Montgomery GOs Tomorrow

Triple-A rated Montgomery County heads into a competitive sale tomorrow of $250 million of general obligation debt. Proceeds will fund capital projects such as schools, roads, and mass transit facilities.

In assigning triple-A ratings to the deal, Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s both cited the large U.S. government presence — 23 federal agencies employing about 68,000 civilians — as fuel for Montgomery County’s affluent and stable economy. Its biotechnology sector is growing, and so are its four major commercial districts, according to Fitch. Moody’s said the county’s tax base is likely to expand steadily.

An increase in housing foreclosures hit the county in the past year, but measures such as a homestead property tax cap should “somewhat mitigate fiscal pressure,” Fitch said in its rating release. Moody’s said the county’s reliance on income tax revenue — which provided 44% of operating revenues in fiscal 2007 — is of “particular concern” but that proactive management and willingness to make mid-year budget revisions mitigated that risk.

Montgomery County issues GO bonds annually. In May 2007 it sold $250 million to Citi at a true interest cost of 4.0821%. Tomorrow’s issue and the May 2007 issue are the largest deals brought to market by the county in at least a decade.

McKennon Shelton & Henn LLP of Baltimore will act as bond counsel.

In addition to rating the county’s upcoming GO sale, Fitch and Moody’s reaffirmed their triple-A ratings on about $1.5 billion of outstanding GO bonds.

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