BOSTON - Colin MacNaught stood before investors and touted the virtues of Massachusetts Treasury's new mobile app.
"Now I can balance my six-month old on one arm at 2 in the morning while checking on a CAFR with the other," MacNaught, the assistant state treasurer for debt management, said with a grin at the commonwealth's annual investor conference at the Boston Convention and Exhibition Center. A CAFR is a comprehensive annual financial report, longhand for audit.
The mobile app is yet another initiative by the commonwealth under the four-year tenure of Treasurer Steven Grossman, who along with MacNaught has sought to put Massachusetts at the disclosure forefront. "Steve Grossman has emerged as an incredible leader in disclosure and transparency," said Treasurer-elect Deborah Goldberg, who will succeed Grossman on Jan. 21.
Disclosure initiatives under Grossman, who vacated the treasurer's office to run for governor, include frequent investor calls, a new data-driven website and even the conference itself.
How disclosure actually benefits an issuer's bottom line is difficult to gauge.
"It's a really good question," said MacNaught, who then asked rhetorically. "If we have a new website, a better app, more conferences, more meetings, and the information you need in one hour as opposed to three, does it pay off?"
Investors and analysts at the Boston conference thought so.
"I admit it's hard to quantify it, but I know disclosure helps," said Alan Schankel, a managing director with Janney Capital Markets in Philadelphia. "I think disclosure challenges will shut out the smaller issuers."
Paul Mansour, managing director and head of municipal research at Conning & Co. in Hartford, Conn., said disclosure helps on the margins. "If it's a close call, I want the states and sectors where I can call people and get information," he said. "This reflects a lot of blocking and tackling. If investors know there is good disclosure, then they will want to buy these credits."
In Pennsylvania, the Commonwealth Financing Authority and Office of the budget postponed a $198 million bond sale planned for Dec. 19 because the commonwealth's CAFR for fiscal 2014 was tardy. State budget officials later posted the completed CAFR.
"No date has been set for a new bond release," said Gov. Tom Corbett's press secretary, Jay Pagni.
The state is already grappling with bond rating downgrades, a large unfunded pension liability, budget imbalance and the York City School District receivership.
Two Pennsylvania entities looking to win back the confidence of the capital markets have taken steps to improve transparency. State capital Harrisburg, which avoided a brush with bankruptcy last year through a recovery plan that erased $600 million in debt, has finally caught up with its audits. City auditing firm Maher Duessel presented its completed 2013 audit to the city's audit committee on Dec. 16. Harrisburg expects to complete its 2014 audit by June 30.
Also in Harrisburg, public-works agency Capital Region Water is targeting an investment-grade rating within about 18 months. The agency, under its former name Harrisburg Authority, was linked to the incinerator bond-financing debacle and had its rating withdrawn in 2011. Its rebranding has included transparency initiatives such as a new website, an investor toolkit, and a series of public meetings. "We're going out and telling people how we're different."
M&T Bank and Amalgamated Bank have stepped forward with financings that represent forward steps for the agency. "Over 18 to 24 months we'll hopefully have more of a track record and some financial statements to show, and we can see that level of investor confidence increase," chief executive Shannon Williams said in a recent interview."
Massachusetts has been home to a tussle between sunshine activists and the MBTA Retirement Fund, which manages the pension fund for Greater Boston's transit employees. The $1.6 billion fund, which operates independently of the taxpayer-funded Massachusetts Bay Transportation Authority, still receives $58 million in annual public funding from the MBTA but operates as a private trust, backed by state court rulings.
Last week, the Boston Globe reported that the fund waited more than a year to disclose problems at the hedge fund Weston Capital Asset Management, where it had invested $10 million. In its
Boston free-market think tank Pioneer Institute said that lack of effective governance overhaul at the MBTA Retirement Fund elevates taxpayer risk. "More reform is needed," Pioneer said in a recent position paper. A Pioneer report earlier this year said the fund "dramatically underperformed" the Pension Reserves Investment Management Board, which oversees the assets of the state and teachers' retirement systems.
Speaking generally, Janney director and municipal credit analyst Tom Kozlik underscored the importance of disclosure. "For folks like myself, just to be able to acquire documents or acquire data, it's very important."
Kozlik praised Massachusetts officials and Philadelphia city Treasurer Nancy Winkler, among others, for "putting analysts and other investors in front of the political actors."
Massachusetts has launched a series of transparency initiatives during the four-year tenure of state Treasurer Steven Grossman. With MacNaught, they included investor calls and an annual conference, a new website and the aforementioned mobile app.
"Massachusetts has done an excellent job at conducting investor meetings on a regular basis," he said.
In Philadelphia, Mayor Michael Nutter took the microphone and faced tough questioning from investors for about a half-hour. "The mayor had a very frank conversation with several of the investors during the meeting," said Kozlik.
"Those are the types of things where I think for municipal issuers, especially the states and larger cities, the transparency really helps."
