By Megan Poinski, Megan@MarylandReporter.com
(July 27, 2011)—While discord over the national debt and budget cutting sizzled Wednesday in Washington, the Board of Public Works approved the sale of $512 million in state bonds at some of the lowest rates ever – and had harsh words for uncompromising Republicans in Congress.
“Notwithstanding what is happening down the road at the nation’s capitol, we are moving forward because that’s what our state does,” said Gov. Martin O’Malley, opening Wednesday’s meeting with a replay of his successful 2010 campaign slogan.
The Board of Public Works – made up of O’Malley, Treasurer Nancy Kopp, and Comptroller Peter Franchot – had set the date for Wednesday’s bond sale months ago, long before the federal debt ceiling stalemate was an issue. They elected to go forward with most of the sale that had been planned.
Wednesday’s sale includes $418 million in tax-exempt general obligation bonds – mainly for school construction and health care projects, Kopp said. It also included $15.9 million of federally subsidized Qualified Zone Academy Bonds for school facilities, and $6.5 million of federally subsidized Qualified Energy Conservation Bonds.
On Monday, the state gave Marylanders a head start and allowed them to purchase $71 million more in tax-exempt general obligation bonds. The interest on them is exempt from both state and federal income tax.
The board did not go through with refinancing of $200 million of older bonds because interest rates are in flux. Kopp said the refinance will happen at a later date.
Kopp said Maryland is the first state with a AAA bond rating to go to the market since the deadlock over the federal debt and budget took center stage. The fact that Maryland was able to make such a strong showing, she said, demonstrates that the state is still seen as a good investment.
“I think this is an amazing ratification in people’s confidence of the state of Maryland and the value of our bonds,” Kopp said.
Despite all of the problems in the federal government, Maryland was able to get some of the lowest interest rates the state has ever had, said Patti Konrad, director of debt management in the State Treasurer’s Office. During the meeting, Konrad said that the aggregate interest rate from this sale would probably be about 3%.
Earlier this month, all three rating agencies reaffirmed Maryland’s AAA bond rating in anticipation of the sale. However, because Maryland’s economy is tightly intertwined with the federal government, Moody’s will re-examine the rating if the debt ceiling is not raised and the federal government does not meet the deadline to avert defaulting next week.
Franchot said that the fact that the federal government’s problems could single-handedly injure Maryland’s economy is a sobering reminder of the state’s over-reliance on the national government. Praising a report released earlier this week by Blueprint Maryland, Franchot said that it is time for the private sector to take charge of the state’s economy.
“We as a state can’t allow ourselves to become complacent and have the federal government become the economic engine of first resort and last resort,” Franchot said.
After the meeting, O’Malley said that a national debt default will harm every state, and the United States is in uncharted territory. But, he said, he remains optimistic that the “party of Lincoln” will not let a few members push the federal government into an “economic suicide pact.”