General Obligation Bonds
General Obligation debt, which is backed by the pledge of the full faith and credit of the State, finances State-owned capital improvements, such as prisons and colleges, and various State capital grants to local governments and private non-profit organizations. Projects funded include local public schools, local jails, water treatment facilities, museums, rehabilitation of historic structures, and private treatment centers for the developmentally and physically disabled.
The State's General Obligation bonds have been assigned the highest credit rating by Moody's Investors Service, Inc. (Aaa), Standard and Poor's (AAA) and Fitch Ratings, Inc. (AAA). One of only eleven states in the nation to hold a Triple-A credit rating from all three major credit rating agencies, Maryland's low interest rates are attributable to these superior ratings.
The Treasurer recommends the size, timing, and terms of sale of General Obligation bonds. This entails periodic analysis and surveys to determine the monthly cash balances of bond proceeds and project anticipated cash needs of State agencies and grantees for authorized capital projects. In recent years, the State has held sales semi-annually although if there are opportune market conditions, the State may issue more frequently as it did in late 2009. The Debt Management Division, in conjunction with the State's financial advisor, the Treasurer's counsel, and the State's bond counsel, coordinates the sale and all activities prior to the actual sale, including liaison with the bond rating agencies, the preparation and publication of statutorily required notices and advertisements, and the preparation and distribution of Official Statements. The preparation of Official Statements is primarily performed in-house, resulting in substantial savings to the State.
The State Treasurer's Office monitors market conditions and arranges the details of the actual sale, including the selection of the method of sale. In competitive sales, which are held at a Board of Public Works meeting, bids are transmitted electronically by underwriting syndicates and verified by the Office. The winning bid is then ratified at the meeting. In negotiated sales, underwriters, which are selected in a competitive procurement process, negotiate bond prices with the Office. Final pricing is incorporated in the Bond Purchase Agreement which must also be approved at a Board of Public Works meeting.
Finally, the State Treasurer's Office supervises all activities of post-sale settlement, the investment of the bond proceeds, compliance with Internal Revenue Service requirements for tax-exempt bonds, continuing disclosure and payment of debt service.