‘Tis the Season For… Emergency Refunding Bonds

With advance refunding bonds on the chopping block in both the U.S. House- and Senate-approved tax reform proposals, and “all but dead” according to Bond Buyerno one should be surprised to see a litany of expedited county bond sales in the next few weeks.

Advance refunding bonds allow counties to refinance tax-exempt municipal bonds to save taxpayer money on outstanding debt. Currently, counties can issue one advance refunding bond per municipal bond – saving taxpayers billions nationwide on public infrastructure. All signs point to that ending on December 31.

Queen Anne’s County had planned to do its sale early next year, saving the County’s taxpayers approximately $2 million a year. That no longer looks likely.

Wicomico County posted Tuesday that it plans to hold a special session of the County Council to consider a resolution next week to award up to $24.8 million of Public Improvement and Refunding Bonds for County projects.

Also on Tuesday, Moody’s assigned Howard County’s Consolidated Improvement Refunding Bonds an Aaa rating.  Those bonds – $159.4 million – are expected to go to sale next week. Frederick County plans to sell $29.6 million in General Obligation Public Facilities Refunding Bonds next week, too. (Those may have been planned in advance, but even if so, they were planned with foresight.)

Local infrastructure is about to get even more expensive.


Senate Continues Tax Reform Tinkering, Vote Expected Friday

On Thursday, the Senate tax reform proposal hit a procedural snag on the chamber floor, delaying action on its final floor vote. The vote is expected to take place on Friday. However, as CNN reports:

Even Republican senators remained unclear about the future of their bill. While most were optimistic the bill would still pass, members acknowledged the uncertainty, joking that they still weren’t set on travel plans to head home for the weekend.

In an effort to assuage Senator Bob Corker’s concerns that the bill would increase the country’s deficit, Senate leadership proposed including a “trigger” in the bill which would automatically increase taxes if the bill failed to generate the economic growth anticipated. However, Thursday evening, the Senate parliamentarian indicated that the proposal violated certain rules and could not be included in the bill as it was. The Senate voted not to recommit the bill to the Finance Committee, but the trigger concept was removed from consideration, placing Senator Corker’s favorable vote in question.

The Senate can afford to lose Senator Corker’s vote – the bill can still pass the Senate even if two Republicans vote against it. It is unclear, however, whether the concern over the deficit will compromise other Republican votes.

Concerns over the costs of the tax cuts further piqued as a new analysis by the nonpartisan Joint Committee on Taxation released Thursday revealed that the tax package would generate significant economic growth, but add $1 trillion to the budget deficit.

From NACo’s Legislative Update from Thursday evening:

The [House and Senate tax reform proposal] versions share broad similarities: both reduce individual and corporate tax rates, revamp the international tax code and eliminate deductions throughout the tax code. Both bills also add between $1.4 and $1.5 trillion to the U.S. deficit, which Republican leadership insists will be offset by economic growth created by the bill and through entitlement reform next year. There are also difference between the bills: the Senate bill sunsets the individual rate cuts, delays implementation of the lower corporate tax rate and has a larger child tax credit.

Following Senate passage, the two chambers will either enter negotiations to address differences between the two packages, or the House will vote on the final Senate package. Final votes could happen as soon as December 6 or 7.

Although negotiations continue, several county priorities are impacted by both bills:

State and local tax (SALT) deduction: The SALT deduction has existed since the federal tax code was founded in 1913, and is a vital tool protecting state and local tax autonomy.

In the House, H.R. 1 eliminated deductibility of state and local income and sales taxes, but retained a capped property tax deduction of up to $10,000.

In the Senate, initial drafts fully eliminated the SALT deduction. This issue remains under consideration, and the final Senate text could mirror the House bill.

Municipal bonds: Tax-exempt municipal bonds are largely unchanged in each bill. However, both bills could impact advance refunding bonds and private activity bonds.

Advance refunding bonds: Advance refunding bonds allow counties to refinance tax-exempt municipal bonds to save taxpayer money on outstanding debt. Currently, counties can issue one advance refunding bond per municipal bond, which saved local taxpayers $12 billion from 2012 to 2016. Both the House and Senate bills would eliminate advance refunding bonds, increasing infrastructure costs for local governments.

Private activity bonds (PABs): Under current law, PABs are tax-exempt and support major infrastructure projects, including hospitals, universities, seaports and airports. The House bill eliminates the tax-exempt status of PABs, while the Senate bill does not make changes to PABs.





