Refinancing Saves OC $670K In Debt Service

OCEAN CITY •€' The town's finance department heard some good news last week at City Hall.

After adding a bit of an exclamation point to the end of the town's claim that it is financially weathering the economic storm, as town officials announced the resort's bond ratings had jumped up two spots, the town refinanced $12.7 million in bonds to a lower interest rate, which will save the town over $670,000 in future debt service.

Finance Administrator Martha Lucey outlined to the Mayor and City Council last Monday night the town's rise in bond rating from a •€˜A' to a •€˜AA-' from Standard and Poor's Ratings Services.

Simply put, the town jumped two ratings in a time when few municipalities are even jumping up one rating, according to Lucey, and the new rating is based on the town's strong financial policies, current low debt burden and rapid debt repayment.

In addition, the town received a A1 rating to the town's $12.9 million General Obligation (GO) refunding bonds, and the same rating from Moody's Investors Service, for the town's GO debt, which affects $78.7 million in parity bonds.

Standard and Poor's also assigned the •€˜AA-•€˜ rating and more importantly, a stable outlook rating, to the town's $12.92 million 2009 GO refunding bonds, which the town was hoping to sell yesterday in the open market with plans to refund the town's 2001 municipal bonds.

As a result of the two-hour bid process, Mayor Rick Meehan chose Robert W. Baird and Company as the winning bidder (out of six bids) at a true interest rate for the bonds at 2.71-percent, as compared to the town's former rate of 4.8 percent.

Lucey had assured the council that if the town didn't see the number that it was looking for as far as selling the refunding bonds, it wouldn't sell.

'This will enable us to continue to stay ahead, but we won't sell them if we don't get the right price, but at this point, in this economy, these ratings are very, very pleasing,' said Lucey.

According to the Standard and Poor's report, the town's limited, but stable tourism-based economy and strong property tax base should ensure that revenues would remain strong.

'We believe that town officials will continue to make necessary expenditure adjustments to keep in-line with revenues,' said Standard and Poor's Credit Analyst Victor Medeiros. 'We also believe that the town is well positioned with very strong reserves, to address any near term revenue declines due to the recession.