Municipal bonds, the money we owe ourselves [Editorial]

In the world of high finance, a world that's alien to most people, Harford County's government is highly rated, having been given ratings like AA+ and AAA by the various firms that keep track of such things.

For those of us who don't follow such things as closely as one might keep track of a pennant race, it's worth noting that AAA or Aaa are the top ratings, and Baa or BBB- are the worst, and the worst are curiously characterized as "medium grade."

It's kind of like going to a restaurant known for large portions and seeing the soft drink sizes offered: large, extra large and massive, or some such nonsense. As it stands, the three ratings firms - Moody's, Standard & Poor's and Fitch - each have a range of 10 ratings grades that can be assigned to the issuer of a municipal bond. Bonds with the best ratings are regarded as having the least amount of risk associated with them. Low risk means low interest rates, so by having a good rating, Harford County can pay a lower interest rate on the bonds it issues, which works out well for those of us who pay taxes to pay off the bonds.

Those bonds, meanwhile, end up in a range of investment instruments, which means there's a high probability that a fair number of people in Harford County have a 401(k) or other retirement plan that includes a smattering of Harford County municipal bonds.

So as it turns out, though municipal bonds – issued by counties and towns - are an important part of the financial market and generally regarded as carrying low risk even in their lowest BBB- form, strangely having a county whose economy is substantially tied to government spending constitutes a reason for lowering that county's bond rating.

Over the years, Harford County has struggled to secure top-tier ratings of AAA or Aaa and the reason it sometimes fails to achieve the coveted highest rating is the large contingent of federal government employees in the local workforce. Too many eggs in one basket, and the wrong basket at that is the logic behind downgraded bond ratings.

It is true that the federal government can, with relatively short notice, change course and close a military installation or cease work on a major project. Then again, if the federal government begins acting erratically and tosses local economies asunder, it's pretty much a sure thing that all aspects of the national economy will suffer, even if they're not linked directly to the federal government.

Presumably reasoning such as this is what results in Harford County being given top ratings fairly regularly in recent years. Either way, it seems Harford County is poised to have its nearly $117 million in bonds issued this year at a favorable interest rate to the taxpayers, at least in terms of having to pay them off. Those who also have the bonds in their portfolios in one form or another will have a secure investment, though one that doesn't pay a big return.

High finance has an exciting ring to it, but it's mainly the mundane story of how we owe ourselves money and pay it back as time goes by.

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