Bond Underwriter Costs: Texas School Districts and the Hidden Cost of Issuing Bonds

Abstract

The purpose of this study was to investigate possible relationships between school district characteristics and bond underwriter costs for Texas independent school districts. Bond data for all school districts issuing bonds in the five-year period 2004 – 2008 was collected from the Texas Bond Review Board. School district information, including financial, socio- economic/ demographic, debt, and managerial information, was collected from those same districts.

The data was analyzed using both descriptive and inferential statistical methods. Descriptive statistics were developed on both bond issue and bond issuer data. Relationships between issue costs and school district characteristics were then examined using multiple regression and factor analysis. Results indicate that, in general, larger districts have an advantage over smaller districts, with underwriter costs generally lower in larger districts. Results also offer modest support for the hypothesis that underwriter fees are related to financial, socio-economic/demographic, debt, and managerial characteristics of school districts.