Questions A & B

PUBLIC SERVICE ANNOUNCEMENT
From the Wicomico County Executive’s Office
Explanation of Questions “A” & “B” on the November 4th Ballot
Note: These questions were placed on the ballot at the initiation of the County Executive and the unanimous approval of the County Council

Ballot Question “A” – Charter Amendment - Permit Refunding of Obligations: To amend the Wicomico County Charter to permit the County to refund outstanding bonds, certificates of indebtedness, notes and other obligations in accordance with state law.

· What does “refunding” mean?
Refunding is the same as refinancing. Just like refinancing a mortgage, the county would redeem (buy back) old bonds sold at high interest rates and sell new bonds to cover the outstanding balance at a lower interest rate.
· Why is this a good idea?
o It could save the county hundreds of thousands of dollars. For example, if the county had $4,000,000 worth of outstanding debt (“old bonds”) at an interest rate of 8% and could refinance them at 4%, it would save $160,000 a year on interest costs.
· Why can’t the county do this now?
o The charter has a provision that prevents this. To remove the provision requires a charter amendment, and that requires a referendum – i.e., it must appear on the ballot and be approved by a majority of voters.
· What are certificates of indebtedness and notes?
o Occasionally, the county enters into debt agreements other than bonds. For example, the county currently has outstanding loans with the State of Maryland. This language is included in current law and is therefore included in the referendum.
· How does voting “yes” on this benefit the taxpayer?
o Enacting the amendment will save the county money and free up funds for use in other county programs.



Ballot Question “B” - Charter Amendment - Extension of Obligation Maturity Date, Clarification of BAN Terms: To amend the Wicomico County Charter to increase the term for which general obligation bonds, certificates of indebtedness, notes and other obligations may be issued from 25 to 30 years and to clarify certain terms for bond anticipation notes.

· Does this affect the county’s current outstanding bonds?
o No. The amendment gives the county the flexibility to enter into 30 year bonds in the future.
· Why would the county want to borrow money for 30 years?
o In general, it does not. For the last 10 years, county bonds have been limited to 15 or 20 years. Current circumstances indicate that the flexibility to borrow for longer terms could be advantageous to taxpayers.
· If the county hasn’t needed the flexibility in the past, why does it need it now?
o The primary reason is the escalating cost of building new schools. The length of a bond should mirror the useful life of whatever it is the county is bonding. In the case of a school, that life exceeds 30 years.
· Doesn’t this put a strain on future budgets by tying up money for longer periods of time?
o Yes and no. Yes, funds are tied up for longer periods. On the reverse, it lessens the strain on annual budgets because principal and interest payments are less.
· How does voting “yes” on this benefit the taxpayer?
o It will give the county another tool to use in continuing its sound financial management practices. It will give an option to better manage school construction costs that didn’t exist previously.
· What will happen if the amendment is not passed?
o When it comes time to build a new school, such as Bennett Middle, the county will only have the option of selling bonds for up to 25 years. This will increase the county’s annual principal and interest costs. The county will not be able to place this question on the ballot again until 2012, locking it into 25 years or less financing four more years.