PHOENIX - Oregon's Municipal Debt Advisory Commission Task Force will gather information about new categories of debt incurred by local governments, including bank loans and lines of credit.
The MDAC sent out a memo Jan. 4 to cities, counties and other local jurisdictions, informing them that they will now be requested to provide information on four new categories of debt not previously subject to reporting to the MDAC, which verifies local debt obligations.
That information, which the MDAC wants by Jan. 22, includes bank loans and lines of credit if drawn upon, as well as capital leases, state loans, and U.S. Department of Agriculture loans.
"Bank, state, and federal loans, capital leases, and lines of credit represent a growing category of indebtedness for local governments nationwide," the memo says.
"The MDAC, along with the Government Finance Officers Association (GFOA), the Governmental Accounting Standards Board, and the Municipal Securities Rulemaking Board (MSRB), believe that reporting these categories of debt is important to both investors and the general citizenry, as it promotes a better understanding of all potential demands on local revenues," the memo says.
"MDAC has gathered outstanding balances for State loans to Oregon local jurisdictions, but your assistance is needed both to confirm the accuracy of this information and to help collect information on your jurisdiction's Federal and private bank loans, capital leases, and lines of credit for incorporation in the statewide MDAC debt database," the memo continues. "Expanding the database to include all Oregon local government loans will enhance transparency, generate more accurate overlapping debt reports, and provide investors and citizens with pertinent information."
Bank loans are an extremely opaque market because municipalities nationwide are generally not required to disclose much information about them. Issuers and banks are often unsure of whether an instrument is a loan or a security subject to Securities and Exchange Commission and MSRB rules, and the lack of disclosure makes it difficult to pin down exactly how large the muni loan market really is. The GFOA and MSRB both recommend disclosure, and muni analysts have consistently said they need that information in order to make a fully formed analysis of a credit.
The MDAC letter also recommends that municipalities disclose any bond-like loans on the MSRB's EMMA website, where the MSRB has provided a means of doing so.
