Outlook is rosy in near future

Office vacancies down

job growth looks strong

`In good shape' for short term

Panel will recommend borrowing for fiscal year

Howard County

December 30, 2004|By Larry Carson | Larry Carson,SUN STAFF

The weather outside may be cold, but county officials maintain that Howard's economic outlook is warm and rosy.

Office vacancies are down sharply, job growth is predicted to be strong and unemployment is low, and Howard's coveted AAA bond rating was recently reaffirmed by three New York bond rating houses. That means the county's bonds can attract the lowest interest rates - under 4 percent - and have the lowest risk factor. Fewer than 20 counties of 3,000 nationally have the top rating.

"In the short term, over the next five or six years, we're in good shape," Richard W. Story, chief executive officer of Howard County's Economic Development Authority, recently told the county's Spending Affordability Committee, whose members are trying to decide how much government borrowing to recommend in the next fiscal year.

Raymond S. Wacks, the county budget director, said the question for the committee is whether good economic prospects mean Howard County can afford to authorize borrowing another $80 million in bond sales. Or would $85 million work, or is a lower figure safer, in case revenue assumptions prove too optimistic?

Wacks said that with capital budget requests for next year expected to be well over $100 million, the committee's recommendation on borrowing is important in determining how many new schools and other building projects the government can afford.

Overall, Story said, things are looking up, with federal defense and homeland-security spending helping to halve the county's office vacancy rate from 24 percent to 12 percent.

The unemployment rate in Howard is 2.4 percent - second lowest in Maryland. The steep upward spiral in home prices promises a steady growth in property and income tax revenues, because officials feel only high-income people can afford the expensive homes.

"The jobless recession is over," Story said, adding that companies are adding workers to avoid losing business because of understaffing. "Job growth is going to be significant."

Wacks said that because Howard's expensive new homes are being bought by people who plan to live in them and not by investors, economists don't expect housing prices to drop.

"As housing prices rise, higher-income people are going to be living in Howard County," Wacks said, supporting his estimate that personal income is likely to rise by 6.25 percent next year.

Wacks gave committee members a scenario showing $80 million in authorized borrowing straight through fiscal year 2013, based on optimistic assumptions about the economy and revenue growth.

If education spending grows 7 percent a year, and property and income tax revenues rise about 6 percent a year, the county could borrow that much annually and still reduce borrowing as a percentage of revenue.

From a high of 9.73 percent, borrowing would decline to 8.5 percent of revenue by fiscal 2013 under that scenario, though annual interest payments would increase from $59.6 million this budget year to $82.7 million in fiscal 2013.

Wacks said the county normally sells fewer bonds than are authorized, noting that for this budget year, the borrowing limit was set at $80 million, but $64 million in bonds will be sold. A sale is scheduled for January.

Actual borrowing takes several years to catch up with authorized borrowing, he said.

Howard is in a good position to borrow money, said Sharon Greisz, the county finance director, because the Rainy Day Fund is full at $36 million, the county is expecting a budget surplus at year's end, and it has devoted about $5 million in cash to capital projects - providing a further cushion.

Wacks said the AAA bond rating "is a signal to the business community and residents that we're well-managed and under control."

Next month, at the next and final committee session, Wacks said that he would give committee members several more possible borrowing scenarios.

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