When is private sale of Local Government Bonds prohibited?

The private sale of local government bonds is prohibited when the total amount of bonds exceeds $1,000,000. This rule is in place to ensure transparency and fair competition in the bond market. By requiring public sales for amounts greater than this threshold, it allows for broader participation from potential investors, which can lead to better pricing and terms for the municipality.

The underlying principle of this regulation is to promote integrity in financial dealings by preventing any potential favoritism or lack of competition that could arise from private sales of significant bond amounts. Such limitations are designed to protect public funds and ensure that municipalities do not miss opportunities for better financial terms that accompany a competitive bidding process.

In contrast, lower amounts may be permissible for private sales due to a reduced risk of market distortion and the administrative burden associated with conducting a public sale, where funds involved are much smaller, allowing for a more streamlined process.