Friday, February 23, 2007

How should the county sell its jail bond?

Commissioners weigh competitive, negotiated sales

Express Staff Writer

Blaine County Sheriff Walt Femling has been championing a new Blaine County jail for 17 years. Express file photo.

With voters approving a general obligation bond to help pay for a new public safety facility earlier this month, the Blaine County Commission now must decided how and when it will sell the bond.

Eric Heringer, vice president of Seattle-Northwest Securities Corporation, which is consulting the county on the issue, presented a broad overview of bond sales and the county's options on Tuesday at the Old County Courthouse in Hailey.

The $10.46 million bond has a 20-year maturity. The county has promised voters that paying off the bond will not cost taxpayers more than $2 per $100,000 of property value. That's less than $8 per year for the average homeowner in Hailey.

Basically, the county has two options to sell the bond: a competitive sale and a negotiated sale.

In a competitive sale, the bond would be bid at a specific day and time. Potential bidders, or underwriters, would bid to buy all of the bonds at a certain price and interest rate. The winning bidder, with the lowest true interest cost, will eventually finalize sales of the bonds to investors, Heringer explained.

In a negotiated sale, the bonds are sold during a "pricing period," rather than during a specific time, Heringer said. The underwriter is pre-selected by the county and works with the county to structure the bond sale to meet specific financing goals. The underwriter also selects a sale period that will be most attractive to investors, Heringer explained.

Until 2001, competitive sales were the only option in Idaho.

Heringer said both options have their benefits.

In a competitive sale, "the county can be confident that it achieved the lowest possible interest rate on the day and time the bonds were sold (bids received)," Heringer wrote in a report. "This is often a compelling reason for choosing a competitive sale."

Interest rates from municipal bonds are currently among the lowest they've been in the last 10 years.

While the county wouldn't have the same control over the interest rate in a negotiated sale, it would have more flexibility to move the sale date in response to market conditions, Heringer said.

A negotiated sale also provides more local bond sale opportunities.

Blaine County Commission Chairman Tom Bowman said he would move forward on securing "the best deal for taxpayers."

He added the commission would speak with County Treasurer Vicki Dick and Interim County Administrator Stan McNutt to further discuss the options before making a decision, which will be soon.

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