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July 22, 2019

Bond Indebtedness and Climate Change

Jennifer Baker

Should climate change be in a county master plan? Well Moody’s Investor Services thinks all governments must not only include climate change in its master plan but have measurable steps in place to avert climate change.

 

Moody’s is so serious about this that local governments were given notice in 2017 that unless they comply with the new demands for climate change regulations in master plans, they will consider downgrading their bond rating without new climate change regulations in place.

 

[A municipal bond is defined as one issued by a state, county, city, or town, or by a state authority or agency to finance projects.]

 

What does that have to do with Frederick County?

 

Frederick County currently enjoys a stellar AAA credit rating with Moody’s. Yearly, the County Council uses municipal bonds to finance many capital improvements – like schools, water treatment plants and waste water treatment plants. The county is so dependent on bonds that each year 1500 new homes must be built just to cover the bond indebtedness through tap fees, impact fees, and in some cases user fees. Without that added revenue the county would need to impose large property tax increases to cover the bond debt each year.

 

So, much like the federal government, Frederick County borrows to make capital improvements while increasing bond debt year over year. It then must pay the bond debt with 1500 new homes to cover the cost of that debt the following year.

 

Frederick County has a spending problem. Unless fiscal conservatives can regain control of the county budget, we will continue to overspend, increase our debt and be forced to conform to any regulations bond rating companies push on us. Today the requirement is climate change regulations, but it’s anyone’s guess what we could be forced to comply with tomorrow.

 

Currently, we have land to support 1500 homes a year, but if those homes are just to carry the current bond debt, how many new homes will be needed in the future to cover the ever-increasing indebtedness.

 

If, as a county, we already borrow through bonds to cover capital projects, we create a never-ending circle of incurring debt to pay previous debt. The more homes built the more infrastructure is needed, the more schools, water treatment plants, etc. All of these projects are financed by selling municipal bonds, which make us more dependent on our bond rating to sell.

 

As a county dependent on our rating for bond sales, we will become a servant to any new policy or request a bond rating service forces upon us. Frederick County, then, will lose its independence and ability to self-govern.

 

So, as a county did we really have any say in Climate Change in Livable Frederick, the new master plan?

 



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