Ocean City bond sale yields 1.8% interest rate

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OCEAN CITY — The city of Ocean City will pay an interest rate of just 1.87 percent on $9.9 million in bonds sold Tuesday, Dec. 11 to permanently finance various capital improvements. 

The bonds were bought by UBS Financial Services in a competitive process that included 11 bids from three companies across the country.

City director of finance Frank Donato initially sought a $16.75 million bond sale in September, but was turned down by the state Local Finance Board due to its non-conforming maturity schedule.

This $9.9 million bond sale, which has a conforming schedule, did not need state approval and was authorized by City Council in November. Donato said that the city should hold the sale to take advantage of historically low interest rates by holding a bond sale early instead of waiting until its next scheduled sale of 2014.

The interest rate was a result of stable and conservative financial management practices which led Standard and Poor’s Rating Services of New York to affirm the city’s bond rating of AA. 

Ocean City had received an upgraded long-term rating from A+ to AA prior to their last bond sale in July 2010. Following a complete review of the city’s financial condition and other factors, last week Standard and Poor’s again assigned an AA rating. 

Ocean City’s bond rating is among the highest of any shore community in the state of New Jersey.

Standard and Poor’s report also concludes that recent damages sustained by the effects of Hurricane Sandy will not negatively affect the long-term financial position of the city. The report states, “Finances remain, in our opinion, strong and consistent.”

“This is outstanding news for Ocean City. The taxpayers have been well served by the fact that the administration and City Council continue to follow the professional advice of our CFO, Frank Donato, and our auditor, Leon Costello. The taxpayers of this community will save hundreds of thousands of dollars over the life of these bonds as a result of sound financial management. We are also now in a better position to more aggressively pursue the long-term capital improvements needed to our infrastructure,” Mayor Jay Gillian said.

The administration recently presented a five-year capital plan to City Council that includes an average of $10 million per year in infrastructure investment, with nearly half earmarked for road and drainage improvements.

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