The next round of the grand debate on competitive bond issuance bids overshadowed the city of Bossier’s 2022 budget introduction, providing insight into the style of insider governance promoted by the majority of the board. municipal while outlining a way forward to save money to citizens not only in that municipality but in any other local government in Louisiana.
Regarding a pair of bond articles introduced, at the previous meeting, the Republican adviser Chris Smith had asked about tenders for such professional services. Appearing to speak for the majority of the Council, the GOP adviser David Montgomery rejected the idea, saying it wasn’t necessary when a reliable supplier was engaged.
Smith persisted in this meeting, when the items went through a final review. He noted the Louisiana Legislative Auditor’s Report 2018 which summarized that the use of competitive bidding is considered good practice in local government debt procurement, believed that it would save local governments money if it was universally adopted, and recommended the adoption of this practice in debt financing. Instead of proposing tender motions on these items, he announced that he would vote against them because they did not have such a provision which he said could result in savings for taxpayers.
Montgomery again attempted a defense of the no-auction philosophy.
He referred to an otherwise undefined “process a few years ago” and alleged “it did not come to fruition” without giving details, concluding that “it turned out to be more so than that. sticking to a professional firm that charges fair fees… provides the best possible savings ”- a notion perhaps acceptable in political systems which discourage, if not prevent, economic competition, but which is certainly at odds with modern economic theory and contrary to advice from government procurement professionals.
Of course, this incident Montgomery referred to does not provide any confirmation of the wisdom of non-competitive contracting. The city has dozens of professional service contracts and several times a four-year cycle sells or refinances bonds.
A one-off episode years ago proves nothing: With today’s technology, it costs next to nothing to offer professional service deals, and get a lower price on a few at the bottom of the line. scale, and certainly on a single bond transaction. , would more than pay for all the extra resources spent in driving the process for all.
Montgomery also praised the current businesses on a recent refinancing that saved the city money on its water and sanitation service.
This is fine, but totally irrelevant to the point in question: there is no reason why another company that bid lower could not do the same or better, and this would all have been part of it. of the application file anyway.
Understand that Montgomery – on behalf of the Council, other than Smith, whose voting behavior suggests they are in agreement – is not speaking for the taxpayers on this issue but for the special interests who have these non-competitive contracts. .
Perhaps Montgomery so passionately defends this approach shunned by professionals because he sells his insurance services so widely to local governments, to the tune of approximately $ 280,000 last year, and can benefit from a series of non-competitive agreements with them.
The argument overflowed comments from a citizen on the refinancing proposal, which wanted to highlight the city’s highly leveraged position. Referring to a previous article in this space, he referred to the per inhabitant Debt in 2019 of $ 6,827, by far the highest of the ten largest cities in the state (he seemed somewhat confused as to the source of this information: the link in the post points to the Auditor’s website part Louisiana Legislature which provides reports, where the full report and annual financial reports of the ten cities are accessible, this figure being taken from the 2019 CAFR of the city of Bossier).
This sparked outbursts from Montgomery of his three favorite English words: “point of order,” in the sense that the discussion of the amount of debt outstanding was unrelated to the subject of refinancing. To this, City Attorney Charles Jacobs agreed that the refinancing was unrelated to debt levels and ruled the latter subject off limits.
Maybe in a hurry, as it was. It depends on the transaction, but generally the costs of financing a bond issue are built into the amount of debt owed (the legal agreement indicates that this is at the discretion of the city). So, if the deal is successful, the amount of the city’s overall debt increases, which makes a discussion on this point relevant at this time. However, if the issue had been raised as part of the debate on the next item, which called for new debt, it should have been allowed as part of the discussion.
Eventually, the votes on this article which refinanced $ 125 million and another which refinanced $ 15 million and issued up to $ 75 million more in debt were passed with only Smith against. He unanimously joined the Board in approving the introduction or issuance of other professional service contracts which were subsequently placed on the agenda.
This must change. The city and all local governments in Louisiana with more than a few contracts of this size that have not done so, should adopt the LLA’s recommendation for the use of the state’s public tender act for the purchasing all professional contracts, which obtains three quotes for services costing between $ 10,000 and $ 30,000, and soliciting bids for the purchase of services exceeding $ 30,000.
That way, ultimately, taxpayers, not political insiders, win.
– Jeff Sadow is Associate Professor of Political Science at Louisiana State University Shreveport and writes the popular blog Between the lines.
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