Harford pushes latest bond sale back to March

Harford County officials plan to postpone by a month a planned sale of bonds to finance two key public safety-related projects and other capital improvements.

Originally scheduled for this week, the bond sale will be for a lower amount, $40 million as opposed to $60 million, when it finally takes place in mid-March, the county's treasurer and president of the Harford County Council confirmed.

A resolution setting the parameters for the bond sale was introduced at Tuesday's council meeting. As in recent years, this year's sale will be conducted online.

The delay will give finance officials time to readjust what they plan to borrow, Treasurer Kathryn Hewitt said.

Hewitt said the delay will not affect the ratings on the bonds. She and Harford County Executive David Craig and other administration officials met last month with representatives of the three national rating agencies during a two-day trip to New York, and the ratings decisions will most likely come out this week.

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 for 1.956 percent. Those bonds were rated AAA by Fitch Ratings Ltd., Aaa by Moody's and AA+ by Standard & Poor's. The Fitch and Moody's ratings the highest those agencies give.

Hewitt said she is optimistic this year's bonds will be similarly highly rated.

In his final State of the County address last week, Craig pointed to the AAA bond rating, which the county received for the first time ever in 2010, as one of the crowning achievements of his time as county executive.

At Tuesday's Harford County Council meeting, the county's bond counsel Steve Winter said  he always tells the council this year's rates are the best, but he's not sure he can say that this year

Council President Billy Boniface said he asked for the reduction in the bond issue total because a smaller amount will be sufficient to cover the projects it intends to fund from the sale. Craig said in a separate interview that he had agreed to lower the amount, which ultimately is subject to council approval, anyway.

"You don't want to go to the bond market for all the money" before a project is completed, Boniface said last week, pointing out there are limits on how much interest income the county can earn on borrowed money that is sitting idle.

Exceeding such arbitrage limits, which are set by the Internal Revenue Service, could jeopardize the tax-exempt status of the bonds that makes them attractive to buyers and lowers the interest rate the county pays to borrow, he noted.

Boniface said when he reviewed the projects to be covered by the planned sale, he felt the county's immediate needs could be met by borrowing $30 million to $40 million, not $60 million.

"They told me they wanted to leave a cushion for the next administration, but I don't like that idea, and we have had problems [with over borrowing] in the past," he added.

Boniface acknowledged the county is taking a risk not borrowing the additional money now should interest rates rise. Such concerns, however, are mitigated by not having to pay interest this year on money the county wouldn't be using anyway, he added.

Boniface and Hewitt both said the bulk of the latest bond sale will cover the next portion of funding for the $40 million EOC building construction and equipment/installation of a 700 MHz emergency radio system, plus other infrastructure projects. The 700 MHz radio system will link Harford to a region-wide emergency broadcast network.

Even though Harford school officials said recently they want to bid the construction of a new $40 million Youth's Benefit Elementary School in Fallston this summer, Hewitt said the bond sale will not contain money for that project.

As of last June 30, principal on Harford's outstanding long-term debt totaled $660.2 million, according to the county's comprehensive annual financial report for fiscal year 2013. Of the total, $462 million was owed on general obligation and refunding bonds, $132 million on water and sewer or similar revenue specific bonds and $61.1 million on installment contracts used to purchase development rights for agricultural land preservation.

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