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PAGE 2—NOVEMBER 1958—SOUTHERN SCHOOL NEWS
Sale of Southern School Bonds Since Mid-1956 Compared
(Amounts are in dollars, 000 omitted.)
Period. Ala. Ark. Del. Fla. Ga. Ky. La. Md. Miss.
1956 3rd qtr
No. of Issues — — 6 — 1 12 15 4 7
Amount — — 2,560 — 425 3,408 2,853 1,650 4,147
Median Interest .... — — 3.306 — 3.00 4.344 3.69 2,78 3.532
1956 4th qtr
No. of Issues 3 1 1 17 — 8 9 6 3
Amount 587 750 25 9,285 — 2,274 8,546 32,188 70
Median Interest 3.443 3.79 3.00 3.78 — 4.905 3.93 3.631 3.734
1957 1st qtr
No. of Issues 6 — 6 4 7 14 18 3 10
Amount 5,955 — 8,193 23,500 13,075 7,713 15,749 7,500 5,203
Median Interest 3.479 — 3.366 3.601 3.20 4.043 3.876 3.186 3.55
1957 2nd qtr
No. of Issues 3 2 2 4 2 19 12 3 3
Amount 300 985 2,400 7,316 1,100 7,615 12,467 19,281 1,510
Median Interest 3.576 3.37 3.272 3.967 3.705 4.09 3.84 3.299 3.586
1957 3rd qtr
No. of Issues 6 — 2 2 — 11 11 2 7
Amount 8,930 — 9,230 11,175 — 5,996 15,620 9,800 2,160
Median Interest 4.198 — 4.01 4.306 — 4.32 4.340 3.776 3.835
1957 4th qtr
No. of Issues 9 — 2 1 5 8 11 1 5
Amount 2,614 — 430 12,500 4,917 3,715 6,005 500 10,650
Median Interest 4.623 — 4.17 4.09 3.561 4.510 4.232 3.27 3.604
1958 1st qtr
No. of Issues 2 — 7 14 6 13 16 7 10
Amount 1,200 — 10,412 12,771 5,730 3,565 23,329 9,400 28,038
Median Interest 3.562 — 3.349 3.214 3.107 3.55 3.61 2.808 3.389
1958 2nd qtr
No. of Issues 8 — 8 2 7 6 17 6 14
Amount 5,480 — 6,873 2,870 2,604 2,315 13,737 35,726 3,550
Median Interest 3.260 — 3.22 3.176 3.25 3.187 3.63 2.797 3.193
1958 3rd qtr
No. of Issues 6 — 4 3 4 13 7 2 6
Amount 687 — 12,280 1,900 5,000 4,081 3,185 7,500 1,730
Median Interest 3.018 — 3.351 3.983 3.549 3.485 3.63 3.447 3.285
Period Mo. N.C. Okla. S.C. Tenn. Tex. Va. W.Va. N.Y.
1956 3rd qtr
No. of Issues 18 7 17 4 2 41 1 — 25
Amount 11,482 3,890 6,063 925 525 17,606 1,300 — 64,983
Median Interest .... 3.113 3.064 3.038 3.112 2.50 3.413 3.20 — 3.309
1956 4th qtr
No. of Issues 9 4 19 2 7 42 2 1 36
Amount 11,735 2,075 4,606 15,335 12,800 22,868 5,500 766 46,067
Median Interest 3.631 3.691 3.25 3.041 3.899 3.84 4,317 3.00 3.748
1957 1st qtr
No. of Issues 16 9 23 5 8 53 6 — 53
Amount 9,868 10,882 2,724 10,680 5,203 57,365 9,816 — 94,294
Median Interest 3.397 3.226 2.919 3.30 3.25 3.657 3.568 — 3.53
1957 2nd qtr
No. of Issues 23 9 29 4 8 68 3 — 38
Amount 13,230 7,392 7,787 360 4,652 27,434 2,470 — 80,271
Median Interest 3.198 3.383 3.416 3.40 3.116 4.070 3.763 — 3.59
1957 3rd qtr
No. of Issues 14 3 17 1 9 35 1 1 41
Amount 3,410 2,550 2,261 300 3,189 16,415 1,680 1,228 76,449
Median Interest 3.938 4.390 3.416 3.532 3.847 4.382 3.747 3.471 3.885
1957 4th qtr
No. of Issues 11 4 16 3 5 37 3 — 56
Amount 4,908 7,170 5,443 1,165 2,725 17,298 9,700 — 89,754
Median Interest 3.305 3.884 3.393 3.505 3.699 4.259 3.672 — 3.585
1958 1st qtr
No. of Issues 24 6 25 2 14 61 3 — 59
Amount 21,619 18,626 1,770 8,900 16,225 53,014 6,152 — 131,607
Median Interest ..... 3.117 2.950 2.734 2.631 2.988 3.310 2.949 — 3.253
1958 2nd qtr
No. of Issues 15 10 48 3 4 42 12 — 65
Amount 5,353 13,446 13,451 520 2,425 12,135 8,684 — 122,792
Median Interest 3.035 3.063 2.267 3.168 2.71 3.485 2.859 — 3.06
1958 3rd qtr
No. of Issues 32 2 11 — 9 43 4 1 32
Amount 9,450 17,000 876 — 6,900 11,974 11,900 1,000 59,303
Median Interest 3.363 3.072 2.57 — 3.510 3.863 3.301 1.74 3.517
Data compiled for Southern School News by Investment Bankers Association of America, Washington, D.C.
