LOS ANGELES -- Small investors who snapped up $3.8 million of minibonds in Tacoma, Wash., last month will receive their bond certificates in the mail this week in the first minibond offering by the city's sewer utility.

Demand was high for the $1,000 denomination bonds, with the average purchase approaching $8,000, said Alex Gebhard, the utility's finance manager.

"We were only expecting about $2 million," Gebhard said. "We had a lot of first-time buyers and some pretty sophisticated investors. so I'm not sure what sparked their interest."

The minibonds were offered in terms of three and five years, with the first paying 4.8% and the second 5.15%. The issue was part of a larger $42.5 million bond deal to refinance the utility's debt from previous and current capital improvement projects.

Tacoma, about 32 miles south of Seattle, has issued bonds and minibonds through various other departments in the past. But this is the first time the sewer utility has used minibonds.

John Stetson, a division manager with the sewer utility, said the city decided on minibonds because they allow residents who otherwise would not invest in bonds to become involved in the community.

"That was one of the main advantages of this offer," Stetson said, "to gain public involvement in the sewer utility, so they could have a little ownership, if you will, in their utility."

"For a minimum of a thousand bucks, anybody can get into it." said Stetson, adding that he bought a $1,000 bond himself.

Minibonds, which first gained popularity in the 1970s, are generally sold as zero coupon bonds or capital appreciation bonds and distributed directly through the issuing government.

Most minibond issues are also linked with underwritten bond deals. They are seen primarily as public relations tools used to help build support for community projects, not as major financing tools.

Gebhard said last month's minibond issue was so popular that the utility is considering another offering next year. if an appropriate capital project comes along.

"I think people like it better if they can see something tangible being built with their investment." he said.

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