Harford County gets 2.78 percent interest rate on $55 million bond sale

Harford County Executive Barry Glassman thanks members of the Harford County Council for their support in maintaining Harford's fiscal discipline, which netted it a AAA bond rating and low borrowing costs. (David Anderson / BSMG)

Harford County sold $55 million in bonds for capital projects Tuesday at a 2.78 percent interest rate, giving the county what its financial advisor called a "very successful" sale.

The interest rate offered, however, is the highest the county has paid in its last three bond sales, which in turn appeared to reflect current market conditions in which bellwether U.S. treasury yields have edged up since last fall's presidential election.


Each of Harford's last three bond sales have been marked with the highest credit ratings possible.

"Congratulations, it's a very successful sale," Lester Guthorn, managing director of Owings Mills-based Public Advisory Consultants, told county officials late Tuesday morning after the electronic bond sale concluded.


Guthorn met with County Executive Barry Glassman, Director of Administration Billy Boniface, County Attorney Melissa Lambert, Treasurer Robert Sandlass and Steve Winter, the county's bond counsel, for the annual sale in the treasurer's office conference room in the county administration building in Bel Air.

Ahead of its $55 million bond sale scheduled for Valentine's Day, Harford County government announced it has retained its top, AAA credit ratings on the bonds.

The 2.78 percent interest rate, offered by Wells Fargo, was the lowest of eight bids displayed on a screen in the conference room. The highest bid, offered by UBS Financial Services Inc., was 2.94 percent.

The other six bids were clustered between 2.85 percent and 2.91 percent.

"The winning bid is substantially below what we call the cover bid," Guthorn said.

He was referring to the second-highest bid, 2.854 percent offered by Robert W. Baird & Co. Inc..

"It only takes one," he said of the winning bid. "The rest of the [financial] community thought differently, if you will."

Harford borrowed $45 million at 2.62 percent in 2015 and $40 million at a historically low 2.29 percent interest rate last year. County officials said at the time it was the lowest interest rate ever paid on their bonds. A 2014 sale went for a rate of 3.04 percent.

Harford County Executive Barry Glassman thanks members of the Harford County Council for their support in maintaining Harford's fiscal discipline, which netted it a AAA bond rating and low borrowing costs. (David Anderson / BSMG)

County leaders visited with representatives of three major rating agencies – Standard & Poor's, Moody's Investors Service and Fitch Ratings – in New York City in January. Following the trip, the rating agencies assigned their top AAA bond rating to the latest bond issue.

That high rating translates into lower interest rates and thus lower borrowing costs. The $55 million borrowed Tuesday will be repaid over 20 years.

Glassman called Wells Fargo's bid "an outstanding rate in the [economic] environment we're currently dealing with."

The $55 million in general obligation consolidated public improvement bonds will cover capital improvement projects approved during the administration of former County Executive David Craig as well as projects approved under Glassman's administration.

The projects include capital improvements for schools – such as $20.3 million toward the replacement of Youth's Benefit Elementary School – public safety radio upgrades, bridges and water and sewer improvements.


"Everything here has already gone through the budget process," Sandlass explained.

Harford County government will return to the bond market in early 2017, planning to borrow $55 million to fund dozens of projects.

The county is currently developing its budget for fiscal 2018, and officials can adjust projected debt service payments that include figures from Tuesday's bond sale.

Sandlass noted the process becomes easier when counties such as Harford do their bond sales during the second half of the fiscal year.

"It gives us a chance to match the debt service payments up with the [new] budget," he said.

The County Council unanimously approved Resolution 004-17 to ratify the bond sale during a special meeting Tuesday afternoon.

Sandlass, Guthorn and Winter presented the results of the sale to the council.

"This is a very good rate for this market," Winter said.

Sandlass, in response to a question from Councilman Chad Shrodes about how this year's rate compared to prior years, acknowledged interest rates have been lower during the past two years, but he said 2017 would be the third year in a row when the interest rates have been below 3 percent.

Harford County Executive used the word "transformative" to sum up his first two years in office, when he sat down Monday to talk about the past 26 months with editors from The Aegis. While we might not go that far, we do agree with his other assessment that has accomplished a lot, when based the agenda he laid out as he took office in early December 2014.

The last time rates were 3 percent or higher was for the 2014 bond sale.
Rates are "largely driven by what's happening in the overall market," Sandlass said.

Harford's AAA bond rating make it one of eight counties in Maryland with a top rating, and that is a major factor when the county borrows money, Sandlass and the other said.

"The administration is to be applauded for the management and fiscal controls of the county," Guthorn said.

He said bond rating agency representatives were "hard pressed" to find anything the county did "less than well."

"They were very impressed with the way the council and the executive works together and the successes you have to record," Guthorn told council members.

Which caused Shrodes to remark that the county is "able now to see the fruits of our conservative labors."

Councilman Mike Perrone asked how much more the county could pay in borrowing costs if its bond rating was below AAA.

Guthorn said it depends on market conditions, which he noted can change in a matter of minutes.

"In today's market it may be five to 10 basis points difference, and sometimes it's three basis points," he said.

This story is updated to reflect comments during Tuesday afternoon's special Harford County Council session.

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