School Bonds
(Continued From Page 1)
factors—Federal Reserve policy shifts,
the Middle East crisis, President Eisen
hower’s health and perhaps troop move
ments to a troubled school district. But
as in the stock market, the effects on
the school bond market imposed by cur
rent events usually are temporary, with
only those of fiscal policy, which affect
the economy as a whole, likely to last
for long.
The school bond figures also reflect
some factors unique to the trade in gov
ernmental securities. For example, the
relatively high interest rates borne by
Kentucky bonds are accounted for in
part by the fact that a large part of the
bonds recorded have been revenue is
sues issued by governing bodies rather
than school boards. Another example
would be the very low rate borne by the
single issue recorded for West Virginia
in the third quarter of this year. “This
was only a three year maturity,” Dr.
Morris said.
Maturity and quality differences are
reflected here and in the rates of other
small groups of bonds more than any
other factors, he said.
SCHOOL ISSUE EFFECT?
Beyond past performance of school
bond issues, Southern School News last
month turned to the buyers and sellers
of these securities with the question:
What effect has the school segregation-
desegregation controversy had on bond
issues?
Let the professionals speak—mostly
with one voice, but not entirely:
“Northern buyers are still buying here
[in Virginia] and at good rates,” said
Walter Cragie, Richmond investment
banker who frequently represents
northern interests in the municipal bond
market. “There has been no noticeable
effect whatever on the interest rates on
school bonds sold in Virginia.”
BUYERS ALOOF
This has not always been so, he noted.
For a brief period in 1956 right after
Virginia enacted its “massive resistance”
laws—including provisions for cutting
off state funds to desegregated school
districts — northern investors became
wary of the state’s school bond issues.
After an official explanation that the
fund cutoff would not affect funds used
for bond retirement, and that the full
faith and credit of the state stood behind
local school bonds, the northerners were
back in the market.
Make comparisons of the performance
of bond issues on comparable bases,
brokers and state financial officers in
variably advised. That is, compare is
sues sold by similar communities at the
same time. Numerous factors affect the
bond market from day to day.
UNAFFECTED BY CRISIS
Therefore, in seeking to illustrate
that, say, Charlottesville, Va., has ex
perienced no financial impact because
of its segregation-desegregation crisis,
Virginians point to the fact that on Jan.
9,1958, that school district sold $1,200,000
of school bonds at 2.45 per cent. On the
same day, the Bond Buyers’ Average
for all types of municipal bonds was
2.97 per cent. What’s more, the issue
was bought by a syndicate representing
65 different investment houses, many
of them in New York.
More recently, on Oct. 8, Hampton,
Va., sold $2 million worth of bonds, in
cluding $1,100,000 of school bonds at
3.58 per cent. That day the Bond Buyers’
Average was 3.50.
BELOW DAY’S AVERAGE
To the south, Rowan County, N.C.,
on Sept. 23 sold $1,500,000 of school
bonds at 3.38 per cent. The day’s aver
age for municipal bonds was 3.54.
And on Oct. 1, the state of South
Carolina sold $13 million of school bonds
at 3.10. The Bond Buyers’ Average for
the day was 3.43 per cent. Joe H. Sand
ers Jr., a South Carolina broker, said
one of the participants in the syndicate
which bought these bonds remarked
that the South Carolina bonds brought
about the same rate a similar issue in
New England would have brought.
Furthermore, he said, by Oct. 17 in
vestors had bought about $11 million of
the bonds from the syndicate.
