Bite-sized bonds

The Regional Transportation Commission in the next few days expects to close a deal to sell $89.9 million in bonds to finance highway construction to Morgan Stanley & Co. Inc., one of the world's largest financial services companies.

The RTC's next bond sale, however, is likely to target much smaller buyers folks, in fact, who look quite a bit like you.

In a little-noticed provision of this spring's much-argued state legislation that allows the transportation agency to move forward with its bond sale, the RTC won approval for a mechanism that will allow the sale of bite-sized bonds to be held by individual investors.

Derek Morse, RTC's interim executive director, says similar mini-bond offerings have been undertaken in other parts of the country. The RTC, however, apparently would be breaking new ground in northern Nevada.

The thinking of RTC's leadership, he says, is that sale of the bonds to local investors will allow them to help the recovery of the regional economy while also ensuring that the interest payments on the borrowing don't leave the area.

"This will be local money raised here that is going to be reinvested here and put people back to work," Morse says.

Those benefits, RTC figures, are enough to outweigh the extra work as compared with a traditional bond issue sold in a single lump sum to an investment house.

While all the details haven't been ironed out, Morse says the mini-bond bonds probably in denominations of $1,000 will be sold to financial institutions. Participating institutions, in turn, will sell the bonds to their customers.

The RTC expects to sell the bonds, probably totaling about $80 million, next February.

The proceeds would be part of the $250 million that RTC plans to spend during the next three years on street and highway jobs in Washoe County. The bonds would be repaid by the gas tax after voters approved an advisory measure that indexes the fuel tax to inflation, and the Nevada Legislature followed with formal approval.

The Legislature's action also allows RTC to negotiate a price for the bonds with financial institutions. That's a change from the past practice, which required competitive bidding.

The bond issue that's expected to close next week, for instance, drew bids from six investment houses. Morgan Stanley & Co. was the lowest bidder, pricing the issue to yield a true interest cost that's a hair under 5.2 percent.

After reserves are set aside, that bond issue will provide about $80 million for RTC to begin road projects this summer. The transportation agency has estimated that projects financed with the gas tax during the next three years will put about 3,000 people to work.