Bidding for bonds

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Reliable sources say that there may be some friction between Tulsa County Commission Chairman Wilbert Collins and Commissioner Bob Dick over the issue of who will handle the revenue anticipation bonds for the new county sales taxes. Recall that Tulsa County will borrow against 13 years of future revenue from the new sales taxes so that projects can be built as soon as possible. All the county's bond business for nearly 20 years has gone to John Piercey, chairman of Leo Oppenheim & Co., a division of the Bank Of Oklahoma. Commissioner Dick describes Piercey as a "dear friend". Word has it that Commissioner Collins promised that F&M Bank would get half of the bond business, while Commissioner Dick insists that it all go to Piercey, arguing for Piercey's long history of success handling bond issues for the county. A Tulsa World story from November 23, 1996, on the issuance of bonds for building the new county jail, gives an indication of Oppenheim's customary fees:

Although the Oppenheim officials said their fees usually run somewhere below 1 percent of a bond issue, city of Tulsa officials said they hoped the fee could be negotiated for under $75,000 [for a $70 million bond issue].

There's no requirement for the Tulsa County Industrial Authority (which has the three county commissioners as trustees) to use competitive bidding for professional services like bond underwriting, but for the sake of fairness and the best interests of the taxpayer, it ought to be considered. Here's a link to a description of how things are done in Wisconsin. The result is an average cost of well below 1% of the value of the bonds.

And this story in the Saint Louis Business Journal points out the importance of advertising for bids in the right places. You don't get many interested bidders if you only advertise in obscure local publications.

The district advertised a request for proposals for the last two bond issues in only two publications: The St. Louis Argus, a local newspaper targeted to African-Americans; and the St. Louis Daily Record, a publication of court records and court news read primarily by attorneys. Byron said the 2000 bond issue was advertised in the same newspapers, per the district's purchasing department, and six teams responded.

Under state law, school districts are not required to advertise for bids for professional service contracts. However, district policy requires advertisements to be placed in a locally well-distributed newspaper, Hilgemann said.

Officials from several other local bond issuers Rockwood School District, Metropolitan Sewer District and Metro named other publications, primarily The Bond Buyer, a national newspaper published by Thomson Financial, as the typical venue for requests for proposals advertisements. These issuers said they received around 10 to 24 responses for underwriters after advertising in the Bond Buyer. None named the Argus or the St. Louis Daily Record.

Byron said the St. Louis School District started a mailing list of interested brokerage firms after an article on the $120 million issue appeared in a December issue of The Bond Buyer and the district began to get inquiries after the time for submitting proposals had passed.

In a Tulsa Whirled story from February 14, 1991, John Piercey, then with Stifel Nicolaus, complained about being disqualified from a bid for underwriting city bonds after having a lock on the process for several years.

For the first time, the city accepted bids for advance funding of some sales tax projects, but a local firm contends the new procedure unfairly excludes non-Wall Street brokerage firms.

Advance funding will allow the projects to begin sooner, at no added cost to taxpayers, officials say.

Critics have chastised city officials for allowing local firm Stifel Nicolaus and Co. Inc., to handle nearly every city funding package since 1982.

Now, in the first competitive bid for such work, that firm has been axed from a list of potential bond underwriting firms, said a Stifel executive.

City Auditor Phil Wood recommended two years ago that the city make such funding programs open to competitive bids.

A subcommittee of the Tulsa Public Facilities Authority, charged with overseeing the advance funding, accepted 13 proposals. Members examined qualifications and opened only the eight bids of those found best qualified, said subcommittee member and city Finance Director Ron Payne.

"We're looking for the best," said Payne. He wouldn't say which firms' bids were left sealed, saying authority members should be notified first.

Stifel's John Piercey said officials didn't open his firm's bid.

He contends Stifel, the smaller, local firm, is purposely being excluded from getting the chance to handle the bonds.

"We designed the first two advance funding programs that the city did and they were immensely successful," he said. "The company took the heat, if you will, for doing that.

"Now that they're well established, it's like `We don't want to consider the people that brought us the idea the first time around,' " he said.

Later in the story it mentions the concern that the bond underwriter would have the capital to purchase any bonds not purchased by investors. That was for $64.9 million in bonds, less than a tenth of what we will need to finance "Vision 2025 projects" if Boeing comes to Tulsa, a bit more than a tenth otherwise.

For the amount of bonds we're seeking, the best interest of the taxpayers demands a competitive process. Every tenth of a percent difference in fees would amount to a savings of over $800,000, enough to fund a few of the projects. And there may even be a firm out there that could get us a better interest rate for even greater savings. Instead of friction between commissioners over handing all or part of this big contract to one or two companies, perhaps all three commissioners could agree to an open, competitive, and fair process.

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This page contains a single entry by Michael Bates published on September 25, 2003 11:35 PM.

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