Whether it’s a project to extend access roads and utilities for the Iowa Speedway in Newton or to build a business park in Huxley, Iowa municipalities are likely to access the capital markets through Ruan Securities Corp.

Ruan Securities is the smallest and probably least-known subsidiary of Des Moines-based Ruan International Cos., which has businesses in transportation, commercial banking, international trading and real estate development. It was founded in 1985 as a spinoff from Ruan’s banking subsidiary, Bankers Trust Co.

“We then became kind of a specialized company working within Iowa municipal bonds,” said Ruan Securities President Tom Mehl, who joined the company in 1989.

The 19-person firm, which operates from the 33rd floor of the Ruan Building, serves both sides of the municipal bond market, providing a niche for deals that most national investment bankers and many of the regional firms would consider too small to handle.

“It’s really important that if some little town wants to build a street or a fire station, they can vote on it and they have access to the capital markets,” Mehl said. “And once the bonds are originally sold, there needs to be some form of liquidity for people to buy and sell these securities, and we provide that secondary market.”

So far this year, Ruan Securities has underwritten 114 bond issues for cities, towns, school districts and other political subdivisions throughout the state. Collectively, those bond issues totaled approximately $215 million, ranging from Newton’s $9.7 million bond issue for the Iowa Speedway infrastructure to a $350,000 issue for the Huxley Development Park.

“This firm has underwritten more [Iowa] issues each year since 1989 than any other firm,” Mehl said, based on data from Securities Data Corp., an industry source that tracks that information. Based on annual number of transactions, “we are the lead underwriter of small issues in the state,” he said.

Ruan Securities’ niche is underwriting bank-qualified bonds, meaning the issuer issues less than $10 million in bonds per year, and so it’s not active in bond issues for larger cities such as Des Moines or Cedar Rapids. Bank-qualified bonds generally provide more advantageous interest rates as an incentive for local banks to buy them.

In addition to the underwriting services of its Iowa Public Finance Group, Ruan Securities each year also buys and sells anywhere from $150 million to $200 million in Iowa municipal bonds, providing liquidity for investors.

Iowa’s public finance landscape has changed significantly over the last few decades, Mehl said.

“Where there were a lot of smaller brokerage firms (20 or 30 years ago), those are gone,” he said. “But we have a lot of individual banks that will underwrite directly. It depends on what kind of deal is being offered. All bonds are not equal.”

Though the demand for small bond issues by regional firms “isn’t what it used to be,” Mehl said, “there is still a competitive market, and most issues will attract a half-dozen or so bids,” he said. However, compared with 30 years ago, more banks have become large enough to underwrite municipal bond issues directly.

In many instances, Ruan Securities will provide interim financing to enable a project such as a new municipal landfill to get going until it reaches the point of generating its own cash flow, Mehl said.

Bob Josten, a partner with the law firm Dorsey & Whitney LLP, has worked as a bond counsel with each of the investment banking and advisory firms that underwrite or advise on municipal bond issues in Iowa.

In addition to serving smaller communities than most groups, Ruan “also works very, very closely with banks,” Josten said, ” and most of their financing is purchased by banks, which is very important to everyone in the system.”

The business of lending money to cities and towns is still in transition, Josten said. In addition to an increase in funding related to economic development projects, the sources of funding have also shifted, he said.

“We used to do a lot of activity with the local banks,” he said. “In the past 20 years, it seems to me we have seen a change in local banking in many small communities that they can no longer make a local decision about lending a community a couple hundred thousand dollars. It makes it more difficult for (the local governments) to get valid market rates. That’s where Ruan steps in and plays a role in providing a source of money that otherwise might have come from a local bank 20 years ago.”

For specific bond issues, a Ruan investment banker may consult with a team from a city for as long as a year before presenting several different scenarios for city officials to choose from. Generally, the size of projects being financed with debt has increased for both cities and counties, said Chip Schultz, the firm’s director of public finance.

“I think they’ve been increasing because of inflation and increases in construction costs,” he said. “But I also think towns and, more and more, counties are getting involved in issuing debt than have in the past. They are being asked to do more, and are able to do more financing from self-supporting sources (such as tax increment finance districts).”

Additionally, cities are putting more emphasis on long-term planning, and Ruan Securities’ investment bankers are increasingly working with municipalities to provide expertise on the financing options available, Mehl said.

On the investor side, Mehl said Iowa banks have been “very supportive” by purchasing Iowa-issued municipal bonds, with many carrying significant portfolios.

Individual investors have also been active purchasers of Iowa bonds, though “we’d always like to see more,” Mehl said. For the right individuals, “it’s a very desirable way to build up a retirement fund,” he said.

Mehl said he sees his company’s role remaining much the same into the future.

“As more consolidation happens on a national level, there needs to be a local presence for small issuers to get to the capital markets, and so that people have the option to invest directly in their communities,” Mehl said. “There’s a preference when we offer those bonds to offer them to local investors first, and many of our municipal clients prefer that.

“And since we are underwriters, we are in the thick of the game. We do know the values and the backgrounds of the issuers, versus the guy in New York on a big trading desk. We’re going to take a look at it from a local perspective.”