Montgomery County may have to choose between retaining its AAA bond rating or spending as much money as it wants for schools and roads, financial analysts said last night before a group of County Council and Board of Education members.
Arthur Schloss, vice president for the First Boston Corp., a financial consulting firm, described the county as economically "dynamic and stable" but with debts that could "pose a threat" to its top financial rating.
"I cannot tell you what level of additional debt will cause a decrease" in the rating, said Schloss, who prepared the report upon a request from County Executive Charles Gilchrist. "I can tell you that any level above the existing level will pose a threat."
Schloss' report comes a week before a public hearing at which the County Council will discuss a six-year building and renovation plan submitted by Gilchrist for the county. Some school board and council members are concerned that the budget might not provide funds for basic needs.
Some board members were still unconvinced after hearing the consultant's report last night. "I thought it was an exercise in pretense," said board member Blair Ewing. "I don't think we know a thing about what we really ought to do" based on the consultant's report.
The desirability of retaining the county's AAA bond rating was a pivotal point raised by Gilchrist early this month when he recommended that the County Council limit school spending over the next six years.
Under Gilchrist's $1.03 billion, six-year plan, the county's bonded indebtedness would remain at its present level and increased spending for capital projects -- construction and renovation -- would be financed partly on a pay-as-you-go basis and from increased use of revenue bonds, which are not counted in the general bonded indebtedness.
Montgomery schools would receive $162 million for construction and renovation, a figure that tops last year's level of $92.8 million by 75 percent, but falls far short of what school administrators and board members say is needed -- $248 million -- to meet a surprise enrollment surge expected to last through the decade.
Gilchrist made the recommendation for the overall capital budget after discussing the county's indebtedness rate with representatives from major financial houses in New York.
The AAA rating, awarded by financial houses when the county sold bonds in the past, is the highest possible and means that Montgomery pays lower interest on the money it borrows than jurisdictions with lower ratings. It also is seen as a key index of the county's economic health that is crucial to attracting investors and sustaining public works projects such as new highways and school facilities. Montgomery is one of only nine counties in the nation to receive a top rating.
In an effort to maintain the AAA rating, Gilchrist has asked the council to eliminate $86 million from the $248 million the board requested for school buildings and renovations through 1991. Part of those cuts would eliminate two elementary schools planned for the northern county, a vocational technical school and an administrative office.
School officials have argued loudly against the cut, pointing out that the school system had its first enrollment increase in 12 years this year. The system, which had 91,697 students enrolled this fall, expects to find an estimated 103,346 in classrooms by 1991.