This letter is in response to Nancy Lavin’s excellent report on the Hargett Farm master plan, titled “Sticker shock: Master plan for park at Hargett Farm includes $98.5 million price tag.” This was a great report with lots of specific details as well as responses from Frederick County and city officials. As the headline indicates, the cost of the project is significant, but there are some points to add:
1. The costs of this project should be compared to other similar construction projects that have taken place in neighboring counties. For example, the Hargett Farm project should be compared to the Prince George’s County Recreation Center or the Germantown Aquatic Center and Sports Center. These are state-of-the-art facilities, and Frederick County should have one as well.
2. Ms. Lavin should also compare the number of multi-purpose fields and municipal swimming pools in neighboring counties to the number in Frederick County. Hint: Montgomery County has one private (but rentable) and three municipal 50-meter swimming pools. Frederick County does not have a single 50-meter pool. It also does not have a single, municipal (county- or city-owned) competition pool of any size. That is an unfortunate statistic for a county that is experiencing record prosperity and economic growth. I think everyone agrees that Frederick County has a need for this kind of facility.
3. Finally, the county and city leaders seem to be missing one of the most common, effective and safe forms of capital funding for municipalities … the municipal bond. Municipal bonds are issued by state and local governments to raise money for public works projects such as the construction and maintenance of bridges, hospitals, schools and water treatment facilities ... or recreational facilities. A bond issuer (the municipality) sells the bond to the bond holder (the investor). The bond holder lends the issuer a fixed amount of money (say $98.5 million) for a certain amount of time in exchange for regularly scheduled interest payments. Municipal bonds are one of the safest long-term investments and are usually very popular with all investors, worldwide. In order to establish a bond, and make it more attractive to investors, the issuer usually publishes their bond rating, which is a measure of the quality and safety of the bond, based on the issuer’s financial condition. AAA is the best rating and D is the worst. Frederick County has a AAA bond rating.
It gets better. Municipal bonds are exempt from federal, state and local income taxes if you live in the issuing municipality. Since 1913, the Internal Revenue Service (IRS) has allowed investors to withhold paying income tax on any earnings from municipal bonds. So when the interest rates for municipal bonds is higher than for Treasury bills, investors earn significantly more especially since they won’t pay taxes on those earnings. This is huge incentive for residents of Frederick County to invest in their own future, at a solid rate of return that is tax free.
Frederick County desperately needs this project to get funded and commence construction. Waiting five years for private investors to come knocking at our door is not going to be effective and demonstrates poor problem-solving. Although hardly creative, the municipal bond is a good way to partially or completely cover the costs for the Hargett Farm Project. It appears to be a win/win for all parties involved.