No 'magic bullet' seen for county's debt

March 06, 1998


Staff Writer

A Virginia consulting firm on Thursday gave the Washington County Commissioners ideas for tackling the $53 million water and sewer debt.

There is no "magic bullet," said Frank C. Starr, senior vice president of Government Finance Group Inc. in Arlington, Va.

Increasing rates and restructuring debt were among the options the firm mentioned during the meeting with the commissioners and the Water & Sewer Department Advisory Commission.

Asking the Washington County delegation to the General Assembly for help to restructure state loans is one option advisory commission Chairman Clarence Scheer said he plans to pursue immediately.


The county could get $9 million to $10 million by refinancing some debt, Starr said.

By refinancing repayment of $24 million in loans from the Maryland Water Quality Finance Administration through zero-coupon bonds, the county could generate $4.6 million, Starr said.

State permission would be needed, he said.

The county could come up with another $4.7 million by refinancing other debt, Starr said.

One plan presented by the firm included restructuring debt, raising rates 5 percent every year and limiting operations costs to 3 percent annual growth.

That would only delay much of the debt for 20 years, Starr said.

"You're putting the pain on your children" with that option, Starr said in an interview after his presentation.

That time could give county officials time to come up with other options, county staff said.

Commissioners President Gregory I. Snook said the firm presented a lot of worst-case scenarios because they didn't account for customer growth.

"I understand that there's a long-term solution. It just doesn't happen overnight. This group is dedicated to keeping costs as low as possible," Snook said.

The water and sewer department's debt service totals $90 million, including the $53 million principle, $35 million interest and other debt.

Because of tax laws, not all of the debt can be restructured, said Debra Bastian, the county's director of budget and finance.

The consultants are expected to come back to the commission with a final report and recommendations, said Greg Murray, water and sewer department director.

The numbers the firm presented Thursday were based on out-of-date figures and didn't account for about $300,000 in operations and maintenance savings, Bastian said.

Murray said any logical recommendations from the consulting firm would be presented to the public during a budget hearing on April 28 to see which the public finds most desirable.

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