Board ponders county spending

Proposals to borrow up to $75 million for construction offered

Howard committee ponders spending

January 11, 2002|By Larry Carson | Larry Carson,SUN STAFF

With surplus cash a fond memory and state school construction funding levels in doubt, Howard County may want to borrow more money than usual for building projects, based on a discussion yesterday by the county's Spending Affordability Committee.

Raymond S. Wacks, the county budget director, presented the committee with scenarios for borrowing between $40 million and $75 million in the next fiscal year, compared with the $25 million to $40 million the committee has recommended to County Executive James N. Robey as a ceiling over the past three years.

"We have a high debt, but we have a fast-growing county that has worked hard to build schools and roads," Wacks told the group of private business people, school and government officials who make up the committee.

Wacks said that Howard's spiraling home values promise a steady 5 percent annual increase in the county's assessable tax base that will be a solid foundation for more borrowing - and will represent a smaller percentage of the county's annual revenues.

Wacks distributed a chart showing that, based on his revenue assumptions, if the county borrowed $50 million next year, and each succeeding year to 2012, the interest payments would represent about 8.2 percent of county revenues, compared with the current 10 percent. The county charter limits debt service (interest payments) to no more than 12 percent of revenues.

He pointed out, however, that "the higher the debt, the less money for other things."

That could be important for next year, when lower income tax revenues will limit how much money Robey can spend in the operating budget for hiring more teachers and police officers, pay raises and higher health insurance costs. The borrowing the committee was discussing involves money for the capital budget - construction projects.

Patricia Baker, who represents the county's Parent Teacher Association Council, noted the much lower recommendations of earlier years, prompting Wacks to pose what he termed the key question: "Will the demand for housing continue to push up housing prices," and thus property tax revenue?

School board member Virginia Charles, who lives in North Laurel, said her area "is one of the poorest areas of the county" but planned developments there will have price tags starting at $250,000 for townhouses and $400,000 for detached single homes. "I find this amazing," she said.

Charles said that aside from the current request for $61 million in school capital budget spending for next year, demand could rise significantly if state officials mandate all-day kindergarten. That would require an extra 88 classrooms, or the equivalent of four new schools. So far, state officials have committed to giving Howard County $7.9 million for school construction, compared with $25 million last year.

Wacks said he included $75 million in the discussion because "that brought us close to equilibrium." If the county borrowed that much each year through 2012, debt service ($52 million this year) would be 10 percent of revenues then, as it is now.

Several committee members seemed unwilling to consider recommending a $75 million borrowing level, but they said $50 million or $60 million might be more palatable.

"Going from $40 [million] to $75 million scares me," said Peter Rogers, a vice president at Microsystems Inc. "I'd hate to see more [debt] thrown on future generations," he said. Arnold Holtz agreed.

"It looks to me like the $50 million figure gives you the best of both worlds," from both the borrowing and revenue angles, said Bruce M. Venter, the school board budget officer.

Howard's debt is $410.3 million, one of the highest in Maryland, Wacks noted, yet the county has the lowest income tax rate among the largest seven jurisdictions.

The trick, he said, is balancing the "value of lower debt levels versus the value of facilities." Howard has the best, newest infrastructure in Maryland, which is one reason that higher-income people continue moving in.

And since the last recession a decade ago, Wacks said, thousands of new, good-paying office jobs have come to Howard County. "We're assuming those kinds of trends will continue," Wacks said.

Wacks said he would talk by telephone with several committee members who were not at the meeting yesterday and write a draft report to circulate among members before a final decision is reached.

Last year, Robey exceeded the committee's $40 million borrowing recommendation by $3 million to pay for a central booking center at the county detention center.

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