New NFMA Chair Wants Group to Be More Proactive on Disclosure

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WASHINGTON – Lisa Washburn, the new chair of the National Federation of Municipal Analysts, wants NFMA this year to become more proactive in collaborative industry efforts to improve municipal bond disclosure and address changes in the municipal market.

Washburn, a managing director with Massachusetts-based Municipal Market Analytics who began her year-long term as NFMA chair on Jan. 1, talked about her goals for the group in a recent interview.

NFMA has historically focused on improving disclosure in the market, and while that will be a main goal in 2016, she said the group and analysts have to keep in mind the ongoing challenges issuers are facing, like rising debt costs, and increasing unfunded liabilities for pension and health care systems.

Washburn said she has seen more of an alignment in the muni market and among stakeholders on the necessity to improve secondary market disclosure as the Securities and Exchange Commission works through its Municipalities Continuing Disclosure Cooperation initiative.

Under the MCDC program, issuers and underwriters get more lenient settlements from the SEC for self-reporting any time during a five-year period that an issuer said it was in compliance with its continuing disclosure obligations, when it was not. The initiative already has led to settlements with 72 underwriters representing 96% of muni trading volume. The SEC is expected to soon start announcing settlements with issuers.

NFMA is one of numerous municipal industry groups that have met to assess what avenues would lead to better disclosure.

"I sense a real openness now on exploring ways to get there," Washburn said. "My goal for the organization is for us to continue the good work we do on promoting continuing disclosure through our recommended best practice papers and white papers, but also to become a leader and active participant in those industry efforts."

So far, the groups have focused their discussions on possibly incorporating continuing disclosure questions into audits of financial statements and working with the Municipal Securities Rulemaking Board to improve the functionality of its EMMA system.

Washburn said EMMA is "a very valuable and highly used resource for access to disclosure" and added it would be an important development to make the data more readily accessible and easier to navigate.

Interim disclosure, or information released in between annual audited financial statements, is another disclosure area of interest for NFMA this year.

Audits can sometimes come out very late and be stale by the time they are released, Washburn said. Instead of waiting, analysts would like to get the internal information that issuers are using on a more frequent basis, like cash flows, monthly budgets, actual expenditures -- anything the issuer's administration or city council is using to guide them financially.

"We're not looking for new information or new reports to be created, but how best can we have access to the information that is critical to understanding the financial health of an issuer," Washburn said.

In addition to communication with other market groups, NFMA plans to address disclosure and other industry challenges by releasing best practice documents on local government debt, tax-backed debt, charter schools, toll roads, and water and sewer debt in the next months. NFMA also is planning to release a white paper on statutory liens in the wake of questions raised during Detroit's bankruptcy proceeding, she said.

The bankruptcy process led many analysts and others to question whether the city's general obligation bonds had statutory liens. Washburn said the statutes left the answer ambiguous. But some states like Rhode Island and California have passed laws where statutory liens apply, she added. A statutory lien is a provision of a law that gives certain bonds held by investors a higher ranking in a bankruptcy recovery hierarchy than others without such liens.

NFMA is not taking a side on the presence of liens in certain bonds, but in response to questions raised about Detroit debt, NFMA thought analysts should be made aware of whether a lien exists or whether an issuer's underlying securities structure is unclear about liens, she said.

Washburn has been on the NFMA board since 2008 and said she first got involved because she "really believes in what the NFMA does."

"I think that the organization has a very well-respected voice in the industry and I really respect and love working with the people I have worked with throughout the years," she said.

Public finance was not Washburn's intended career path after graduating from Lehigh University in Bethlehem, Pa. with an undergraduate degree in finance and a minor in psychology.

"I got started on a fluke," she said, recounting how she worked a couple of finance jobs before getting into public finance with Moody's Investors Service in 1991. While at Moody's, she worked on a variety of projects including its first municipal default study and ratings calibrations, before joining Municipal Market Analytics, formerly Municipal Market Advisors, in 2011.

"I really got the Moody's job not really knowing what public finance was," Washburn said. "The more involved I became in the sector, the more I discovered it is one of the most interesting, diverse sectors that you can be involved in. It is never not interesting."

As for her psychology minor, Washburn said that has also helped her in her professional life.

"I think there's a lot that happens in the market that is really more driven by behavior than necessarily what is the economically right thing to do," she said. "Understanding motivation is huge. I don't think you can decouple people from financial decisions."

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