By Megan Poinski, Megan@MarylandReporter.com
(July 13, 2011)—If the dispute between the White House and Congress over lifting the U.S. debt ceiling is not resolved soon, the state may put off its scheduled bond sale for upwards of $500 million set for July 27, the state treasurer’s office told a legislative committee Tuesday.
State Treasurer Nancy Kopp and Patti Konrad, director of the Debt Management Division, told the Joint Committee on the Management of Public Funds that a continued impasse on the debt ceiling would negatively impact the bond market. In order for the federal government to meet the Aug. 2 deadline to raise the debt ceiling, Kopp said that both sides must agree by July 21 or 22, days before Maryland has planned to go to the markets.
“If they don’t have the debt ceiling issue resolved, the markets will be chaotic, and we will probably postpone the sale,” Konrad said.
Kopp and Konrad told committee members that they have been keeping a close eye on the discussions in Washington. They have also been talking to all of the bond advisers working with the state on the sale about the possibilities. Kopp said the advisers are optimistic that everything will be resolved, but the state is preparing for whatever happens.
But Kopp and other state officials are hopeful that the potential for U. S. default on its debt won’t roil the bond markets, and can sell up to the $512 million of bonds authorized by the Board or Public Works last month – including retail sales of up to $100 million to Maryland residents.
State retains triple-A rating
The three bond rating agencies made a routine visit to Maryland at the end of June, Kopp told committee members that two of them — Standard & Poor’s and Fitch — have renewed Maryland’s AAA bond rating. Kopp still had not heard back from Moody’s.
Konrad said that the bond rating agencies’ representatives were all impressed by their time in Maryland – especially by the fact that they had a chance to interact with members of both the executive and legislative branches of state government. Committee co-chairs Sen. Verna Jones-Rodwell, D-Baltimore, and Del. Ana Sol Guiterrez, D-Montgomery, were both part of the meetings.
“They loved the opportunity to meet with lots of different people. Not just the staff people, but the people who are making the laws and have the vision,” Konrad said.
The two-day visit featured brief individual meetings with each rating agency, since it is rating agency policy not to ask any questions or make any comments in front of the others, Konrad said. State officials offered a presentation on the state’s economy, budget, structural deficit, pension reform issues, and the housing market. They also had dinner with Gov. Martin O’Malley.
The second day of the visit centered on the projects that are part of the military Base Realignment and Closure (BRAC). The ratings agencies watched a presentation about the Maryland facilities involved in BRAC, then took a tour of the work being done at Fort Meade.
“A gentleman from the rating agency said he appreciated the chance to touch and feel the projects,” Konrad said.