Just as a consumer seeks a low rate on a credit card, Howard County wanted the best deal when it came to selling government bonds.
Howard scored a low interest rate this week, about 4.15 percent, on $100 million in bonds, which are government loans that fund capital projects, such as road construction.
The county also nabbed a roughly 4.27 percent rate on $10 million in metropolitan district bonds, which fund water and sewer projects.
Just as with credit cards, the lower the rate, the lower the amount of interest Howard has to pay on the $110 million.
“That?s a clear advantage to the Howard County taxpayer,” said local economist Anirban Basu, of the Sage Policy Group.
And just as a consumer?s high credit score translates to a lower rate on a credit card, Howard?s AAA bond rating ? the highest possible ? was a major factor in the rates.
The county received 10 bids from financial institutions offering interest rates that varied mere tenths and hundredths of a percent ? all just more than 4 percent. But every bit counts when you?re talking about $110 million.
The money from the bonds goes to reimburse Howard for capital projects paid for and started, Howard Finance Director Sharon Greisz said.
Three bond rating agencies again gave Howard a AAA rating this week, citing the “diversity of its tax base, the relative affluence of its residents, its sound financial management and long-range planning, and a moderately low debt burden,” according to one agency, Fitch Ratings.
However, this fiscal prudence can lead high-rated counties to borrow too little, Basu said, meaning counties aren?t investing enough in school construction, for example.
“For policy-makers it?s really very important to try to balance the fiscal prudence considerations against the community?s demand for services,” Basu said.
