Speakers rip tech park bonds

County proceeds with 15-year term, federal subsidy

Friday, March 12, 2010

While the effort might have been a fiscally responsible one, the Charles County commissioners' decision to pursue a combination of bonds with a 15-year payment period was eclipsed by resident criticism at a public hearing on the same debt service just hours after the action's approval.

During a Tuesday meeting, the board members voted unanimously to approve a blend of tax-exempt general obligation bonds and taxable Build America Bonds to fund the list of capital projects worth $30 million at a 2.82 percent interest rate.

Commissioners' Vice President Edith J. Patterson (D) was not in attendance.

About half the bonds are dedicated to water and sewer projects including $1.8 million in water infrastructure improvements in Bryans Road, where the Indian Head Science and Technology Park is located within a resource protection zone.

The 268-acre parcel of land has been the subject of heated debate for some time between the county and environmentally minded residents and with plans for paying to lay water and sewer lines on the docket, concerned conservationists came before the commissioners at the March 9 hearing to plead their case.

"With 60 percent of our working population commuting out of Charles [County] we are a bedroom community, which is one of the many reasons I do strongly support all the projects that would bring professional jobs and prosperity to our county," said Meredith Sweet, a Waldorf resident and member of the Smarter Growth Alliance for Charles County. "However, while the tech park can certainly fill this criterion, in this present location it would sit like a jagged scar in an area that is forested and has elementary schools and state parks for neighbors, while in Waldorf and White Plains prime industrial park real estate remains vacant."

The 1.5 million square feet of property sits along Route 210, close to the Maryland Airport. Build out is planned in 14 years with some 3,000 employees working on-site.

The only tenant currently committed to tech park space is Martin-Baker, a British aircraft ejection seat maker.

"The [Chesapeake] Bay and its tributaries provide a large part of those things that make Maryland, Maryland," said Indian Head resident Edward Joell. "Each year the dead areas of the bay grow larger. These dead areas are the result of excess nutrient runoff from both agricultural and urban-suburban sources. This excess runoff comes from lawns, open fields, parking lots, roads, rooftops and other impervious surfaces. As tributaries go, so goes the bay. The science and technology center will replace the heavily forested stream valley with lawns, parking lots and roof of the same types that contribute to the excess nutrient runoff that is killing the bay. Anyone who says they want to protect the bay while threatening the tributaries is talking hogwash."

About a dozen people spoke during the testimony, all in opposition to the technology park.

But there are also those who see it as an opportunity for the county.

"I'm a native of Charles County. I worked at the [Indian Head] base and I know what they do there. I see folks go to [Washington] every day because there are no jobs here," said Vincent Hungerford of the Western Charles County Business Association. "Anything reasonable we do to further employment here is a good thing to me."

Hungerford said for some time there's been a push by a loud minority to protect the Mattawoman Creek and its tributaries and the site of the science and technology park is just one of the targets.

"They say the park could go in Waldorf or in Indian Head but there's no place for it. There's not enough contiguous property," Hungerford said. "They worry [an energetics park] is close to schools, but what we're talking about over there is dealing with things like an airbag.

"I'm certainly an advocate of business, and I wouldn't advocate something that flew in the face of good stewardship of the environment."

Besides the technology park, other projects on the 66 project roster are three boiler replacements at county schools worth more than $1 million; the application of the National Pollutant Discharge Elimination System permit program for areas around the county worth $500,000; $5 million in various transportation projects; and more than $6 million to address general government projects such as the courthouse expansion and Nanjemoy Community Center.

Earlier this month the commissioners were presented with four options when considering how they would enter the bond market: using 20-year general obligation bonds and 15- or 20-year Build America Bonds.

Build America Bonds were created in the 2009 American Recovery and Reinvestment Act — the federal stimulus package — and offer a 35 percent rebate from the federal government.

In the past the county has pursued 15-year general obligation bonds.

A shorter loan period tends to have a lower interest rate, while a longer loan will generally have a higher interest rate and so the commissioners had directed staff to look at a win-win situation.

What the county's fiscal team came back with was a comparison of a 20-year combination of bonds, 20-year general obligation bonds, 15-year general obligation bonds and 15 years with a combination of both.

The respective rates were 3.19 percent; 3.35 percent; 2.95 percent and 2.82 percent.

Commissioner Gary V. Hodge (D) pointed out that while the yearly debt service for the 15-year bonds was a few hundred thousand dollars higher than their 20-year counterparts, in the long run the county's taxpayers would be saving about $4 million.

The commissioners were informed that the county would be going to market April 6 and a 10-day notice of sale was required from the day of their decision on what kind of bonds to secure.

The board members were also told that the county's bond rating would be coming March 22 due to the delay in deciding on bond types from the prior week. Fiscal and Administrative Services Director Deborah Hudson said the bond rating agencies like to make their grade as close to the issuance of debt as possible.

The commissioners also adopted a formal general fund policy which will keep the fund balance range between 8 percent and 15 percent of the total budgeted operating revenues.

"There are counties that carry a higher fund balance than 15 percent and we have had a longstanding policy of 8 percent fund balance. I think that having met now several times with bond rating agencies in New York during our trips they respect us for maintaining that 8 percent," Hodge said. "… Our financial management is highly regarded in New York and has a direct result for our taxpayers in lower interest rates, so maintaining an 8 percent fund balance is critical to the strategy we've pursued as a county for many, many years. I think it's very valuable for us to have a written policy. This is not a new policy, we're not establishing a policy, but perhaps we are codifying a policy in writing that has served the county very well in the past."

Commonly known as the "rainy day fund," the general fund balance is a fund in the county coffers normally reserved for major one-time expenses and emergencies. It's also a factor in the bond rating process.

One recent example is the $3.8 million for snow removal that required a dip into the fund balance to help cover that cost.

"Eight percent in this particular year is roughly around $23 million and honestly that's not a huge amount of fund balance to have on hand for a $300 million budget. Twenty-three million dollars could go rather quickly, so we definitely don't want to go below our 8 percent, or our floor," said Fiscal and Administrative Services Director Hudson said. "Fifteen percent we felt that was a reasonable range. We also don't want to necessarily carry too much fund balance before you start spending it on one-time expenses."

Budget Chief David Eicholtz told the commissioners that the 8 percent minimum was established some years back when a previous board decided to keep a reserve of the budget as fund balance.

"We looked at what the average fund balance was among the 24 counties in Maryland. That came out to 8 percent. We didn't want to be the very highest and we didn't want to be the very lowest," Eicholtz said. "The 15 percent is strictly a range for us. It could be higher. It could be 20 percent if you wanted to, but the 15 percent we felt, based on today's dollars and today's budget; if you had a 15 percent fund balance that would approach $40 million. We felt … to have any more than that would be a good use of reinvesting into capital pay-go projects, using it to pay down the debt."

Also included in the fund balance policy are directions in case of a budget surplus or shortfall.

Should the fund balance grow above 15 percent the steps the county will take — in order of priority — are eliminating shortfalls in related funds, reduction or avoidance of debt, supplementing or enhancing equipment or capital replacements, funding one-time expenses and stabilizing taxes, fees and rates.

In case of a budget shortfall, the policy outlines that any other surplus in remaining funds be distributed and over the course of the next three budget cycles at least 20 percent of the shortage should be put toward restoring the 8 percent floor.

If that isn't possible a written plan is ordered to address cutting services or raising taxes.

msomers@somdnews.com