Paul Maco

"The municipal securities market is critical to building and maintaining the infrastructure of our nation." So said a unanimous Securities and Exchange Commission in its July 2012 Report on the Municipal Securities Market. The SEC Report focused on improving municipal bond market transparency, and illustrates why transparency has been an SEC priority for the past two decades and remains so today. The health of the marketplace depends upon the quality and timeliness of information available to investors. Investors are not alone in their interest in the transparency of municipal bond issuers. Financial information of state and local government debt issuers is of great interest as well to state residents and taxpayers, not only for how tax dollars and other revenues are used, but how well they are used and the priorities that are inherent in their use. The more transparent, the greater confidence, or lack thereof, citizens may have in their government. The bar for such transparency has just been raised by DebtWatch.

DebtWatch, the website recently launched by California State Treasurer John Chiang, thoroughly embraces this philosophy. Pointing out that California state and local government issuers have borrowed over $1.5 trillion in the last three decades, in announcing the launch of DebtWatch, Treasurer Chiang stated "[b]onds are not free money, and indeed, obligate the public to repay them through higher taxes and fees. DebtWatch aspires to empower Californians to hold government accountable for its borrowing decisions." This is accomplished by providing existing, not new, information in easy to understand form, using graphics and tools permitting users to employ the data in their own analyses. DebtWatch is essentially an aggregator of data previously collected under state law by the California Debt and Investment Advisory Commission. Because the information is provided in an open data format, anyone willing to make the effort may employ it to develop greater understanding of how and how well government operates. Rather than simply dump information on the user, DebtWatch provides users a choice of three different starting points, Debt by Issuer Type, Debt by County, and Explore All Debt, from which they may extract particularized findings and trends and employ a variety of tools provided on the site to compile and compare data to download if desired. Tutorials on site use maximize accessibility and more is on the way. "Site improvements are planned to bring added functionality and features, which will be rolled out incrementally based on user feedback."

California ranks first among the states with total state and local government debt outstanding for FY 2016 of $433.9 billion (but 10th in per capita debt), according to, so it is fitting that Californians have the means to put its fiscal condition in perspective. While several states collect data on state and local debt issuance, not all make it internet accessible, few approach California in scope, and none provide the level of data available on DebtWatch. DebtWatch demonstrates what can be done by state government officials with the information already at hand to promote government transparency for residents and taxpayers. Whether other state governments choose to emulate California in this regard may depend in part upon the level of user activity and taxpayer response to DebtWatch.

As the press release announcing its launch makes clear, DebtWatch targets taxpayers, not investors. The site cautions, "[t]he information displayed is compiled by the State Treasurer's Office from reports submitted to the California Debt and Investment Advisory Commission in accordance with State law. The information has not been independently audited by the State Treasurer's Office for accuracy and completeness. The reliability of the data is the responsibility of the reporting governmental agency."

Municipal bond investors today look to a different source for transparency, EMMA or Electronic Municipal Market Access, provided by the Municipal Securities Rulemaking Board. EMMA provides initial and continuing disclosure collected from underwriters and issuers under provisions of the federal securities law. The MSRB continues to enhance EMMA with tutorials and explore ways to expand its utility. Data gathering for taxpayer transparency differs in purpose from that provided to investors, but a great stride forward has just been taken by DebtWatch.

As state and local governments expand and better utilize financial data to inform taxpayers, might such information, perhaps refined along the way, ultimately enhance the data populating EMMA and inform investors as well? Such application may be a long way off, but the discussion may be worthwhile.

Paul S. Maco is a partner in the Washington, D.C. office of Bracewell & Giuliani LLP and served as the first Director of the SEC's Office of Municipal Securities from 1995 through 2000. Alexander D. Pappas is a research specialist in Bracewell's Washington, D.C. office.