Changes Recommended to Help Bond Commission, Local Governments Reduce Bond Issuance Costs

An evaluation of the State Bond Commission’s oversight of local government bond issuance costs suggested some changes to help the Commission and local governments reduce those costs.

Auditors found that the Commission does not track actual local government issuance costs in an electronic format and is not required to do so. However, tracking this information electronically would help commission staff more efficiently analyze costs from comparable bond transactions when reviewing a bond issuance application.

Auditors estimated that between January 2013 and June 2017 local governments paid approximately $6.7 million in bond issuance costs that exceeded the average costs of similar issuances. If commission staff were able to monitor this information electronically, they could more easily identify and investigate whether these costs were higher than necessary.

In addition, commission staff members might be able to help local governments reduce their borrowing costs by providing resources to help them use competitive bidding to select bond issuance professionals. Competitive bidding for such services is a nationally recommended best practice.

Auditors calculated that competitively bidding out services could potentially enable local governments to reduce their bond issuance costs by approximately $1.2 million annually. Among those local government entities that responded to an auditor’s survey, only 38 percent said they used competitive bidding to select bond issuance professionals.