THERE'S ANOTHER SIDE TO BOND-ISSUE AUDIT

School district superintendents and financial officers found themselves on the defensive after a state audit released last week claimed Missouri taxpayers could have saved $83 million in interest on municipal and school bonds.

The problem, according to the audit, was that districts didn't use competitive bidding every time they sold bonds to raise money for capital projects.

The audit covered bonds issued from 1997 through 2000 in areas with fewer than 65,000 residents. Twenty-two bond issues included in the report were from Southeast Missouri school districts including Cape Girardeau, Jackson and Delta and three municipalities.

Here's how the bond system works:

School district voters approve bond issues, generally for construction projects. The district's goal is to pay the lowest amount of interest on the bonds. To do so, they check the Bond Buyer Index, which shows the going rate for bonds on a given day. State Auditor Claire McCaskill suggests they also competitively bid the bonds.

The audit mentioned the $8.7 million in bonds sold by the Cape Girardeau School District in 1998 to refinance a 1997 issue. The district got a 5.581 percent interest rate, but the index for the day was 4.9 percent.

The audit said Delta got 5.4116 percent when the index was at 5.1 percent. But the report also mentioned Jackson, which did better than the index: 4.8746 percent when the index was at 5.130 percent.

McCaskill says the audit shows districts should get bond selling "out of the back room and into competitive bidding."

However, there are two sides to every audit. Delta officials and its bond agent, for example, dispute the rate published in the audit report.

Our local superintendents aren't hunkered down in back rooms congratulating each other on what they've pulled over on the dumb taxpayers. To the contrary. They are trusted individuals who have displayed financial integrity. And Jackson actually got a better deal by not using competitive bidding.

Rob Huff, Cape Girardeau School District's business manager, said fluctuations in the bond market account for the discrepancy with that district's bond rate.

Finally, the Delta district did use competitive bidding, Superintendent Tom Allen said, but only two firms responded.

Even so, McCaskill is to be commended looking at the bond process and suggesting ways to do better. Certainly, her audit should help remove any temptation for district officials to make sweetheart deals with bond underwriters.