Prince Georges County, Md. To Offer $300M of LTGOs

Prince George’s County, Md. will sell more than $300 million of highly-rated tax-exempt debt Tuesday, as the county seeks to benefit from low interest rates with both new money and refunding bonds.

The unanimously triple-A rated county will sell the limited tax general obligation (LTGO) bonds on a competitive basis in two series. The first will be about $137.6 million of new money for the county’s capital improvement program, while a second series of about $188.1 million will refund debt issued in 2005, 2006, and 2007, according to Stephen McGibbon, deputy director of the county finance office.

The bonds earned the same triple-A ratings from all three major credit rating agencies as the county’s regular GO bonds, but they are not identical in structure. Certain taxes and fees used to back the LTGO bonds may not be increased without voter approval, and the bonds are also subject to a county charter limit that restricts the real property tax rate to 96 cents per $100 of value.

Saul Ewing LLP, of Washington, D.C. and Baltimore is the bond counsel and Maryland-based Public Advisory Consultants, Inc., is the financial advisor.

The deal represents a large transaction for the county, which has refunded only intermittently over the past decade and typically issues between $100 million and $250 million of debt annually, according to data from Thomson Reuters.

McGibbon said he expects the county to save about $13.5 million with the refunding bonds.

“It’s interest rate-driven,” McGibbon said. “I don’t want to call it happenstance, but it only happens if the numbers are there.”

McGibbon said the new money issue is in line with the county’s normal behavior, but that it would ordinarily not go to market without the expectation of very low rates.

Prince George’s County houses a variety of federal facilities and much of its employment and revenue is closely tied to its location bordering the District of Columbia. Joint Base Andrews Naval Air Facility is the county’s second-largest employer after the University of Maryland, and the U.S. Internal Revenue Service is the third-largest.

Fitch Ratings noted the county’s well-managed debt profile in assigning the bonds a top rating, but also pointed to challenges such as property tax revenues that are expected to decline this year and an underfunded pension system.

“The funding of the state’s pensions has deteriorated in recent years, with June 30, 2011 funding for the state employees at 62.8%, a weak level, and teachers at 66.3%,” a Fitch analysis explains.

Closing on the bonds is expected on or about Feb. 20.

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Maryland
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