Muni Think

We continue to hear increasing discussion about the “need” to regulate municipal financial advisers.

The program has enabled hundreds of issuers to come to market on better terms, thus encouraging them to go forward with badly needed facilities, such as new schools, hospitals, environmental projects, and water and sewer projects.

Since the first transaction in April, issuers nationwide have sold more than $47 billion of BABs at net yields significantly below what they could achieve in the traditional tax-exempt market.

At the end of August, New York Comptroller Thomas DiNapoli announced that pension contributions for governments in the state would increase by about 35% in 2011, or some $880 million.

We welcome Robert Barnes and Donald Hunt’s commentary [published Sept. 28] and general support for a municipal bond insurer similar to our recently proposed Issuers Mutual Bond Assurance Co. However, we feel compelled to clarify several misconceptions they expressed about the plan.

Since last fall, new issues of less than double-A rated municipal bonds have been severely constrained. Why should we care? Because these bonds are typically issued by governmental and tax-exempt entities, often to fund shovel-ready projects ranging from bridges to hospitals - and the failure of that market continues to seriously crimp a national economic recovery.

A recent article in The Bond Buyer reports that investors are gravitating toward longer maturities (“Investors Going out Longer,” Aug. 31). Yet in spite of the longer focus of investors, the pillars of credit analysis and ratings continue to be largely based on analysis of what can be seen in the rear-view mirror.

Since the autumn of 2007, the municipal market has been reeling from the crash of the mortgage market and the collateral-damage impact on the ratings of, and appetite for, bond insurers.

We write to clarify and reinforce the long-standing position of governmental municipal issuers in support of complete and full disclosure in the municipal bond market.

We read with interest the comments of the Government Finance Officers Association's debt committee, reported in The Bond Buyer article "GFOA Shifts on Muni Disclosure" in the June 30 edition.