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FairfaxShould Fairfax borrow now while interest rates are low?

Should Fairfax borrow now while interest rates are low?

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As interest rates continue to languish in the cellar, the McLean Citizens Association (MCA) board of directors is urging Fairfax County officials to borrow more money – and sooner – to take care of pressing capital needs.

MCA board members on a 23-7 vote March 3 passed a resolution recommending that the Board of Supervisors increase the amount of bonds it issues at the current rock-bottom-low interest rates. Supervisors should do so in a timely manner, while still adhering to sound financial-management practices that protect the county’s coveted triple-A bond rating, the resolution read.

MCA’s resolution also recommended that county officials engage a financial advisor to determine how to increase the borrowing, then consider that analysis and act swiftly while interest rates remain favorable.

Fairfax County Public Schools traditionally has received the lion’s share of the county’s capital spending (and general-fund budget, as well) and should counter overcrowding at some schools with a combination of new construction and boundary adjustments, MCA members said.

One key aim of the school recommendations is to reduce the use of classroom trailers and modular units. The school system’s current capital-improvement policy schedules major renovations at facilities every 37 years, but a more ideal time frame would be once every 20 or 25 years, MCA’s resolution read.

Given the heightened demand for improved air quality during the pandemic, MCA’s resolution recommended that the School Board more strongly prioritize, and shorten the timeline for, ventilation-improvement plans throughout the school system.

The county’s outstanding debt is only 1.16 percent of the estimated market value of its assessed properties, or less than half the recommended threshold of 3 percent, and its principal and interest payments amount to 7.67 percent of general-fund disbursements, which is below the recommended 10-percent limit, MCA’s resolution read.

County supervisors in fiscal year 2019 boosted the limit on sales of general-obligation bonds to $1.5 billion over a five-year period, with a maximum of $325 million sold in any given year.

Nearly one-quarter of MCA board members who participated in the meeting voted against the resolution. Board member Debbie Matz thought the recommendations should focus solely on the county government’s borrowing and leave out the school provisions, which perhaps could be the subject of a separate resolution.

Including the school items “somewhat diminishes the importance and the innovative idea of issuing the debt in advance,” Matz said.

Board member Martin Smith did not think speeding up bond issuances was a good idea. He also questioned why removing modular units and classroom trailers was not a higher priority for the school system and said ventilation improvements in schools would be a valid use for federal CARES Act funds.

Louise Epstein, who long has studied education issues, said school officials often prefer to spend available funds on programs and not facilities. Epstein favored investing in better air-filtration systems for schools.

MCA treasurer Bill Crosby cautioned that interest rates may rise between now and November, when the county would hold its bond referendums, and the proverbial free lunch does not exist.

“We can borrow hundreds of millions of dollars indefinitely, but at some point that money is going to need to be paid back and somebody’s taxes are going to have to go up to pay for it,” Crosby said.

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