OCEAN CITY – This week’s bond sale will result in Ocean City saving over $850,000 in debt service over the next five years.
On Tuesday morning at the bond market, Ocean City sold $33.56 million of General Obligation Municipal Purpose and Refunding Bonds, which will result in a savings of $858,377 in future debt service for the town’s wastewater and general funds.
During Tuesday afternoon’s Mayor and City Council work session, Finance Administrator Martha Bennett explained $22.5 million of the $33.56 million will be used toward capital improvement projects, including the reconstruction of the Boardwalk, the new Caroline Street Comfort Station, St. Louis Avenue street improvements, pumping stations and the expansion of the 4th Street municipal parking lot. The balance will be used to refund 2005 bonds.
Proceeds of the new bonds will refund the town’s outstanding Series 2005 bonds, which mature after 2015. The sale resulted in a net present value savings of 5.61 percent of refunded principal.
During the meeting, the town’s financial advisor Sam Ketterman of Davenport & Company announced that Ocean City attracted national interest in the municipal market as nine prominent underwriters competed for the bonds. The bids ranged from the low 2.39 percent to 2.67 percent.
“It is a reflection on the quality and reputation that the city has in the marketplace and everyone should be proud of the result you received today,” he said.
Prior to the sale, Standard & Poor’s Ratings Services affirmed its rating of Ocean City’s general obligation debt outstanding of ‘AA-/Stable.’ The rating is based on Ocean City’s strong financial management practices, thorough budget preparation and capital improvement planning. In spite of assessment declines, other credit characteristics that support the town’s rating include its stable, but limited, tourism-based economy coupled with the adequate wealth and income factors, manageable debt burden and the effectiveness of the governing process to manage performance and address problems.
Moody’s Investors Service affirmed an ‘Aa2’ rating to Ocean City debt. This rating reflects Ocean City’s established tourism-based economy, conservative financial operations, affordable debt position and historically sound reserve levels.
Fitch Ratings assigned an ‘AA-’ rating to the town’s bonds, concluding that Ocean City’s financial position is sound with consistent reserve levels and tax raising capacity. Fitch believes the town has the financial flexibility to further adjust rates to offset additional tax base declines and maintain revenue stability.