Typical Chronology:

 After authority to raise money through debt is granted by city council or town meeting, actual issuance of notes or bonds may occur months, or even years, later. For this reason, it is good practice for local finance officials to meet periodically to review borrowings that have been authorized, but not issued, to make sure that the debt position of the community is understood by all. Once the structure of a borrowing has been determined, a preliminary official statement (POS) is developed under direction of the treasurer and disseminated to the bond market community. The POS will also be used by rating agencies in their analysis of credit worthiness. Both the POS and the final Official Statement (OS) are documents prepared for potential investors that contain information about a prospective bond or note issue and financial data about the city or town. The OS is sometimes referred to as an offering circular or prospectus. After all of the preliminary work has been done and the various experts (e.g. bond counsel, rating agencies) have weighed-in on the sale, the bonds or notes are sold to underwriters or broker syndicates and, ultimately, to investors. Once payment on the purchase has been made, the community has the funds for the specified capital improvement or operating expenditures. To minimize interest costs, or more efficiently assemble borrowing packages, treasurers should always communicate with the department head, who will oversee a project or purchase, to better understand when funds will be needed. By taking a deliberate and thoughtful approach toward debt, cities and towns can optimize their borrowing practices to better maintain capital assets and minimize costs. Having a basic understanding of the process and making use of the knowledge of investment professionals improves a community’s odds of success.

Jeff Bennett