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St. Mary's County hears municipal advisor: timing looks favorable for FY17 bond sale as ratings 'on the precipice' of improvement
Summary
A Davenport municipal advisor told St. Mary's County commissioners that low long-term interest rates and the county's scorecard metrics make the planned FY17 bond sale likely to be affordable; Moody's scorecard shows an indicative AA2 rating and staff and consultants plan rating‑agency visits in early June with tentative pricing in late July.
St. Mary's County commissioners heard on Tuesday that current market conditions and the county's fiscal profile should make a planned FY17 bond sale affordable.
The presentation came from Joe Mason, a municipal-advisory representative with Davenport & Company, and was introduced by Jeanette Cudmore of county finance staff. Mason told the commissioners the long-term interest-rate environment is near recent lows and that, “your decision to enter the market at this time is looking like a good one.”
Mason reviewed how rating agencies now publish scorecards and how Saint Mary's County scores on those metrics. Using Moody's scorecard methodology and audited FY2015 data, he said the county's unadjusted indicative score was 1.86, which falls within Moody's AA2 range, the county's current Moody's designation. Mason noted S&P's indicative score was stronger under its methodology and that Fitch was finalizing revised criteria. He added that the county's tax base — about $11.8 billion in the scorecard — and rapid principal paydown are strengths that support potential rating improvement.
Why it matters: a stronger rating or favorable market conditions reduce the county's cost of capital and lower debt-service pressure on operating budgets. Mason gave the county an implementation timeline: prepare a preliminary offering statement in spring, hold rating-agency meetings in early June and tentatively price bonds in late July with a close in early August.
County staff and Davenport used conservative assumptions for modeling a $25,000,000 bond issue with level 20‑year debt service at 4 percent in the near term and 5 percent for future issuances. Mason described that as conservative relative to current market yields and said staff should expect detailed rating-agency questions on economy, finances, management and debt/pension metrics — the four Moody's categories now weighted in their scorecard.
Discussion and next steps: commissioners asked about Moody's and S&P differences, how pension metrics are now included with debt, and operational choices that could improve scorecard metrics (for example, growing fund balance or adopting a 10‑year payout‑ratio policy). Mason said two practical next steps were (1) preparing a comprehensive credit presentation for rating-agency visits and (2) working with bond counsel to prepare the preliminary official statement. "We will be preparing for rating agency visits, which we intend to do in early June," Mason said, and added the tentative pricing and close timetable.
No formal action was taken during the presentation; staff indicated they will follow-up with materials, coordinate the rating visits, and return with refined CIP timing and debt-issuance decisions for the board to approve.
