The Massachusetts treasurer's office and the state Department of Administration and Finance issued a comprehensive debt policy and requirements yesterday effectively banning most plain-vanilla negotiated sales.
The statement said the decision to change the way Massachusetts sells bonds stemmed from the state's recent credit rating boost and improved fiscal shape.
"Since Gov. [William] Weld and I came into office in 1991, we have made a hard and fast effort to sell more of our bonds competitively," said Treasurer Joseph D. Malone. "We are pleased to be in that position now."
The ban on negotiated sales extends from the state's sale of general obligation bonds to sales for agencies such as the Massachusetts Bay Transportation Authority.
Exclusions to the ban are included in the joint statement. Refundings, bonds priced under turbulent market conditions, issues with low ratings, large deals, and derivative financings will all be allowed to come to market with a negotiated financing.
Malone said there will not be a flat percentage of deals that will have to be done through negotiation. "We just feel like we have two sets of tools in our toolbox," he said.
Both treasury and administration and finance department officials said the state's capital plan requires a "significant amount" of issuance, and a certain percentage of that debt should be done through negotiated sales.
Any issuer interested in selling debt through negotiated sale will have to be given a waiver from the state Finance Advisory Board.
This summer the state banned two firms, Merrill Lynch & Co. and Lazard Freres & Co., from a bond sale because they did not fully comply with state disclosure requirements.
Malone said that although there were very minor disclosure changes made in the treasurer's requirements for disclosure, administration and finance may now extend these requirements into the more than 40 state authorities.
The state will also require that selection of underwriters, financial advisers, attorneys, and other bond professionals be handled in an open and competitive manner.
Malone said the state will continue to set aside percentages of underwriting slots and other positions for minority- and woman-owned firms.
When the state enters into a contract with any finance professionals, they will have to release information about their boards of directors, consultants, general and limited partners, lobbyists, fee-splitting arrangements, and other relationships.
Malone said the proposal will allow the state to maintain "an open and fair system of procurement in order to assure price and idea competition and obtain the best value for the citizens" of the state.
