Piper Jaffray was the winning bidder in Harford County's $40 million bond sale Tuesday, offering a 3.0465 percent interest rate to beat out 11 other bidders.
"It is higher than the county paid last time, but that was a different market," county bond counsel Steve Winter told the Harford County Council, which approved the sale unanimously during a brief special meeting Tuesday afternoon.
Winter said 3.0465 "in this market is a very good rate."
The bid is about half a percentage point higher than the county received in the past.
"I expect it to be half a percent [higher] next year again," financial adviser Lester Guthorn told the council, adding rates could be expected to rise again.
"We have gone through a remarkable period of low interest rates," Guthorn noted.
Most of the sale will help pay for the new $40 million emergency operations center building and a 700 MHz emergency radio system, as well as other infrastructure projects.
Bids were received online Tuesday morning for the 20-year consolidated public improvement bonds. The council ratification of the sale is required by law.
First ever top credit ratings from the three principal bond rating services and good market timing helped them attract far more than the typical seven or eight bidders, county officials said.
"The county unbelievably received 12 bidders, which is the most I have ever seen," said Winter, who has been advising Harford officials on bond transactions for the better part of four decades.
Harford's bonds were rated AAA by Standard & Poor's Ratings Services, Aaa by Moody's Investors Service and AAA by Fitch Ratings.
Only four other counties have received an AAA rating this year, County Treasurer Kathryn Hewitt said.
Investors can buy
Individual investors interested in buying into the bonds, which are listed or advertised in financial media, should speak with a broker or financial adviser.
Interest earned on Maryland municipal bonds typically has certain tax advantages; however, the buyer's tax and financial advisers should ultimately make such determinations.
Bonds can be bought in $5,000 blocks, but the county is not allowed to give private investors or brokerage houses a leg up over institutions, Guthorn said.
"We want to make sure the offering is fair to all and we cannot sort of reach in and say... you need to set aside so much for a retail customer," he said. "This needs to be as transparent as possible."
The bonds' premium for resale is also determined by the broker.
"What we try to do is everyone has the same bid parameters," Guthorn told the council. "It is simply how each bidder decides to structure their offerings."
Councilman Joe Woods said there may be "some comfort" in seeing large banks and firms come out as bidders and wondered if that is an indication of greater security.
Guthorn replied an institution's size or prominence does not necessarily make it a more secure bidder but said he did not consider quality to be a concern.
"The only thing we can evaluate is the lowest bidder. These are all qualified organizations," the adviser said.
Other bidders ranged from Hutchinson, Shockey, Erley & Co., to BMO Capital Markets, with interest rates proposed between 3.063755 and 3.168128 percent.
The bonds will mature on or after March 15, 2025, according to the resolution the council adopted at Tuesday's special meeting. The "good-faith" deposit from the winning bidder is $1 million, Hewitt said.
The county received that on behalf of Piper Jaffray and holds the money for two weeks before the expected settlement on the bonds.
"The bidders have to be able to come up with that money to be able to bid, and that is one of things that make them qualified," Hewitt told the council.
County Executive David Craig, who was in the audience for the council's approval vote, said county officials "did a good job" on the sale.
In February 2013, Harford sold $40 million in 20-year general obligation bonds at an interest rate of 2.515 percent and $74.66 million in 15-year refunding bonds at 1.956 percent. Those bonds were rated AAA by Fitch, Aaa by Moody's and AA+ by Standard & Poor's.