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0Mrs am l�ssecisas.lnc. <br />ILFAD[AS IN PUBLIC IF NEWSLETM <br />1 <br />OFFICES IN MINNEAPOLIS AND WAUKESHA • 501 Marquette Avenue • Minneapolis, MN 55402 1255 • 612 339 8291 <br />rig- .0 <br />FILE: Financial Specialists: Ehlers and Associates, Inc. <br />Please distribute to governing body members <br />March. 19W <br />The bond market continues to be volatile with full point price movements in a dam. Not long ago that <br />would have been dramatic for a month. (One point in price is S 10 per S I ,U00. or I %. A point in the <br />interest rate is 1 / 10 of l V) <br />NEGOTIATED BOND ISSUES <br />Some ar Iue that governments ought to privately negotiate their bond issues, especially in volatile <br />markets (which is most of the time). But no one can predict whether the bond market will be higher or <br />lower tomorrow, next week or next month. When an underwriter says, "Privately sell your bonds (to me) <br />riaw before interest rates go up in this volatile market," is he telling other clients (investors): "Buy now <br />before interest rates go gp??" Nutty argument. Our own experience and various studies show that <br />competitive sales save up to 3/4 of I% in interest rates, about $110,000 on a $1 million, 20-year issue. <br />The California legislature is proposing that all bond issues go to public sale (except in volatile markets?) <br />because a former State Treasurer prequalified bond underwriters by receiving political contributions <br />before commencing negotiations. Investigators found nothing wrong, but some legislators obviously do. <br />FINANCIAL ADVISOR FEES -- HOW MUCH IS TOO LITTLE? <br />Financial Lo+-Y=rlting has been very <br />competitive, mostly in the areas of service <br />and results, but some firms justify themselves <br />by quoting lower fees. <br />Public officials sometimes feel they cannot be <br />cr►ticizeo if they always take the lower bid, <br />even for professional services. That can be a <br />biq mistake because professional service is <br />u,.ly as good as the various people being <br />considered, which is why most states exempt <br />professional service from competitive bidding. <br />If —penor professional service and results are <br />the main objectives, then fees should be the <br />last consideration, not the most Important <br />consideration. F-11ring on the basis (if a cheap <br />fee should not bP an excuse to avoid the <br />difficult task of compar!ng Individual <br />consultants. <br />"No op the Iw WiddW " <br />( opynght 1988: Reprinted Courtesy of <br />BIII Fioest and FIARAUt Magazine <br />