SAN FRANCISCO — Hawai'i County, after a decade of hiring Wall Street banks to sell its bonds, saved taxpayers money by being the state's first municipality since 1997 to issue debt through an auction.

The $50 million offering this week produced lower average yields for the county relative to top-rated debt than at its last three bond sales, when it rejected competitive bidding and instead hired investment banks to arrange the issues and negotiate terms.

"You want to see aggressive bidding because you want to see the highest possible price on the bonds to save taxpayers money," said Gary Kitahata, who served as the financial adviser on the transaction. "This is why the competitive bidding process works so well."

Hawai'i County's decision goes against the trend in the $2 trillion municipal bond market, where most borrowers select Wall Street bankers in so-called negotiated sales. In the past nine years, issuers in Hawai'i sold more than $10 billion of bonds without seeking competitive bids.

The Feb. 8 auction, Hawai'i County's first since 1996, produced savings over the county's prior sales, according to data compiled by Bloomberg.

The county, which governs the Big Island, also paid lower fees to Merrill Lynch & Co. and A.G. Edwards Inc., the banks that won the right to underwrite the debt by offering the lowest interest cost at the auction. The county paid $306,000 for underwriting and bond insurance in the sale this week, compared with $450,000 for underwriting and insurance on a negotiated sale of $55 million of bonds in August 2004, according to Hawai'i County Treasurer Mike Okumoto.

The bonds, which mature from 2007 to 2026 and are insured against default, were sold for an average yield that was 0.03 percentage points less than AAA-rated municipal securities, according to data from Bloomberg and Municipal Market Advisors Inc. Over the next two decades, that amounts to $212,800 less in interest costs than a top-rated borrower would pay, taking into account the maturities and yields of the 20 individual bonds.

By comparison, the $55 million of county bonds sold in August 2004 were priced, on average, at yields that were 0.06 percentage point more than top-rated debt, for additional interest costs of $196,000. In 2003 and 2001, the average was 0.04 and 0.10 percentage points more on bond sales of $36 million and $23 million, respectively, which adds up to $103,000 and $273,000 in extra interest costs above top-rated debt over the life of the bonds.

"I think we got a good price," Okumoto said.

Hawai'i and its local governments had gone the longest of any U.S. state without selling bonds by competitive bid. Data compiled by Bloomberg on Hawai'i bond sales for an Aug. 31, 2005, article found that in four out of six instances last year when governments in Hawai'i sold bonds at about the same time a similar issuer in another state took bids on debt, the publicly bid bonds were priced at lower rates.

Negotiated sales are the dominant method of selling tax-exempt debt, accounting for 81 percent of the record $407 billion in municipal bonds sold last year, according to Thomson Financial.