Raising Maryland bond debt debated

As needs grow, officials consider lifting limit

March 11, 2007|By Andrew A. Green | Andrew A. Green,Sun reporter

For the first time in decades, Maryland is about to hit its credit limit.

And with a seemingly insatiable demand for more building projects, state leaders could increasingly find themselves saying no to the community groups, churches and individuals around the state who annually seek money for schools, hospitals, museums, ball fields, theaters and more.

Maryland is likely to spend a record $400 million this year on school construction, but with thousands of students across the state going to class every day in trailers, parents are demanding even more funding.

Meanwhile, the Senate and the House of Delegates will hear requests from Port Discovery in Baltimore, the Westchester Community Center in Carroll County, a skate park in Baltimore County, the Children's Theatre of Annapolis and scores more. Each chamber will get more than $100 million in requests for $10 million in funds for such small capital projects.

Some leaders in Annapolis are wondering whether the purse strings are being held too tightly, and they have suggested easing the limits that the state has set on how much bond debt can be issued.

"We should look at it," said Sen. Edward J. Kasemeyer, a Howard County Democrat, who until this year was chairman of the capital budget subcommittee. "Are we constraining ourselves too much?"

Gov. Martin O'Malley said repeatedly during last year's campaign that he would seek to take advantage of the low interest rates Maryland's AAA bond rating affords the state so he could issue more debt to pay for schools, roads and other projects. However, he was able to meet his school construction promises this year without doing so.

The legislature's analyst on capital debt suggested much the same thing, proposing a change in how Maryland interprets its credit limits that would effectively add hundreds of millions to the debt capacity, which is about $10 billion.

But changing the debt caps is bound to run into skepticism. There is a strong institutional aversion in Annapolis to anything that could hurt the state in the eyes of the credit rating agencies.

"We are quite conservative when it comes to borrowing, and that has paid off in terms of our bond rating and in terms of the interest rates we pay," said Treasurer Nancy K. Kopp, a Democrat, who added that reviewing debt limits is a valuable exercise but a complicated one that should be approached cautiously.

To some parents with children in aging or overcrowded schools, though, the need for the state to start contributing more for school construction is urgent.

A state commission headed by Kopp estimated two years ago that the state had a $2 billion backlog in school construction and maintenance, a figure that has likely grown because of increased construction costs.

Take Mount Hebron High School in Ellicott City, a 40-year-old former junior high school that has been added to and renovated so many times that it has four separate electrical systems and 13 air-conditioning systems. Mold is growing on ceiling tiles, parents say, and there's a crack in the exterior wall of an English classroom that sends a constant draft of cold air onto the students.

What's worse, several times in the past few years, most recently in January, sewage pipes have leaked into the ceilings, causing fetid muck to drip into two science classrooms on the second floor.

The Howard County school system estimates that it would cost about $50 million to patch together the mechanical systems, and that a new school would cost $80 million or more. But the county has only $22.5 million in the budget for the school.

These are "not minor problems," said Cindy Ardinger, the PTSA vice president at the school, who has daughters in the sophomore and senior classes and another in middle school. "It might be in the best interests of Howard County to make this investment now versus trying to Band-Aid the problem that's just going to keep hemorrhaging, but it requires more money."

Though Mount Hebron is a drastic example, local officials around the state say there are dozens of other projects they need to complete but almost certainly won't have the money for.

In Baltimore County, for example, Catonsville High School needs to expand its cafeteria, Chesapeake High School requires a new air conditioning system, and Chapel Hill Elementary School needs new windows. None of those projects is likely to get funding this year.

Despite the needs, Maryland has a limited ability to issue more bonds - the chief way governments pay for major capital projects. According to the Department of Legislative Services, Maryland is at 94 percent of its self-imposed debt capacity, up from 77 percent in 2000.

The limit is based on a ratio of the amount of outstanding debt to the total personal income Marylanders generate, which is estimated at just over $300 billion. Maryland set its limit at 3.2 percent, and analysts expect the state to be at about 3 percent for the next few years.

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