Debt Service

In an Aug. 31 article about the purchase of Sweetheart Cup by American Industrial Partners, The Sun used information supplied by the company's underwriter that incorrectly priced the bonds used to make the purchase. The correct interest rates are 10.5 percent for $110 million in bonds and 9.625 percent for the remaining $190 million in bonds.The Sun regrets the errors.NEW YORK -- Although lightened of the crushing debt load that has plagued it for the past five years, Sweetheart Holdings Inc. will still be paying off high-interest junk bonds for another decade, according to Wall Street bond analysts familiar with the company and its newly completed financing.

Meeting behind closed doors, the city's Board of Finance on Monday approved more than $100 million in taxpayer assistance to help fund a massive, waterfront development project that will host energy giant Exelon Corp.'s regional headquarters. After barring the public from the 90-minute meeting, board members voted 4-0 to approve a developer's request for $107 million in tax increment financing to pay for roads, utilities and parks for the $1 billion Harbor Point mixed-use development on the waterfront between Harbor East and Fells Point, according to Stephen M. Kraus, the city's chief of treasury management.

The good times for Howard County government spending could be over.For years, the county has been the model of prosperity. Its fast-growing population had an increasingly larger government that delivered a panoply of services and programs about which officials often boasted.Now the prospects of its continuing are dimming in the wake of a projected $18 million revenue shortfall.County Executive-elect Charles Ecker promises to slash spending and cut services. He is considering layoffs and whether to audit the county's finances to see if the fiscal problems run even deeper.

A Senate committee approved legislation Wednesday that would launch a $2.4 billion plan to rebuild aging Baltimore city schools, putting the measure on an apparent fast track toward final passage. The Budget & Taxation Committee cast a bipartisan 13-0 vote to approve the House-passed bill, which would provide the first $1.1 billion for the plan, with no substantive amendments. That means that if it passes without further changes on the Senate floor, the measure would likely avoid a conference committee and quickly land on  Gov. Martin O'Malley's desk.

The board of the Baltimore Development Corp. is recommending the city approve a developer's request for $107 million in tax increment financing to pay for roads, utilities and parks for the $1 billion mixed-use Harbor Point development on the waterfront between Harbor East and Fells Point. The board of the BDC, the city's development agency, voted Thursday to send a recommendation to Mayor Stephanie Rawlings-Blake for consideration. The financing, a way to fund construction of public infrastructure for new development, also requires City Council approval.

The city will be forced to dip into its general fund for $1 million to help the city-owned Hilton Baltimore make debt payments this year, city officials said Wednesday. Harry E. Black, Baltimore's director of finance, said the hotel needs the money to make payments in March and September. The Hilton is expected to contribute $2.8 million in taxes this year from the hotel occupancy tax to the general fund, so the hotel is drawing from money it created, he said. "I expect it's going to be an ongoing thing for a period of time," Black said.

Q. How can you get Blue Cross of Maryland to process a claim fast? A. Make it for executive entertainment expenses.United Germany is making it a crime to have spied for East Germany against West Germany but not the other way round.You may soon earmark 10 percent of your tax payment for deficit reduction. The other 90 percent is for debt service.

Howard County residents will have a chance tonight to comment on a proposal to spend $250 million for public school construction, renovations and additions over the next 10 years.About 20 residents have so far signed up to speak during the hearing.The proposal was introduced last week by schools Superintendent Michael E. Hickey, who has proposed several ways to cut construction costs, including adopting year-round schedules and building cheaper schools.In a Sept. 23 letter to Mr. Hickey, County Councilman Darrel Drown proposed several ways to cut construction costs and reduce rising debt service costs.

The city has agreed to amend its contract with the Northeast Waste Disposal Authority so that the authority can refinance a 1982 bond issue that provided money to construct the Bresco incinerator in South Baltimore.By refinancing the bonds at a lower interest rate, the authority will cut its debt service and pass the savings along to the city by cutting the tipping fee the city pays for solid waste disposal at the incinerator. Northeast needed the city's approval to change language in the contract that set the terms of the bond sale.

The Howard County Council served notice last night that it will not look kindly on spending bond money in fiscal 1995 for pay-as-you-go projects."Debt service is going to kill us," said Councilman Charles C. Feaga, R-5th. "My guess is that we're way out in front on debt service" per capita when compared with other Maryland counties, he said.Mr. Feaga was reacting to a report from Raymond S. Wacks, the county budget administrator, that indicated the county will have a $20 million increase in fixed expenses next fiscal year, including an $8.3 million increase in interest on county-issued bonds.

