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In probably 97 percent of the bond is-
sues it was a unanimous vote.
There is another point involved here.
Fifteen years is itself a compromise. There
is a philosophy of pay as you go financing
versus debt financing for states and 15
years serves itself as a compromise be-
tween pay as you go and debt financing.
Do we attach the word "compromise" or
"flexibility" or whatever the judge wishes
to call it and get further away from pay
as you go? Pay as you go was what Senator
Hughes would prefer to see but accepts
the 15-year compromise.
We have over the last hundred years
seen vast changes. We have probably prog-
ressed far more in this past hundred years
than we will probably do in the next hun-
dred years. We have weathered not only
national financial crises but international
crises and we still stand today with a
triple A rating.
Why change what has lasted over a
hundred years for the sole purpose of
change or speculation that in the next
hundred years there may be an occasion to
use it.
It appeared to me yesterday the majority
had stolen all my thunder, that the ma-
jority was using all the arguments I was to
use today. I copied one of Judge Sherbow's
sentences yesterday that he spoke. Do you
want to follow what has been done or
change it? This was the attitude of the
majority yesterday. Today they ask for
change.
The cost of improvements that are made
by the State in debt financing will rise
and rise greatly. A million dollar loan
using- the last bond rate will cost more
than one-fourth of the loan more. If you
build a million dollar building-, borrow for
25 years, it will cost at least $1,570,000 in
principal and interest and probably more
because we are using- the rate that is
established for 15 years.
I show you here a chart which repre-
sents the difference in blue for 15 years
and in red 25 years of what the interest
looks like on $1 million using the bond
rate, composite rate of 3.6674. This rate
was the rate we sold our bonds in June,
June 20 of this year. This difference is only
one million dollars.
Bond indebtedness, fiscal year 1967 on
general obligation bonds was $374,559,000.
If they were the same rate, if this propor-
tion between the two, multiply it by 374
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times for the excess interest. This is what
you pay when you go to 25 years.
Many will talk and seek the possibility
of measuring maturity of bond periods to
the asset that it creates or the building it
creates over the useful life they call it of
the facility being financed. This is very
important for revenue bonds. We do not
build a turnpike five miles a year, pay for
it out of current funds or small-term debts,
we build it all at once. With buildings it
is different, maintenance costs rise as the
building gets older. A perfect example of
this is this very historic building we sit in.
I am willing to venture the pointing and
chipping going on around this building
right today as we see it improve probably
is costing the State and costing us today to
maintain this building as much as the
original building- cost. We want to use it.
We maintain it. Air-conditioning and heat-
ing units go out long before the shell does.
Lighting improves and lighting must be
replaced and wiring- decays. If we want to
use these buildings over a long period of
time those that are using it in later years
must maintain it to satisfy their purposes
then.
The legislative leaders who came before
us went on record with a letter to us. I
would like to quote from that. Perhaps I
will find it as I go on.
Judge Sherbow spoke to you of invest-
ment bankers that came before us and
stated that 25 years was adequate and
fine. However, the record also shows that
many of them said what I have said that
they felt the pressure placed upon the
legislature would, I quote Mr. Taylor, vice
president of Maryland National Bank, who
said the pressure for debt financing is so
great that it will probably force the use
of 25 years.
Mr. Riepe, partner of Alex Brown and
Sons stated he did not think the change
in maturity period would affect bond rating
but pointed out that an increase in ma-
turity from 15 to 25 years would require
higher interest rating.
Some also will tell us it is easier to sell
bonds for 25 years than at 15 years.
Thomas Langford, vice president, Union
Trust Company of Maryland, on a question
of Mr. Abramson of our committee as to
whether the 15-year limitation had created
any hardship in the past, Mr. Langford
said he did not know of any.
On a question by Judge Sherbow, Mr.
Langford expressed the opinion that if the
permissible maturities were increased the
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