County’s Interest Rates Impress; Shockley Upset Snow Hill High Not Included In Bond

SNOW HILL — During a bond sale this week, the Worcester County Commissioners agreed they hit a home run in terms of the interest rates secured, but the silver cloud has a dark lining, according to Commissioner Virgil Shockley, who chided his colleagues for not including bonding for Snow Hill High School (SHHS).

“We missed an opportunity [Tuesday] to save taxpayers literally millions in interest on Snow Hill High School,” he said.

Two sets of bonds were bid out this week — a Pension Contribution Refunding Bond for Correctional Officers Retirement System totaling $4.6 million and a series of consolidated Public Improvement Refunding Bonds totally $8.5 million.

The first bond received four bids and was awarded to Robert W. Baird and Co. at an interest rate of 2.943 percent, which was well under what the county had anticipated and therefore a strong sell.

However, the biggest shock of the day came when the second consolidated bond received 16 bids and was awarded to Morgan Stanley and Co at an interest rate of .777 percent.

“These excellent interest rates exemplify the hard work our professional staff has displayed and the remarkable management of Worcester County,” said Commission President Bud Church.

Shockley agreed, saying, “This is just unheard of … I never dreamed we’d go below 1 percent.”

However, the .777 percent rate is proof, argued Shockley, that he was right in the predictions he made over the summer that 2012-2013 would be the year to go to the bond market for the best rates.

“It didn’t take rocket science or a crystal ball,” he said, noting that the rates were easy to predict with the limping economy.

Last June, Shockley voted against accepting the county’s budget because it did not include a provision for going to the bond market for financing for SHHS renovations. The budget passed without Shockley’s vote, but he said this week that he feels vindicated in sticking to his guns last summer. Had the commission moved forward with a SHHS bond this cycle, he claimed that it would have likely attracted similar bids to what the Public Improvement bonds received, since both would be tax exempt.

“The stars were aligned for a low-interest rate,” said Shockley.

The number might not have been as good as .777 percent for SHHS, he admitted, since the bond would have been much larger, roughly $45 million compared to the $8.5 million Public Improvement bonds. But he asserted that it would have received double-digit bids, possibly three-quarters of the 16 bids for the $8.5 million bond.

But others on the commission don’t believe that the ship has sailed on favorable interest rates in the future.

“I don’t think the ship has pulled away from the dock,” said Church.

Whether or not Worcester will be able to secure a sub-1 percent interest rate when they do eventually bond SHHS Church wouldn’t predict. He admitted that he would be surprised if the county ever beats .777, which he stressed was an entirely unexpected and fortunate number. But coming in close to that number could be feasible, he added.

“It doesn’t look like a whole lot is going to change in the next five to seven months,” said Church.

For one thing, the county’s bond agency rating is unlikely to drop before Worcester moves forward with SHHS, potentially going to the market within the next year.

Moody’s Investors Service gave Worcester an Aa2 rating, while both Fitch Ratings and Standard and Poor’s assigned the county an AA rating.

“The rating agencies assigned and reaffirmed the county’s Aa2 and AA ratings, which are high quality, low credit risk investment grade ratings,” reported a release from the commission. “All three agencies citied the county’s impressive financial flexibility and conservative fiscal attitude combined with the maintenance of solid reserves and manageable debt in their decisions.”

County Finance Officer Harold Higgins told the commissioners that all three bond agencies were pleased with the county’s conservative financial management. A large property tax base, maintenance of strong reserves and low overall debt were all cited as reasons for the agencies’ favorable reviews.

Regardless of the end interest rate for the bonds, Church was adamant that the commission simply could not move forward and go to the bond market for SHHS when Shockley suggested it. Where Shockley saw a golden window, Church said the majority of commissioners saw a closed door that won’t open until late 2013 at the earliest.

“There are certain hurdles and obstacles that have to be overcome before you [go to the bond market],” Church said. “We were advised that it was not the proper time to do that.”

Chief Administrative Officer Gerald Mason supported Church’s view. The exact cost for the SHHS project remains unknown, explained Mason, with only a rough estimate of about $50 million having been presented by the Board of Education. Worcester would be responsible for about $46 million of that price tag with the state supposed to pick-up the remaining $4 to $5 million. But whether or not the state will supply their portion of the funding has yet to be confirmed, said Mason.

Because going to the bond market for the school is essentially just borrowing money for the project, Mason asserted that the commission was right to not move forward with the project without having all of the numbers.

“You never would borrow money without having all of your facts,” he said.

Additionally, once bonded, the county would only have three years to spend the money on SHHS renovations, putting the commissioners on a tight timetable that Church said he was not comfortable with.

Despite Mason’s and the majority of the commissioners’ hesitation to move forward with SHHS without having all of the numbers confirmed, Shockley has defended the idea that there was a viable window to advance this year. Even though the final cost for renovations wasn’t confirmed, he argued that the estimate made by the school board was comprehensive and will almost certainly be close to the end cost.

As for the state not guaranteeing its funding, Shockley claimed that it would have been highly improbable that officials would have backed out once Annapolis saw that Worcester was prepared to advance with the project.