OC’s $12M Bond Scores Low Interest Rate

OCEAN CITY – The Town of Ocean returned from a bond sale last week that resulting in a low interest rate.
At the conclusion of this week’s Mayor and City Council work session, Finance Administrator Martha Bennett announced the town went to the bond market last Thursday and sold $12.7 million of general obligation municipal purpose bonds at a true interest cost of 2.099 percent, attracting national interest in the municipal market as nine prominent underwriters competed for the bonds.
The bids ranged from 2.099 percent to 2.249 percent for the bonds, which mature Dec. 1, 2014 through Dec. 1, 2023.
“That is very positive for the town… our interest rate is very good and speaks highly of the town’s position in the market,” Bennett said.
The bid of 2.099 percent was awarded by Mayor Rick Meehan to Morgan Stanley & Co. LLC.
“The town’s interest rate speaks highly of the town’s position in the market,” said Samuel Ketterman of Davenport & Company, the town’s financial advisor for the sale. “Town officials should be proud of the result.”
Proceeds of the new bonds will finance the new Performing Arts Center, Beach Patrol headquarters building, new roofs on the Public Safety Building and Service Center garage, and an effluent disinfection system at the wastewater plant.
“This is incredible,” Council President Lloyd Martin said. “I have been with the town for 11 years and I have never seen interest rates like that, so we are going in the right direction.”
All closing documents for the bond sale will be completed by Dec. 19, Bennett said.
Prior to the sale, Standard & Poor’s Ratings Services raised its rating of Ocean City’s general obligation debt from outstanding to ‘AA/Stable.’
“The improved rating is based on the town’s strong financial management practices, thorough budget preparation and capital improvement planning,” Bennett said last week. “In spite of assessment declines, other credit characteristics that support the Town’s rating include its stable, but limited, tourism-based economy coupled with the adequate wealth and income factors, manageable debt burden and the effectiveness of the governing process to manage performance and address problems.”
Moody’s Investors Service affirmed an ‘Aa2’ rating to Ocean City debt.  This rating reflects the town’s sizable tax base that serves as a year-round tourist destination and above average socioeconomic factors.
Fitch Ratings assigned an ‘AA-’ rating with a stable outlook to the town’s bonds, finding that the town’s financial position is sound, with consistently healthy reserve levels and tax raising capacity.  Fitch believes that the town has the financial flexibility to maintain revenue stability.