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Bonding Paves the Way | 4/10/2012
You may not think much about how cities like Bismarck and Mandan pay for fixing up roads every year. However, that work isn`t just paid for with tax dollars, cities also have to go out and find money. To do that, they need an expert in the financial sector.
Road construction is set to begin around the capital city. To pay for that kind of work, cities like Bismarck normally use municipal bonds.
"Cities like to issue tax exempt municipal bonds because of the low interest rate," said Dougherty & Co. Vice President Mike Manstrom.
Manstrom`s job is to handle the paperwork when it comes to bonds. He works as both an investment banker and a financial advisor on multi-million dollar projects. "A bond trader in New York or a bond trader in San Francisco doesn`t know Bismarck. But they do know what the value is for an Aa1 Moody`s rating. So they`re really buying a rating."
Manstrom says as project costs have risen over the years, it`s in the best interest of a city to use the services of a bond underwriter.
"And cities really don`t have the time or the expertise to try to be involved in the market on a day to day basis. Well, a firm the size of Dougherty, we have trading desks, we`re buying and selling bonds on a daily basis throughout the Midwest and throughout the US."
Offices like Dougherty and Company are something of a rarity in North Dakota. But without experts like Manstrom`s team, cities would likely have to raise taxes or borrow more money to keep roads in good shape.
For small cities that may not have a AA rating, Dougherty and company can buy and resell municipal bonds on the open market.