Harford County officials raised nearly $115 million through two bond sales Tuesday to finance new and existing capital projects and to refinance previous bond issues.
Officials with the county's Department of the Treasury received eight bids from major national financial firms on a $40 million consolidated public improvement bond for new capital projects, and seven bids on a $74.66 million refunding bond.
County Treasurer Kathryn Hewitt said Tuesday afternoon the bonds were sold to the bidders who offered the lowest interest rate – J.P. Morgan Securities LLC was awarded the $40 million bond at 2.515 percent interest, and Citigroup Global Markets Inc. was awarded the $74.6 million refunding bond at 1.956 percent interest.
Hewitt said the county's AAA bond rating – the highest rating possible – is critical in getting a low interest rate for Harford County.
"Because we're highly rated, we get the best interest rates," she said. "Someone rated lower than us would have higher yields, which would cost more [in debt service]."
Hewitt compared the county's borrowing with a prospective homeowner seeking a mortgage.
"You want the lowest mortgage [cost] possible," she said. "The difference between getting a mortgage at 3 percent versus 3.5 percent would cost you more in the long run."
The members of the Harford County Council held a special session Tuesday afternoon, several hours after Treasury officials completed the electronic bidding process for the sale of the two bond issues.
The seven Council members had to vote on a separate resolution for each bond, and unanimously approved both.
The $40 million bond, known as "new money," will be paid back over 20 years and fund a variety of capital projects such as $10 million worth of water and sewer improvements, and $30 million for school and other public facilities and highway projects.
In an interview earlier this month Hewitt listed an number of projects the capital improvement bond money would go for, projects that have already been completed or are close to completion, such as Red Pump Elementary School, the Harford County Sheriff's Office Southern Precinct and renovations to the Susquehanna Center at Harford Community College, as well as other building projects on which construction has not yet started, such as the county's planned Emergency Operations Center replacement building
"When we pass a capital budget it's determined what will be financed by bonds. . . . we start the project off with [county] cash first to get it going and then go to the [bond] market," Hewitt explained.
She said bond money is typically used to fund projects of a "long-term nature," buildings that will be used for decades such as school or recreation facilities.
"It is not used to pay operating costs of the county," she said.
The $74.66 million refunding bond will be paid back over 15 years and be used to refund new money bonds sold in 2005 and 2007 to finance capital projects.
Hewitt said the refunding bonds can be used to pay off older bonds at a lower interest rate – she compared it to taking out a new mortgage to pay off a prior home mortgage.
"You're reducing your debt service costs," she said.
In January 2012, Harford sold a $55 million capital improvement issue at an interest rate of 2.6 percent and a $9 million refunding bond at 1.66 percent, according to a published account of the sale on http://www.exploreharford.com.