By Lyna Bentahar
SEABROOK – In a special meeting on Aug. 28, the Hyattsville City Council approved, in a unanimous vote, a resolution to issue general obligation bonds to finance two public works facility projects that the city currently has underway.
The resolution was approved outside of their usual city meetings to take advantage of the current bond market.
The resolution was approved quickly and with no deliberation, to the point that Council President Kevin Ward attempted to move on, nearly forgetting to vote. Mayor Candance Hollingsworth and councilmembers Carrianna Suiter and Joseph Solomon were not in attendance.
In November 2018, Hyattsville solicited general obligation bonds, municipal bonds backed by the city’s taxing power, to help fund building a pre-engineered Department of Public Works facility and adapting a property to become the city’s new police headquarters.
The Department of Public Works sustainable facility broke ground just two years ago, and now manages street maintenance and solid waste removal. It became a priority for the city to have a new building to help employees who long suffered in cramped conditions and with defective plumbing. At the time, the city administrator, Tracey Douglas, looked for grants to cover the costs of the $3 million facility.
Plans to renovate the 3505 Hamilton Street property for the city’s new police headquarters, meanwhile, have been in the works as early as 2011. The property, formerly a bank, was chosen among several city-owned properties. The city will contract out its design and renovation work.
The two projects will cost the city almost $15 million.
After nearly a year since the city solicited bonds, Douglas and the city treasurer, Ron Brooks, called the special meeting to approve a bond determined to be best by the city administrator, the treasurer, the city’s financial advisor and the city’s bond counsel.
The meeting was called to take advantage of market conditions, worried that they would lose the opportunity if they waited for a scheduled meeting in the coming weeks.
“The markets have been somewhat volatile relative to rates,” said Brooks. “Given the volatility of the market, we wanted to make sure we were ready to go.”
The administration will conduct the sale with Stifel, Nicolaus & Company, an investment bank, on Sept. 12, subject to postponement depending on market conditions and the bond rating that the city will receive from the credit rating agency Moody’s.
This is a departure the city’s traditional funding from the Maryland Municipal Bond Fund, which has put Hyattsville through audits in the last few years.
According to Brooks, Hyattsville has been one of the largest issuers within the Maryland Municipal Bond Fund. But as the audits are underway, the administration determined that “it’s a good time to go out on our own.”
“I think it’s a very good process,” said Brooks. “For the first time, the city went out on its own to secure bonds and get its own bond rating.”
Because they have not received their credit rating yet, the city has not yet determined what the bond will definitively entail. Brooks expects the bond rating, in a conservative viewing, to be a Baa1 rating, which would consider the city to have an adequate capacity to meet financial commitments, but with moderate credit risk.
According to Brooks, the city can afford to borrow as much as $17 million. The resolution approved by the council, however, approved a maximum of $13.825 million.
“The key component is not how much we can borrow, but what we can afford to pay back,” said Brooks.
Hyattsville’s bond counsel, Lindsey Raider, reiterated that because these bonds are dependent on taxing power, the city needed to have confidence in its ability to sufficiently collect. If not, paying the debt might require raising property taxes to have funds for future projects.
The resolution delegates authority to the mayor to approve bond pricing but limits the office so that it must reject interest rates over 6%. Raider and Stifel, however, do not expect the bond pricing to go beyond 5%.
“The pricing would otherwise cause the city to receive more bond proceeds than it needs,” read the resolution. “The city does not want to have an over-issuance problem.”
“It will be increasingly necessary for us to manage costs of programs, of projects, in the city,” said Douglas. “It is our job to make sure that we are financially solvent. We take that responsibility very seriously.”