so attractive that the county may refinance about $12 million in bonds sold earlier at higher rates, Curfman said. The rate may fluctuate between now and the date of a potential sale, but if last week's rate holds, the county could save $1.8 million with a refinancing, Curfman said.

Three Wall Street bond-rating companies came to the county Nov. 13, and after a three-day visit, gave Carroll's bonds the same AA rating as last year. The higher the bond rating, the lower the interest rate -- usually.

But last week's Carroll sale produced the same kind of results that the state's bonds brought in October, even though the state bonds carried Wall Street's highest rating -- AAA.

"For a county of our size, a AA rating is about the highest we can expect," Curfman said, given the county's population, demographics, employment history, wealth and tax payments.

"With all those things taken together, [Wall Street] has determined that Carroll County is a very high-quality credit risk," Curfman said.

"They are saying that the county is well run financially, that we have a stable economy and that we are able to handle drops in income well. The results of the bond sale indicate that Carroll is well thought of in the bond market, and the [AA] rating shows it."

Pub Date: 12/09/96

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