Investors turning to municipal bonds in Henrico County

By Andy Jenks - bio | email
Posted by Terry Alexander - email

HENRICO, VA (WWBT) - Municipal bonds don't sound as exciting as the next big stock. But they are giving investors a stable and tax-free way to grow their money. And in Henrico County, almost as soon as they're available - they're gone.

When Henrico County wants to build things, the county needs money so it issues bonds. Essentially they're a debt on which the county pays interest over several years. In 2009 alone, the county has gone out and sold bonds three times, and there appears to be no shortage of investors.

"We've seen sales where we have 3 buyers for every bond. 4 buyers for every bond," said John Vithoulkas, Henrico County Director of Finance.

Recently, the county generated $13-million dollars, just a fraction of the $350-million worth of projects that were approved by voters in 2005. They include new schools, libraries, and fire stations.

They can also fund things like a youth baseball complex. But as with any investment, advisors say people need to know where their money is going.

Tim Anderson is with Riverfront Investment Group.

"Is it tied to a specific project? The revenue from a toll bridge, something like that you'd definitely need to pay much more attention to," said Anderson.

Generally municipal bonds are viewed as safe. And for the local investor the returns are tax free.

"You're probably looking at yields somewhere in the neighborhood of 2.5% to 4.5%. The thing to remember, you're not paying federal income tax that," Anderson said.

The bonds, though, aren't cheap. They start at $5,000. But that's not enough, lately, to scare buyers away from investing in the world around them.

"You're able to invest in projects that you can see locally, come to fruition. Driving down the street, you see that high school going up, and you know, I've invested in that high school, literally," John said.

Henrico's success is tied to its bond rating, which is higher than most other counties in the entire country. Purchases are made through your financial advisor.

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