Meridian Star

September 4, 2013

Advisor: Bond issue costs not too high

By Terri Ferguson Smith /
The Meridian Star

MERIDIAN — In response to questions about how a previous county bond issue has been spent, a financial consultant on Tuesday gave county officials information about the process of issuing bonds.

    At a Board of Supervisors meeting, Steve Pittman, a partner with the financial advising firm,  Government Consultants Inc.  presented the board with information about the costs of a $10 million bond issue passed in 2012 to pay for road improvements.

    Government Consultants Inc.  works with cities and counties throughout the state in handling bond issues, he said, explaining how bonds are issued.

    "County bond issues can be issued one of two ways, either by the county or through the Mississippi Development Bank. The recommendation as to whether or not to issue by the county or by the Development Bank, is the recommendation made by the bond counsel and your financial advisor," Pittman said.

    That decision is typically based on how an entity wants the bond issue structured, he said.

    Allegations of wrongdoing have been included in an objection to the board's actions to pass a $14 million bond issue. Tommy Williams of Marion has been an outspoken opponent of the $14 million bond issue that supervisors hope to use to pay for recreational projects and some renovations to the county courthouse. Williams filed an objection to the validation of the bonds last week in Chancery Court, citing numerous reasons it should not go forward.

    Among those objections was the high cost that Williams said the county paid to issue the 2012 bond issue of $10 million. In his objection to the current bond issue, Williams said the board "breached its fiduciary responsibility to the county by paying an exorbitant amount for the $10 million loan," which included nearly $73,000 to the law firm of Butler, Snow, O'Mara and Cannada; $50,000 to Government Consultants, Inc., more than $30,000 to the law firm of Rick Barry, board attorney; and $20,000 to the Mississippi Development Bank.

    Pittman said in the case of the $10 million bond issue from 2012, the total cost of issuing the bonds was $193,000. Counties typically try to keep the cost of issuing the bonds between 2 percent and 2 1/2 percent, Pittman said. The bond issue passed by the county in 2012 has an issuance cost of less than 2 percent, he said.

    "Two percent, of course, would have been $200,000," Pittman said.

    The percentage that the board attorney makes is set by state law,  Pittman added.

    Barry said since questions had arisen about the fact that his brother William Barry is the executive director of the Mississippi Development  Bank, he asked Pittman if the board attorney is allowed to select the issuer of the bonds.

    Pittman said the board attorney does not make that selection; it is made by the board on the recommendation of bond counsel and the financial advisor.

    "The Development Bank is governed by a nine-member board of directors that actually reviews each entity that comes through," Pittman said. "There is a credit committee that looks at the credit behind the debt to make sure that the city or county can actually service the debt."

    Attorney Stephen Wilson also filed a separate objection to the validation of the bonds last week, but for different reasons. His objections, filed on behalf of several clients, were based on the majority of the Board of Supervisors' refusal to include signatures of opponents that came in after deadline. Petitioners were calling for a county-wide vote on the bond issue but failed to get enough qualified signatures before the deadline.