Tennessee Comptroller Justin Wilson has extended the deadline until Jan. 8 for his office to receive public comments on a proposed model debt-management policy for local governments.
He initially set mid-December as a tentative deadline for comments but extended the timetable to give people more time to respond.
Wilson plans to submit a proposed model debt policy to the State Funding Board for consideration. If adopted, the policy may require local governments throughout Tennessee to adopt their own debt policies consistent with the model.
The debt policy is designed to make it easier for citizens and members of local governing bodies to get details about debt transactions, including the relationships between the parties involved in the transactions, according to the comptroller.
It also prohibits an individual or company from representing more than one party in local government bond sales. Fees, relationships, and contracts between companies, their employees, and independent contractors would have to be disclosed.
Wilson also expects the debt policy to include standards for the use of variable-rate debt by local governments as well as provisions discouraging the excessive use of backloaded debt.
Emily Evans, one of 40 members of the Metropolitan Government of Nashville and Davidson County, told Wilson the state’s proposed debt policy “goes a great distance in assuring better disclosure to the issuer.”
However, Evans wrote to Wilson that the proposed debt policy is not strong enough in the areas of transaction fees and risks. Evans cited Nashville’s proposed new $585 million convention center. The Metro Council is currently evaluating the financing plan, which calls for a large portion of the debt to be back-stopped by a general fund pledge.
Council members have been told that the financial projections for the convention center financing “will protect the general fund and there will be only a remote risk to taxpayers,” Evans wrote.
But bond documents for the project contain “all the usual and customary warnings about forward-looking statements,” Evans said. She complained that finance teams often make verbal statements to local officials to secure approval of a transaction, “while knowing full well those same statements would not pass muster with the SEC or the NASD.”