A Texas city declined to award a bond deal this week to Citigroup Inc. even though the bank submitted the most competitive bid, showing how Wall Street is still contending with a Republican-backed state law that punishes financial firms for taking on gun policies.
The bank was rejected after submitting the best bid among firms that sought to underwrite two bond sales totaling almost $100 million this week by Anna, Texas. It’s unusual for a municipality to reject a bank’s winning bid on a municipal-bond deal.
Frances La Rue, a spokesperson for Anna, said in a statement that officials chose the second-lowest bid after discussions with the office of the state’s Republican attorney general and the municipality’s legal counsel and financial adviser. The attorney general’s office, which oversees most bond sales in Texas, said Friday that it is still reviewing Citigroup’s ability to comply with the state’s gun law.
The firearms measure was one of a pair of laws that took effect in September 2021, limiting Texas governments’ work with companies unless the firms verify that they don’t “discriminate” against gun entities or boycott the fossil fuels industry.
Citigroup initially suspended muni underwriting in the state for a few months after September 2021 as it worked to verify compliance. It resumed underwriting Texas muni deals in November and closed a deal as recently as last week.
In 2018, Citigroup announced policies that set restrictions on the firearms industry after the mass shooting at a high school in Parkland, Florida. Citigroup said it would prohibit retailers that are customers of the bank from offering bump stocks -- devices that let semiautomatic rifles fire even more rapidly -- or selling guns to people who haven’t passed a background check or are younger than 21. The bank’s policy does include caveats, including an exemption to the under-21 age restriction if a person has military training, for example.
Anna, a city of about 20,000 people roughly 50 miles (80 kilometers) northeast of Dallas, awarded the sale to Robert W. Baird & Co., which hasn’t been affected by the new laws. It will cost the city an estimated $277,334 additionally over more than 25 years to work with Baird instead of Citigroup, according to the city spokesperson.
The city’s decision signals that Texas municipalities are still hesitant to work with banks affected by Texas Republicans’ fight against Corporate America for wading into social issues.
Early this year, the National Shooting Sports Foundation, a national trade association, told Texas Attorney General Kenneth Paxton that Citigroup can’t certify compliance with the Texas law. The bank has repeatedly said it doesn’t see its policies as violating the law.
In an emailed statement Friday, Paxton said the office had received a complaint that Citigroup’s policies would constitute discrimination against the firearm industry, violating the gun measure, known as SB 19.