Well, here's a well-timed book. The Government Finance Officers Association, which in 1984 made a splash with An Elected Official's Guide to Government Finance, has now published An Elected Official's Guide to Debt Issuance, by J.B. Kurish and Patricia Tigue.
What an excellent, excellent piece of work this is. Even my usual store of hyperbole fails me in its praise. Here, in 77 pages, is a plain-English guide to the municipal bond market in all its multifariousness. The authors follow the usual straightforward style that the GFOA has set for this series, and the book comes in a handy pocket size.
In Q&A Format
The authors, in a question-and-answer format, take the reader all the way from preparing a capital improvement plan and developing a debt policy to deciding to refund outstanding bonds and complying with arbitrage regulations. "It is our hope that this publication will provide elected officials with a better understanding of the steps involved in issuing debt, so that they will be able to take a more active role in the process." they write in the foreword.
There is some question, of course, about whether or not elected officers should take such an active role in bond sales, but until there is a major change in the way the market operates, they do and they will. An Elected Official's Guide to Debt Issuance is the best walk through the process for the uninitiated I have seen yet. It is scrupulous, and it is virtuous. It defines things like competitive and negotiated sale, and lists the advantages and disadvantages of each. A competitive sale, for example, "promotes the appearance of an open, fair process. Taxpayers have greater assurance that bonds have been awarded at the lowest possible cost, and not for the benefit of underwriting firms engaged in political activities to support elected officials."
A negotiated sale, on the other hand, means that an underwriter "can engage in extensive pre-sale marketing to assess demand for and to promote the issuer's securities. Based on these efforts, a structure can be developed that both meets the needs of investors and is cost-effective for the issuer." It is pure serendipity that the definition and discussion of competitive and negotiated sales lies at the precise center of this book.
Not least of the book's virtues is its thoroughness. "What is involved in sizing a bond issue?" and "What is the purpose of an original-issue discount or premium?" and "What is the purpose of the federal arbitrage restrictions?" (The authors forgo cynicism in their answer to the last question).
Questions like these, much less the answers, are not at the fingertips of most elected officials. Yet they are the kinds of questions, and answers, the officials need to know if they are to make informed and objective decisions on debt issuance.
An Elected Official's Guide to Debt Issuance is available from the GFOA. It is priced at $10 for members, $15 for nonmembers. Bulk discounts are available for those who want to get a lot of election winners a really useful gift this November.