Since 1951, South Carolina has mar
keted an aggregate of $154,500,000 worth
of school bonds. Interest rates have
varied from a low of 1.50 per cent on
Oct. 1, 1951 to the high of 3.10 per cent
Oct. 1, 1958. The average for all the
issues has been 2.27 per cent, giving
the state one of the most consistently
favorable market rates of any in the
region.
RESISTANCE ABSENT
Over in Arkansas, Jay W. Hill, Little
Rock broker, said: “We have not en
countered the slightest resistance. The
school situation hasn’t affected the mar
ket yet, but it could.”
Several reasons were advanced for
this. Chief reason is that 99 per cent
of the bonds of the Arkansas school
districts are sold through Little Rock
brokers to buyers in Arkansas. Another
is that they are sold under a contract
which assures their retirement by the
school districts or by the state if some
catastrophe should place the district in
a position to default.
As for the effect on interest rates, Mrs.
Thelma Spinnenweber, supervisor of
records and reports for the Arkansas
Department of Education, doesn’t be
lieve there has been any. She estimated
the current rate is about 3 per cent. With
a 4 per cent ceiling set by state law, she
said the highest interest paid on bonds
during the 1950’s was the 3.5 per cent
in 1954 and the lowest was 1.5 in 1956.
DELTA STATE SELLS ISSUES
Mississippi only started issuing school
bonds in 1956. That year, the Legislature
authorized an open-ended issue of $60
million for equalization of white and
Negro schools. Within the $60 million
ceiling, new bonds are issued as others
are retired. Thus far $30 millions have
been sold. The first issue of $10 million,
put up a couple of times when bids were
rejected as too high, finally was sold
in December 1957 at 3.1805 per cent.
Summary Available
The fifth printing of a statistical
summary, entitled “Status of
School Segregation - Desegrega
tion in the Southern and Border
States,” is off the press. Copies
have been mailed to its subscrib
ers.
Southern Education Reporting
Service has on hand a limited
supply of the 31-page loose-leaf
folder—containing information on
enrollments, teachers’ pay, court
cases and legislative enactments
—which may be ordered, at $1 per
copy, from SERS, P.O. Box 6156,
Nashville, Tenn.
The data contained in the sum
mary is up-dated and supple
mented periodically and made
available, at the cost of printing
and mailing, to persons indicating
a desire to receive it on this basis.
Another $20 millions were sold in April
1958 at 2.6806 per cent.
There is no difficulty selling the state
bonds since they are general obligation
bonds, backed by the full faith and
credit of the state, Mississippi dealers
said. However, local school bonds face
a different situation.
Ed Lewis Jr. of Lewis and Co., Jack-
son, said buyers “up North won’t touch”
the local school bonds. However, he
added, “there is no trouble in disposing
of the local school bonds in the South.”
He said the local bonds usually go at
about 3.5 per cent.
ALABAMAN SEES PREJUDICE
An Alabama official attributed some
of the reluctance of nothem and east
ern investors toward southern school
bonds to “simple prejudice.” One east
ern investor told him that because of
the segregation controversy he wasn’t
interested in a sale of Mississippi power
company bonds.
“An offering of southern school bonds
at this time has no receivers, no bid
ders, any place in the East,” said Hugh
Morrow, a Birmingham, Ala., broker.
He was countered by a state official
close to the bond market and by a Mont
gomery broker, Sidney J. Mohr Jr., who
said that while eastern buyers of
southern school bonds are “less avid”
they still can be found. Mohr observed
that this reluctance is due, in part, to
the current uneasiness of the whole
market and in part to the threat of
school closures. This fear has not been
dispelled by explanations that retire
ment of bonds, where property taxes
are pledged, does not depend on school
attendance.
These varied views are reflected by
the wide variations in recent bond sales.
Recognizing differences in credit ratings,
and other factors, Colbert County, Ala
bama, on Oct. 22 sold two issues totaling
$450,000 at 3 per cent, while on Oct. 15,
Conecuh County’s $120,000 issue went
at 4.0376 per cent.
On the other hand, on Oct. 15 an
issue of $3 millions of school bonds by
the Orleans Parish, La., school district
was bought by a northern syndicate
headed by the First National Bank of
New York. The interest bid was 3.8952
per cent. This was substantially above
the 2.8012 per cent rate on the $6 million
issue sold in October 1955, but well be
low the 4.0827 per cent borne by the
$3 million issue sold last October. These
fluctuations were attributed solely to
bond market trends nationally.