Preview the 2018 Session “Big Picture”

A compilation of Issue Papers previews major fiscal and policy issues facing the General Assembly in the year ahead. This resource is a handy guide to the top issues that your legislators will be tackling in the year ahead – a great preparation document for county officials in advance of meetings with their local Delegations.

Developed by the Department of Legislative Services, the 2018 Issue Papers are an annual staple for the Annapolis policy-inclined population. They are also a great resource for county officials tracking specific issues, or interested in the state budget and other top-tier topics.

Here are a few direct links to hot topics that may interest counties:

Operating Budget

Transportation Trust Fund

Pension Issues

Capital Budget and Debt

Education Aid and Maintenance of Effort

School Construction

Health Care Reform

Broadband Access

Public Safety

Environmental Issues

Aid to Local Governments

9-1-1 Funding and Modernization

Tax Reform Provokes State To Expedite Purple Line Bond Sale

The State plans to expedite its bond sale for the Purple Line, securing a year’s worth of funding for the public-private partnership (P3) before the end of December. Why? Because the House-passed tax reform package would end private activity bonds (PABs) – the preferred tool for funding the P3.

Reports The Baltimore Sun:

The sweeping tax legislation approved by the House this month would end the so-called private activity bonds, a tool local governments have used for transportation projects, affordable housing and student loans. Supporters say the financing mechanism reduces costs, but critics view it as a subsidy to private businesses.

PABs allow tax-free borrowing by private entities for public purpose projects, like the Purple Line, private school construction, and affordable housing. They are a key tool for facilitating P3s and private investment in public services.

The Senate tax reform proposal does not call for termination of the bonds.

Learn more about how the State seeks to fund major capital transportation projects at the Winter Conference session, Workshop: An Overview of the New Transportation Scoring LawThe MACo Winter Conference will be held December 6-8, 2017 at the Hyatt Regency Chesapeake Bay Hotel in Cambridge, Maryland. This year the conference’s theme is “The Power of Partnership.”

Learn more about MACo’s 2017 Winter Conference:

Could Insurance Pools Save Counties Cash?

Could counties save money by joining other government jurisdictions in pooling public employee health care? Potentially yes, according to the National Conference of State Legislatures (NCSL):

Some public purchasers regularly try to lower overall administrative costs and negotiate lower prices from providers and insurers using their large numbers of enrollees as a bargaining tool. Health costs are controlled by using size, volume purchases and professional expertise to:

  • Minimize and combine administrative and marketing costs;
  • Facilitate negotiations with health insurers for more favorable premium rates and broader benefit packages; and
  • Relieve individual employers of the burden of choosing plans and negotiating coverage and payment details.

In addition to cost containment and simplification, multi-agency purchasing arrangements also can give employees more choices of health benefit plans.

Such pools can result in savings for administrative costs of up to 15 percent for smaller employee groups. Nearly half of all states authorized other government employees to join into state insurance pools in 2010, according to the NCLS report. New Jersey has one of the most extensive health insurance pooling programs – it’s State Health Benefits Program allowed local jurisdictions to join as early as 1964.

Relatedly, MACo is currently exploring options for counties to pool workers’ compensation insurance, and has issued a Feasibility Study Request for Proposals.

Senator Cardin Holds Round Table with Maryland Business Leaders

Senator Ben Cardin discussed critical issues — taxes, healthcare, infrastructure — being debated in Congress that have are impacting Maryland’s business and residents at a round table held at the Maryland Chamber of Commerce on Friday, November 17.

Senator Cardin discusses taxes, healthcare, infrastructure, transportation priorities and more at business round table.

Senator Cardin discusses taxes, healthcare, infrastructure, transportation priorities and more at business round table.The Senator emphasized his commitment to addressing key priorities for Maryland including:

  • FBI – working on finding a path forward for moving the FBI to Prince George’s County.
  • Protecting Federal and Military Installations in Maryland – ensuring they receive the resources and support they need. There was not a round of BRAC this year but one may be coming in another year or so.
  • CSX/Howard Street Tunnel – addressing the issues with the tunnel is essential to its long-term viability and talks continue with CSX financial officers and CEOs.

Q&A with the round table participants centered a lot on their frustrations with the state of the national health care laws and rising premiums, but also involved lengthy discussions on taxes, cyber security, and small business procurement issues.


WSSC Revising Rates, Counties Provided Opportunity To Comment

The Washington Suburban Sanitary Commission (WSSC) is recommending a new rate structure, which is intended to make water bills more predictable and “less discriminatory for larger households,” according to The Washington Post:

With no discussion, the board for the Washington Suburban Sanitary Commission (WSSC) forwarded to officials in Montgomery and Prince Georges counties three staff recommendations for a new pricing system. County officials are expected to provide feedback this spring before the board approves a new system in June.

