St. Mary's County will go into the bond market next week to raise $29.5 million for new schools and a library, the biggest onetime borrowing for capital projects in county history.

Though county officials call the spending a necessity, some expressed anxiety over borrowing so much and hinted of future belt-tightening or a slowdown in building expenditures.

"I don't want to give you the impression that we're in a dire situation," said County Commissioner Daniel H. Raley (D-Great Mills). "But I think there's some warning signs on the horizon that we have to take heed of. I think we have some significant decisions to make in the coming years. We've got to set some priorities because we have to live within our means."

About two weeks ago, the county commissioners and other county officials met in New York with officials of Standard & Poor's, and Moody's Investor Services Inc., two bond-rating agencies. The ratings determine the county's "credit worthiness," a credit rating that determines the interest rate the county must pay.

St. Mary's was rated A1, the same as in 1997 when bond raters upgraded the county from A. In the world of bonds, the upgrade was a significant adjustment in financial stature, and it saved the county tens of thousands of dollars in interest payments.

But county officials were perturbed that neighboring Charles and Calvert counties are rated AA, a rating that gives them lower interest rates. (Nationwide, only 35 counties have triple-A ratings. In Maryland, Montgomery, Baltimore and Howard counties have the AAA rating, the highest possible.) If St. Mary's were to borrow the $29.5 million on a AA rating, it would pay about $500,000 less in interest over the 20-year life of the bonds.

"Overall, financially we're very strong," said St. Mary's Finance Director Steve Welkos. Out of about 1,000 counties nationwide rated by the New York agencies, St. Mary's rates in the top quarter, he said.

"But the biggest problem we've had [with bond raters] is the issue of our economy and how diversified is it," Welkos said. "The Navy base is the driving engine of the economy, which is good, but the rating agencies are always concerned what happens [when the Navy cuts back]."

In recent years, St. Mary's County has benefited from consolidation of military operations in New Jersey and Pennsylvania. When operations from those states moved here, they brought thousands of new jobs to the Patuxent River Naval Air Station in Lexington Park.

"The Navy makes us a one-horse county," said County Commissioner Shelby P. Guazzo (R-Chaptico).

But officials said the county has made headway toward diversifying its economy to make it less reliant on the Navy. For example, raters looked favorably at St. Mary's when the county reinstituted a hotel tax, which officials expect to generate at least $300,000 a year. The revenues have been earmarked for promoting tourism in St. Mary's and economic diversification.

In addition, the county established a rainy day fund last year with seed money of $200,000. The commissioners said they expect to contribute a similar amount this year and next.

"The county has an excellent payback history," said Commissioner Joseph F. Anderson (D-Drayden), vice president of the Board of Commissioners. "The county has always been perceived as a conservative in how it manages its money."

The amount of money--including bonds issued--that the county can borrow is limited to 5 percent of the property tax base. Currently, St. Mary's outstanding debts, including the new bonds, amount to 2.8 percent of the tax base, Welkos said.

But Guazzo and Raley said they are worried that with the current rate of county spending, St. Mary's could reach the limit in the next few years.

"The rating agencies consider our debt levels moderate. We know and they know that we have a big capital program, and we might get there by the fiscal year 2003," Welkos said.

Raley suggested a slowdown in the spending rate is likely.

"We are going to be very close to our self-imposed legal cap," Raley said. "I'm not going to raise that bar."