The board of the Baltimore Development Corp. is recommending the city approve a developer's request for $107 million in tax increment financing to pay for roads, utilities and parks for the $1 billion mixed-use Harbor Point development on the waterfront between Harbor East and Fells Point. The board of the BDC, the city's development agency, voted Thursday to send a recommendation to Mayor Stephanie Rawlings-Blake for consideration. The financing, a way to fund construction of public infrastructure for new development, also requires City Council approval.

The city will be forced to dip into its general fund for $1 million to help the city-owned Hilton Baltimore make debt payments this year, city officials said Wednesday. Harry E. Black, Baltimore's director of finance, said the hotel needs the money to make payments in March and September. The Hilton is expected to contribute $2.8 million in taxes this year from the hotel occupancy tax to the general fund, so the hotel is drawing from money it created, he said. "I expect it's going to be an ongoing thing for a period of time," Black said.

The operators of Baltimore's city-owned Hilton gathered Thursday to defend the hotel's financial reputation, saying it has enough cash to cover its costs and emphasizing that city taxpayers are not on the hook for expenses or losses. Last year, the hotel lost $11.5 million. Most of that loss, about $9.6 million, can be attributed to accounting requirements, which do not represent cash losses, said M.J. "Jay" Brodie, who heads the Baltimore Hotel Corp., which oversees the Hilton's finances.

The Maryland State Board of Education said Wednesday that Anne Arundel County government underfunded schools by nearly $12 million for the current fiscal year, striking down the county's appeal of an earlier ruling that it failed to meet a state-mandated funding requirement. The requirement, referred to as maintenance of effort, says that counties must give school systems at least the same level of funding per pupil as in the previous year, adjusted for student growth. In November, Anne Arundel Superintendent Kevin Maxwell indicated to the state board that the county had appropriated $556.1 million for the schools, about $12 million short of the maintenance-of-effort target.

The April 20 Sun editorial regarding the maintenance of effort law ("Leopold's accounting trick") requires a response. As a member of the House of Delegates 25 years ago, I sponsored legislation, which was enacted, that strengthened the maintenance of effort law, and I have long been aware of the spirit of the law that local government should use state dollars to supplement, not supplant, county funding. The law, however, runs headlong into the harsh reality in Anne Arundel County where over the past six years the Board of Education budget has increased 17 percent while all other county agencies' budgets, in the aggregate, have decreased 7 percent.

No sooner had Anne Arundel County Executive John Leopold unveiled his proposed budget for next year than Superintendent Kevin Maxwell was complaining that the schools were being shortchanged by $12 million. It was the latest salvo in a long-running feud between the two men over what it really means for the county to maintain its state requirements for school funding. It's not entirely clear which one is right about the law. But what is clear is that the General Assembly was right to approve legislation this year adding specificity and teeth to its maintenance of effort law. The argument between Messrs.

County Executive Charles I. Ecker was advised to slash $20 million from the $121 million in capital budget requests received in January.The county cannot safely authorize more than $55 million in new general purpose bonds in the coming fiscal year -- $13 million less than this fiscal year and $20 million below the January request -- the county's bond affordability committee told Ecker this week.Each year the committee reviews how much more long-term debt the county can assume in the coming year.

Counter-cyclical stimulus spending makes sense during business cycle recessions, which is not the kind of recession we're currently in. We're recovering from a single event - the 2008 collapse of America's debt-based economic model after a spending binge that was, admittedly, quite fun while it lasted. Once consumers get their debt loads down to manageable levels, they'll begin spending again, which is projected to happen in 2015 - unless, of course, 2015 comes and the governments owe so much money that taxes have to be significantly raised to pay back years and years of "stimulus.

Having fallen for the hollow promise of easy residential development money years ago, the Havre de Grace city government is in the unfortunate situation of not being able to pay the debt service on what it has spent to make that development possible. Going back when Havre de Grace embarked upon the building boom that started with Bayview Estates and Grace Harbour, the city was limited in its ability to provide public services - specifically sanitary sewer service - to a large number of new homes.

It is refreshing that Maryland Comptroller Peter Franchot opposes an increase in the state's debt ceiling ("Franchot: Maryland can't keep borrowing and spending," Jan. 4). The impassioned "loyalty oath" to the Democratic Party contained in his letter to The Sun is illustrative of the dysfunction that is American politics and the cause of its political gridlock: A need in people to take sides and stubbornly, at times blindly, perpetuate this awful two-party system by avowing support for everything on their party's agenda.