Each proposal results in higher water bills for smaller households and lower bills for larger households. The revised structure comes after the Maryland Public Service Commission ordered WSSC last March to revise its rate structure because the 25-year-old existing structure was “unduly discriminatory” and “unreasonable” because it could result in larger households paying more per gallon.

The new rate structure would take effect July 2019.

What is “Water Independence” and How Did Anne Arundel Get There?

Anne Arundel has completed long-awaited upgrades to its water infrastructure – giving every County resident access to County-treated water, and ending dependence of parts of the county on Baltimore City’s water system.

The upgrades began in 2007, with construction of major water transmission mains along the east Broadneck and Crofton/Odenton corridors. Major upgrades also included the expansion of two water treatment plants, the Crofton Meadows Water Treatment Plant to 15 millions of gallons per day in 2011 and the Arnold Water Treatment Plant to 16 million gallons per day in 2012.

Stated County Executive Steve Shuh:

Today is an historic day for Anne Arundel County, and marks yet another example of our transformation from a small, rural backwater county to a major jurisdiction in our state. Becoming a jurisdiction with a autonomous, self-sustaining water infrastructure system is a major step forward and an incredible sign of progress.

From the County’s press release:

Given the previous costs of purchasing water from the Baltimore City, these upgrades will save Anne Arundel County $8.5 million annually and help ensure a reliable, state-of-the-art-water treatment system.  Baltimore City will continue to provide an emergency water connection if needed.

Next-Generation 9-1-1: What It Means For County Coffers

Next Generation 9-1-1 (NG911) issues are of top concern for county governments officials seeking to improve and enhance their handling of emergency calls from cell phone users. New technologies will increase response times, location accuracy, and allow traditional callers to text and send photo and video data directly to first responders.

As Maryland and its counties move toward implementing an NG911 network, one key issue that must be addressed is how to fill the void left by Verizon and its vast communication infrastructure. And, while the technology to implement NG911 is available now, there are many issues that local governments must work through, including uniform specifications, the process of transition, governance, and funding.

Learn about the budgetary and procurement impacts of this important issue  at the MACo Winter Conference special session, Next Gen 911: What It Means For Purchasers, PSAPs & Purse Strings.

Joint Committee on the Management of Public Funds co-chairs Senator Cheryl Kagan and Delegate Ana Sol Gutierrez at NG911 hearing July 2017.

Title: Next Gen 911: What It Means For Purchasers, PSAPs & Purse Strings

Description: As counties gear up to join the Next Generation 9-1-1 (NG911) effort and upgrade their Public Safety Answering Points (PSAPs) to adapt to the digital era and toss analog aside, basic questions abound for the buyers and budgeters. What exactly do we need to do? When do we need to do it? And, of course, how much will it cost? While the technology to implement NG911 exists now, so do many administrative issues, such as identifying uniform specifications, transition processes, governance terms, and funding. The Federal Communications Commission has estimated that it will cost $2.68 billion to implement NG911 nationally. Join this forum discussion with state and local experts to find out what NG911 means for Maryland counties’ purchasers, PSAPs, and purse strings.


Ross Coates, Harford County Government Public Safety Manager

Scott G. Roper, Executive Director, Emergency Number Systems Board, Department of Public Safety and Correctional Services

Walt Kaplan, MPH, Enterprise Client Manager, Mission Critical Partners, Inc.

Moderator: The Honorable Cheryl Kagan, Maryland State Senate

Date/Time: Wednesday, December 6, 2017, 2017; 4:15 pm – 5:15 pm

Baltimore County Maintains AAA Bond Ratings

Baltimore County once again has earned the highest possible AAA bond ratings from all three major rating agencies.

The County indicates in its press release that it is one of only 46 counties nationwide that holds AAA ratings from all three bond rating agencies. Charles County announced last week that it also qualifies for this elite status.

The County also saved $5.9 million by refunding $98.6 million in County bonds on November 2.

From the press release:

“Triple-A bond ratings are like a high credit score, ultimately saving Baltimore County citizens millions of dollars in interest when we borrow money through the sale of bonds to pay for things like school construction and parks and infrastructure maintenance,” said [County Executive Kevin] Kamenetz. “We have achieved this important distinction through strong fiscal management that means we invest in strong communities, but in a responsible way with no tax rate increases in more than two decades.”

“These bond ratings are critically important, and it is truly impressive that the County has maintained the triple-triple-A rating while investing in a historic upgrade of our schools,” said County Council Chair Tom Quirk.