For the first time in its history, the state of Maryland will pay more in interest than it will receive in principal for general obligation bonds.
The state agreed yesterday to sell $96.265 million in 15-year, Triple-A-rated bonds at an interest rate of 11.2999 percent, meaning the state will pay $111.3 million in interest, according to Comptroller Louis L. Goldstein.
"For the first time the state will be paying back more than the principal amount of the bond sale," Goldstein said. "This interest rate reflects the high interest rates that are prevalent today. Maryland general obligation bonds continue to be rated Triple-A, the best possible rating. Had we not maintained the Triple-A rating, the cost of the bond sale would have been substantially higher."
"We can't keep this up," Gov. Harry R. Hughes said. "But I don't think we have any choice. The money is needed, and I don't know of any other place to get it."
The bonds will be used for public school contruction, the Baltimore Harbor dredging project, a biology building at Johns Hopkins University, a new jail in Anne Arundel County and other special projects.
The "low" bid came from a syndicate headed by Bankers Trust and Associates of Chicago. Goldstein said that high interest rates require the state to review carefully construction projects and "pay as you go" financing when possible.