Walter Latapie, chief accountant for
the Orleans Parish school board, said
the segregation-desegregation issue has
had “no effect on the sale of our parish
school board bonds.” He was supported
by James Roddy of Scharff and Jones
who said the situation was generally
the same throughout the state.
FUTURE INDEFINITE
Harold Judell of Foley, Cox and Ju-
dell, a law firm which handles the
major portion of school bond issues in
Louisiana, added: “To date there is no
apparent effect on our bond issues in
Louisiana. What will happen in the fu
ture is anyone’s guess, particularly if
anything should happen toward turning
public schools into private ones as has
been done in other states.”
Border states, where most of the de
segregation since 1954 has occurred,
report the same general bond trends as
the states farther South. From Dela
ware to Texas, interest rates are up but
bonds continue to sell.
“There is a good market for Delaware
school bonds,” according to Gordon
Willis, senior vice president of the Far
mers Bank of Delaware which acts as
fiscal agent for the state in school bond
sales. “The present tax exempt feature
plays a part.
“Of course, the interest rate has gone
higher in recent years, but the integra
tion-segregation situation has not af
fected either interest rates or sales so
far as Delaware is concerned.”
This evaluation applied to both local
school district and state issues.
UP AND DOWN IN TEXAS
Rates on school bonds in Texas also
have climbed rather steadily—from a
median of 3.05 per cent in 1952 to 3.30
in 1954, then dropped slightly to 3.15 in
1956 and a high of 3.65 this year. Still,
Vane Burnett, finance officer for the
Texas Education Agency, said, “So far
as I can see the segregation problem
has had absolutely no effect upon the
sale of Texas school bonds.” He said
buyers both in Texas and outside have
been concerned only with the financial
condition of the districts, not with its
policy on segregation or desegregattion.
Corroboration came from W. E. Tins
ley of Austin, director of the Municipal
Advisory Council of Texas, who added
the bond market generally has been in
“pretty bad shape for three or four
months . . . governments have gone to
hell . . . interest rates are high.” As a
consequence, he said, all bond issuing
agencies, including school districts, have
been reluctant to put bonds on the
market.
FAVORABLE PRICE
Most recent issue sold in Texas was
$1.5 million marketed by the Victoria
school district in October which drew
3.61 per cent on its 25-year bonds. Vic
toria is a well-off district and got a
favorable rate by current standards
though it would have been considered
high a couple of years ago. Victoria
district has begun desegregation, but
still maintains separate schools for Ne
gro pupils who prefer them.
In Maryland, the local school dis
tricts, i.e. counties and the city of Balti
more, issue school bonds while at the
state level only general obligation bonds
are issued. James L. Reid, supervisor of
school plant planning for the state de
partment of education, said “There have
been no indications from bond counsel
or county boards of education that de
segregation has had any effect on the
school bond interest rates in Maryland.”
He said the local issues had experienced
the normal fluctuations of the bond
market.
The desegregation issue was raised by
New York financial firms early in the
Maryland desegregation program, said
Richard W. Case, Baltimore attorney
who serves as bond counsel for some of
the more heavily populated counties.
But they soon were satisfied desegrega
tion was not a problem, and “today the
men in the bond market do not consider
desegregation to be a factor in accept
ance of Maryland school bonds.”
The most recent issue in the state was
$6 million sold by Prince George’s
County Sept. 23 at about 3.9 per cent,
which was considered favorable. A Jan
uary issue went for 3.3 per cent, a dif
ference which Case said was due en
tirely to the change in the bond market.
PINCH FELT
Case said, however, that Fairfax
County, Va., just across the Potomac
from two of the Maryland counties he
serves, has to pay a full one per cent
more in interest on its school bonds.
He attributed this to the school situation.
“Interest rates follow the money flow,”
said Bernard H. Voges, finance and sta
tistics officer for the Missouri Depart
ment of Education. He observed that he
had heard of no school district having
trouble obtaining finance, though some
districts which sell their bonds privately
pay a fourth- or a half-point more than
districts which sell theirs on competi
tive bids. '
SOME AREA RATES UP
Of the regional bond market, Newell
S. Knight of the Mercantile Trust Co.
said that while the Missouri bonds have
not been affected by the segregation-
desegregation issue, other areas have
been “very much affected.” The result
has been, he said, interest on school
bonds from .10 to .15 points higher than
on other types of municipal bonds. For
school bond issues in some parts of the
South, Knight said, it is very difficult to
find takers.
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