Loudoun County has extended the deadline for its first mini-bond sale because only slightly more than half of the available bonds had been sold as of last week, officials say.
Planned to finance the $2 million purchase of 200 acres for the Franklin Farm Park between Purcellville and Round Hill, the bonds are being touted as a way for local residents to invest in Loudoun County. The five-year bonds carry an interest rate of 6.4 percent, and the interest income is exempt from state and federal taxes.
Some in the county government had hoped to sell all 4,000 of the bonds, at $500 each, last week. Part of the ground floor of the administration building in Leesburg was roped off to keep waiting buyers in line, but crowds failed to materialize. The bonds are purchased by the public from the county government without a middleman.
"I definitely think it's the economy" slowing the sales of the bonds, said M.E. "Mickey" Poole Jr., Loudoun's financial services director, who added that the sale is the first of its kind in Northern Virginia. He said similar sales have worked well in Maryland and elsewhere.
Originally, officials planned to sell the bonds to the public in person or by mail Oct. 22 through 26, with any remaining issues to be sold on the regular bond market as general obligation bonds. In addition, county officials set a maximum purchase of 10 bonds per customer.
However, by midday Friday only about $1.1 million in bonds had been sold. The direct-to-public sale has been extended by up to seven business days, through Tuesday, if they are not all purchased by that time. And there is no longer a limit on how many bonds an individual customer may purchase, according to Poole.
On Monday morning, Tom and Lorraine Shedlick, of Alexandria, were among area residents taking advantage of the extended deadline to invest savings in Loudoun mini-bonds.
After learning that the bonds are guaranteed by the state government, Lorraine Shedlick pulled out her checkbook and took the plunge. The money will turn into "a nice little nest egg" in only five years, she noted.
"One of the good things is that you don't have to go through a broker," said Tom Shedlick. The couple said they had previously purchased municipal bonds and invested in mutual funds but found that the broker fees cut too far into the return on their investments.
Poole said purchasers have been "concentrated in Northern Virginia," though he said he could not estimate the proportion of purchases made by Loudoun residents. Radio and newspaper ads have touted the sale as "an opportunity to invest in Loudoun County and your future."
"In the last couple of days, it's really picked up," Poole said Friday, after the decision had been made to extend the deadline.
"Some of the financial columns I've seen say that investors should not tie up their funds for a long time," he stated, noting that the five-year maturity is an attractive feature of the Loudoun bonds. In addition, he said that the bonds' low denomination -- $500 each, compared with the traditional minimum municipal bond purchase of $5,000 -- should also appeal to area residents.
There are some potential drawbacks: Because they are capital appreciation bonds, the interest and principal are paid only when the five years are up. They can't be cashed in early, and they can't be sold or transferred to another person, unless the owner dies, officials say.
The county has set up a special phone line to answer questions about the bond sale, 771-5420. Investors may fill out bond purchase applications at 18 N. King St., Leesburg, and they have the option of mailing back the application with a cashier's check, certified check or money order.