Five-Term Milwaukee Comptroller Morics Moves On

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CHICAGO — Longtime Milwaukee Comptroller W. Martin “Wally” Morics retired late last year, handing the reins of the office that manages the city’s debt issuance to his longtime deputy Michael Daun until voters elect a new comptroller this April.

Morics early retirement from the position that manages many of Milwaukee’s fiscal affairs and serves, in effect, as its financial officer followed his spring announcement that he would not seek re-election to a sixth term. Longtime Comptroller James McCann hired Morics in 1976 and when McCann retired in 1992, Morics successfully ran to replace him.

The office is in the hands of Daun, the deputy comptroller. Daun said Morics was coaxed into leaving early by travel plans and financial penalties in his retirement compensation if he waited.

“Life is short,” Morics told his staff, according to Daun.

Daun himself pondered a run in April, but at 67 and with retirement plans of his own, he feared the reaction his wife, Shirley, might have to the news. “Four years ago, I might have run,” he said.

Daun served in the office under Morics for three decades. He came in on a federal grant to manage a project using information systems to improve management and decision-making and worked on implementing long-range financial planning. “I feel my time here has been well-served,” he said.

Two candidates are vying for the post in the April 3 general election: Milwaukee County supervisor Johnny Thomas, chairman of the county board’s finance and audit committee, and Martin Matson, deputy city pension director.

Because only two candidates are running in the nonpartisan race, no primary will be held. The inaugural is on April 23. Daun said he intends to assist in the transition and would consider a part-time position to offer ongoing help.

Though the office will see a changing of the guard at the top, Daun’s longtime debt team will remain. They include Craig Kammholz, director of financial services, and Richard Li, public debt specialist. “These two fellows are critical because of their talent, experience at the city, and business experience,” Daun said.

Kammholz has worked in the office for 10 years and before that served in the city’s budget office for two years. Li joined the office in 2002 after holding several private sector positions at financial services firms.

The comptroller sits on the city employees’ pension board; manages Milwaukee’s financial affairs, including debt management; establishes accounting policies for city departments; and manages cash flow, audits and financial analysis of projects. The comptroller also sits on several boards and is secretary to the city’s public debt commission.

By Wisconsin statute, all of the city’s new-money general obligation bonds over 10 years must be sold competitively. Refundings, floating-rate bonds and other securities can be negotiated. Milwaukee abides by internal policies set by its Public Debt Commission to use competitive bidding on as much debt as possible, including its short-term notes and annual revenue anticipation note sales. The office also typically uses competitive sales on its current refundings but goes negotiated on advance refundings.

The commission’s policies offer more flexibility on the city’s sewer revenue bonds, and the comptroller last year included some new-money bonds in a planned advanced refunding that sold through negotiation.

Daun helped Morics steer the office through a debt-management modernization. “It was just plain bread-and-butter issuance back then. We’ve expanded to use variable-rate debt, swaps and commercial paper,” Morics said in a recent interview.

In another debt management shift, the office will change the structure it uses on most of its floating-rate borrowing. Spooked by the risks and rising costs as banks that provide letters of credit and other liquidity support were downgraded after the 2008 financial crisis, Milwaukee decided to shift to products that don’t need liquidity.

The office conducted a competitive selection process for broker-dealers interested in managing the deals and settled on Bank of America Merrill Lynch and Morgan Stanley as leads with Loop Capital Markets LLC as a co-manager. The timing also coincides with the expiration this year of the city’s seven-year letter of credit contract with State Street Bank.

Instead, Milwaukee will use a product first launched by the state years ago — extendible municipal commercial paper in which the maturity is automatically extended for a term in the event of a failed remarketing.

The office also will use SIFMA index bonds and rolling tender variable-rate bonds. The office will maintain a bank relationship as a backup. The move should generate savings since the LOC cost was expected to rise to 50 to 60 basis points from 17 basis points to renew this year, Li said. “This gets us away from single credit exposure,” he added.

Borrowing plans this year include a Ran issue for at least $100 million in March, $75 million of new-money GOs in March or April, and school Rans of about $200 million in late summer or early fall.

Moody’s Investors Service rates Milwaukee’s $750 million of GO bonds Aa1 with a negative outlook, Standard & Poor’s rates them AA and stable, while Fitch Ratings assigns a AA-plus and negative outlook. Analysts say the city’s overall credit profile remains strong, with rapid repayment of manageable debt levels and a fully funded pension system, but its exposure to state actions and limited revenue-raising options pose a threat.

Milwaukee relies heavily on property tax collections and state revenue sharing to cover about 80% of its general fund expenses. State aid levels have remained flat since 1995, but Gov. Scott Walker’s two-year budget cuts the city’s aid by 4% and tax caps limit its ability to make up for the shortfall.

Walker argued that controversial legislation he signed into law to curb the collective bargaining rights of most public unions and increase employee pension contributions and health care premium payments would ease the impact of cuts. Morics called that notion “ludicrous” and noted that public safety unions and employees were exempted from the state legislation and they account for 75% of the city’s personnel costs.

Daun offered the next officeholder some of his own advice. “Ours is a unique office in that it is independent,” he said. Its advice to the mayor and Common Council — especially where property taxes are affected and proposed economic development projects are involved — may not always be heeded as they weigh political objectives, but “brutal objectivity” is required.

Daun said the next comptroller also will face a difficult task in retaining skilled professionals. While some city employees might be comforted by a no-layoff pledge during an austere time, compensation is key. “It’s hard to get talented people,” he said, “and we’ve lost people because they don’t see the prospect of financial incentives.”

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