Following the assignment of ratings, the County sells its bonds via competitive bid, generally in March or April. The exact timing of the sale usually takes into consideration the schedule of other large potential Maryland sellers, such as the State Maryland, and the current state of the bond market. This bid process is conducted in open session and done electronically, led by the County’s financial advisor, using a financial services program called Parity, with banks and underwriters bidding on the bonds. (An underwriter is a securities dealer who helps government entities bring bond issues to market by buying the bonds from the issuer and then reselling them to investors. In doing so it assumes a financial risk and thus expects to make a profit on the transaction. An underwriter may be independent or part of a securities firm or bank. Often, securities firms and banks have municipal bond departments that carry out functions such as underwriting, marketing or trading municipal securities.)
Multiple, highly competitive bids, at very favorable rates for the County’s bonds, are usually received. Following verification by the County’s financial advisor of the rates offered, the bid is formally awarded that day by the County Commissioners to the bidder providing the lowest overall rate. (In a typical 15 year bond issue, the bond principal matures at different times and in different amounts, and therefore these maturities are most often bid with slightly different interest rates each. Sometimes a cash premium back to the County is also part of the bid. Therefore, the lowest overall net rate bid must be verified.)
Thereafter, interest payments on the bonds are paid twice yearly, while principal payments are paid annually to bondholders.
The bond rating and sale process is a time consuming, complex endeavor, requiring outside experts, thorough preparation and considerable staff time and attention to be very successful (upgrade to or maintain AA and above ratings), and requires both financial and presentation skills from top management and the County Commissioners, as well as favorable demographic and economic trends.
