Handbook for Muni-Bond Issuers. Mysak Joe

strictly with the issuers and buyers in its own state. It is not too far off the mark to say that, because of their independent, decentralized nature, nearly every state has a highly developed municipal bond market all its own. Comparatively few firms operate on a truly national basis. Those that do (the major Wall Street firms), typically deal with only the largest bond issues and issuers.

      Most municipal bonds are relatively small. In 1996, more than $183 billion in municipal bonds were sold, but in more than 11,500 issues: The average size was approximately $15 million. And even this number is skewed higher by a relative handful of blockbuster deals. About 85 percent of the bonds sold each year are for an average of just over $5 million.

      But the 80-20 rule also applies to municipal bond issuance: 80 percent of the actual number of bonds sold make up only about 20 percent of the dollar volume. These larger, more lucrative deals are the bond issues that Wall Street finds it worthwhile to chase. But in reality, small issuers just like yourself make up the bulk of the business. It is up to you to insist on the same level of service the larger issuers get in the big market.

      Why do you sell bonds? For the same reasons that individuals take out loans. You, your municipality, does not have ready money at hand; or you find it more efficient to match up liabilities with the useful life of whatever it is you are paying for; or you think that a project’s users should also pay for it; or any one of a number of reasons.

      Municipalities – and the term covers everything from a fire district, to an authority, on up to a state – today sell bonds for purposes ranging from repairing roads and bridges, to paying for sewer systems and mass transportation systems and even telecommunications systems, to funding pension liabilities, to building theme parks and sports stadiums and acquiring historic properties, to preserving farmland and beaches.

      In a typical week, the municipal market handles 194 separate bond sales; the number rises to 250 or more in busy times and falls to 150 or less in a holiday-shortened week. In a typical week last year, as the York County, Pennsylvania Solid Waste and Refuse Authority was preparing to sell $114 million to refund bonds it had sold at higher interest rates back in 1985, Fergus Falls, Minnesota sold $6.6 million in general obligation bonds to fund various public improvements, and the Darlington, South Carolina School District sold $3.1 million to pay for school improvements.