Comparative financing costs for competitive and negotiated Pennsylvania school district bonds

This article summarizes a study that examined the overall financing costs of competitive and negotiated bonds sold by Pennsylvania school districts in 1993. A principal finding is that the bond marketing strategy, i.e. competitive or negotiated, is not a statistically significant factor in the determination of overall financing costs. This finding contradicts a number of earlier studies, but appears to be consistent with changes that have taken place in the municipal securities market since the earlier studies were completed. Duration is also found to be an important explanatory variable. This is important because it shows how the structure of a bond issue, i.e. the pattern of interest rates and scheduled principal redemptions, influences TIC (true interest cost).