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Home > Leadership > City Comptroller > News Articles > City Holds First Bond Auction Since 1986

City Holds First Bond Auction Since 1986

By:  Brian Meyer
News Staff Reporter

The last time Buffalo borrowed money by enticing investors to competitively bid for bonds, The Cosby Show& was winning the TV ratings game, and Ronald Reagan still occupied the White House.

Not since 1986 had the city orchestrated a competitive bond sale. Its precarious finances forced comptrollers to take the less-desirable route and engage in negotiated sales.

But this all changed last week when, for the first time in nearly a quarter-century, the city staged two spirited auctions to snare the best interest rates for $27.6 million in bonds.

The money will be used to pay for dozens of improvement projects in city parks, schools and other public facilities.  Returning to the competitive bond market was a proud day for Buffalo, said City Comptroller Andrew A. SanFilippo. The fact that seven investment entities some of them Wall Street Goliaths bid on each of the two sales is further proof of Buffalo's improving financial status in the bond market, SanFilippo stated.

We would have been happy with four bidders. This far exceeded our expectations, and were very excited about that, SanFilippo said.

Document: Bids from investors for sale of city bonds

What's the big deal? What difference does it make whether the city requests proposals from individual bond buyers, then negotiates a deal, or whether it offers bonds at a competitive sale?

The city's outside fiscal consultant said competitive bidding can help lower borrowing costs, provide a more transparent process and offer a better gauge as to how bond buyers view municipalities. J. Chester Johnson, chairman of the New York City-based Government Finance Associates, said the fact that so many investors eagerly bid for Buffalo bonds is a good sign.

We have some clients with [credit] ratings higher than Buffalos that do not get seven bidders, Johnson said. It's obvious theres a change in attitude about Buffalo.

SanFilippo said the citys rising credit rating is a key factor. Two months ago, Buffalo received its first A+ credit rating in decades, making it the first time in memory that three major Wall Street agencies placed the city in the A tier.

Wednesdays online auctions involved rounds of spirited bidding that went down to the wire, SanFilippo said.  It was almost like an eBay auction, he said. One bidder ended up bidding with only three seconds left.

The winning bid in the first auction was made by J.P. Morgan Securities, which offered a final net interest cost of just under 3.63 percent for $22.7 million in bonds.

During the second auction involving $4.9 million in bonds for school improvements, Morgan Stanley & Co. submitted the winning bid of 3.53 percent just eight seconds before closing.

It was pretty exciting, SanFilippo said.