Maine bank takes municipal bonds to market

AUGUSTA – The Maine Municipal Bond Bank decided Friday to go to market with $90 million in bonds that will raise money for roads, capital improvements and other local projects around the state.

The rates offered Friday would result in loan interest rates of 5.25 to 5.5 percent for 20-year borrowers, said Robert Lenna, executive director of the bond bank. The final rates will not be established until the bond sale is completed next Wednesday, he said.

On Friday and today, bonds will be offered exclusively to Maine buyers before they hit the open market.

The bonds going to market Wednesday will raise money for 18 municipal borrowers for such projects as school construction, town road improvements and emergency services vehicles, said Lenna.

The municipal bond sale comes amid continuing turmoil in the nation’s financial markets. Last week, the bond bank found no buyers on Wall Street for a $50 million transportation bond because of the unusually high short-term interest rates.

While under more normal conditions interest would have been around 3.8 percent or 3.9 percent, rates on municipal bonds had risen as high as 10 percent, in effect shutting down market activity.

The 5.25 percent to 5.5 percent rate foreseen for the latest bond sale is higher than the 4.15 percent rate for $49.1 million in bonds issued last spring, and a 4.38 percent interest rate for a $53.5 million bond issued in fall 2007. From 1998 to 2008, rates varied from a high of 5.53 percent to a low of 3.3 percent, Lenna said.

The bond bank decided to go to market as the U.S. House approved legislation providing $700 billion in government money to bring stability to reeling financial markets, sending the bill to President Bush for his signature.

Lenna acknowledged that the upheaval in the larger financial market has an impact on Maine’s sale, saying, “When you talk about bonds, you’re talking about the national credit market.”

The larger financial woes have created worries about the impact on localized banking and other financial activity in Maine and the other states. But Lloyd LaFountain, who heads Maine’s Bureau of Financial Institutions, said he sees no signs that mortgages or auto loans are drying up or of lending complaints from consumers.

Lenna said that’s not surprising, but ultimately what happens nationally has an impact on smaller, more closed markets.

“Different aspects of what is going on [nationally] show up in different markets,” he said. “But ultimately, the dichotomy between Wall Street and Main Street is a false dichotomy.”