Especially given the amount of these Bossier City has outstanding, it makes sense to shop for the best bonding deals – unless you’re Republican City Councilor David Montgomery.
The city’s highly leveraged position turned into an issue of incumbent competence during this spring’s city elections. At almost $487 million or $6,827 per capita, of Louisiana’s ten largest cities (some of which operate under consolidated governments with the surrounding parish), Bossier City citizens owe the most per head (using 2019 data, as some have yet to file their legally-required audits for 2020). Shreveport trails by over $1,500, and only Baton Rouge’s Metropolitan Government also cracks the $4,000 level (for 2020, Bossier City’s fell to $6,561).
Worse, according to revenues available, Bossier City will come under pressure to pay it all off. Its debt-to-annual revenue ratio is 3.14, just exceeding East Baton Rouge but trailing its neighbor to the west at 3.85. The higher the ratio, the less money the city will have available to pay operating expenses in future years, thus tempting tax increases (whether by individual debt authority renewal or rolling forward property tax rates) to cope.
So, it makes sense to refinance at lower rates, which it and other cities have done with regularity in recent years with an economy (when not disrupted by the Wuhan coronavirus pandemic) under former GOP Pres. Donald Trump boasting relatively high growth with low interest rates. Refinancing has become more imperative now that an explosion of debt and spending under Democrat Pres. Joe Biden has forced interest rates to rise as a response to the highest inflation levels since the presidency of Republican George W. Bush that only look to go higher for the indeterminate future.
To refinance, governments hire an underwriter (and perhaps other entities such as counsel) to issue bonds to pay off outstanding notes, at a fee. This week, the Bossier City Council approved such measures, and in the course of that an illuminating exchange occurred between Montgomery, who has served on the Council over two decades and with three others still there oversaw the massive buildup in the city’s debt, and Republican Chris Smith, who just joined in July.
Smith asked about whether these kinds of deals ought to go to bid. They haven’t for many years, as since 2007 the city has relied upon a pair of south Louisiana firms to do all the issuing and underwriting. His question echoed advice from a 2018 report by the Louisiana Legislative Auditor that noted only a third of the state’s municipalities followed best practices of having underwriters and counsels bid on each bond package, which collectively likely cost them almost $350,000 extra a year. Applying that methodology to the authorized refinancing in this meeting, not using competitive bidding could cost tens of thousands of dollars more.
But Montgomery was having none of that. He stated, “We don’t shop this. This is a professional service. We believe in these people …. If you want to check the fees, their fees are all publicly disclosed, and you can go to the state bond commission and compare those fees charged to what the average fees are charged in the state of Louisiana.” (The State Bond Commission website has no such information.)
Aside from the fact Montgomery has no authority to speak on behalf of the entire Council or the city, his attitude runs contrary to the best practices recommended by the state and government finance professionals. Montgomery, whose insurance business raked in about $280,000 according to his last financial disclosure from local governments, appeared to show more sympathy for those who win contracts from governments than the interests of the taxpayers he supposedly serves.
And it’s an attitude widely shared among elected Council holdovers such as Democrat Bubba Williams and Republican Jeff Free. Earlier this year with Montgomery they successfully stumped for extending Manchac Consulting’s no-bid contract to administer some city services despite the industry norm of local governments bidding out such business. And while no party Jeff Darby resisted that renewal, he has signed on to plenty of other no-bid contracting as have those other graybeards.
Given that Bossier City needs to save every penny it can in its bond dealings to protect future provision of services without needless tax increases, this attitude disserves the public good. City government should institute competitive bidding for all professional services above an LLA-recommended minimum of $30,000 to serve the interests of citizens, not the politically-connected.