Despite the stormy markets and uncertainty about a $700 billion federal bailout, Maine plans to sell $99 million in bonds Friday to raise money to pay for more than a dozen municipal projects, ranging from building new schools to buying ambulances.

Even as that deal moved forward, unusually high interest rates prompted School Administrative District 51 officials to delay a $14 million bond for improvements at Greely High School in Cumberland. They will try again in early December, in hopes the market will have stabilized, officials said Wednesday.

Financial adviser Joe Cuetara, senior vice president at Moors & Cabot Investments, who is handling the Greely High School bond, said the situation has brought the Wall Street meltdown into sharp focus for residents of Maine.

“It’s one thing if we’re bailing out Wall Street. It’s another if (a town) can’t sell a bond for its streets. Now all of a sudden, it’s about (Mainers),” said Cuetara, who handles bond issues for many Maine municipalities that do not borrow through the Maine Municipal Bond Bank.

Many Maine municipalities use the bond bank to pool numerous smaller bonds in order to get a better interest rate. The bond bank generally goes out twice a year to sell these pooled municipal bonds: in the spring and fall.

This year, the planned fall sale just happened to take place in the midst of the most chaotic bond market current traders have seen.

Robert Lenna, Maine Municipal Bond Bank executive director, said he would be watching the U.S. Senate and House votes closely and monitoring the market in order to get the best rate.

“What I would be looking to see is an average interest rate of 5.5 percent, give or take,” Lenna said Wednesday, hours before the Senate was scheduled to vote. “If they are, then we’ll probably go ahead.”

By comparison, the bond bank got a 4.15 percent interest rate on its $49.1 million bond issued last spring, and a 4.38 percent interest rate for a $53.56 million bond issued in fall 2007.

“From 1998 to 2008, the highest rate we paid was 5.53 percent in 2000,” Lenna said. The lowest rate was 3.3 percent.

Just a week ago, the bond bank tried to float a $50 million transportation bond but couldn’t get a price for it because of the unusually high short-term interest rates.

The $99 million bond is larger than usual because it contains $55.5 million in financing for two new schools. Other projects include sewer and road improvements in several towns and purchasing emergency services vehicles.

Bond bank officials have been calling the individual municipalities that are involved in this issue, checking to see if they could wait if needed. None of the participants need the money immediately, Lenna said.

Sanford Town Manager Mark Green said the town’s $3.65 million bond, part of the $99 million bond, will pay for future road projects and a new salt shed. A delay could have a ripple effect on local jobs.

“We told them we could wait,” Green said. “But it’s a concern. We may have to put those projects on hold, and that salt shed was probably something that a local Maine company would build. The road projects are probably something a Maine company would bid on.”

Sanford officials also budgeted for a 5 percent interest rate, and a higher rate could cause problems, he said.

“This is an unusual situation, so you don’t know what’s going to happen,” Green said. “On the other hand, we don’t want to panic.”

Lenna said he was encouraged that the market had stabilized in recent days, and thought congressional action on the bailout bill would help.

“Everyone is sort of waiting for this vote,” Lenna said.

Even before Wednesday night’s vote, short-term interest rates that peaked at more than 9 percent last week had stabilized to around 3 or 4 percent. But they were still far from their previous range of 1 or 2 percent before the financial crisis.

The short-term interest rate is one of several figures used to calculate rates on bonds. The rates last week were so unusual, it all but shut down the municipal bond market.

“My hope is that by Friday, we’ll see interest rates that work in terms of what makes sense,” Lenna said.

Cuetara said the Greely High School bond was given a range of interest rates from 4.5 percent to 5.5 percent, prompting district officials to wait.

“Obviously we want to see (the interest rates) lower, but the bids at 4.9 percent were still competitive,” said Scott Poulin, the district’s finance director. “But we are in a strange market right now, so we decided to wait.”


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