Law and legal issues

DALLAS - Louisiana's current budget problems will be dwarfed by future deficits unless the state takes action now to prepare for lower revenues later, Gov. Bobby Jindal said Monday.

A Securities and Exchange Commission official yesterday said that staff are developing an "action plan" to boost municipal disclosure and accounting standards through new rulemaking or legislation.

BRADENTON, Fla. - Current debt management practices in Palm Beach County, Fla., have cost taxpayers as much as $5.38 million in extra interest and other expenses because of the way underwriters have been selected, the use of negotiation to sell bonds, and the purchasing of unnecessary bond insurance, according to Sharon Bock, the county's elected clerk and comptroller.

BRADENTON, Fla. - Jefferson County, Ala., commissioners today will vote on resolutions to authorize new payment extensions for troubled sewer debt and extension of forbearance agreements on payments for related swaps on which the county owes $748 million in termination payments.

SAN FRANCISCO - Under recently proposed legislation, California lawmakers may make it more difficult for municipalities to declare bankruptcy like Vallejo did last year.

WASHINGTON - The National Association of Bond Lawyers has finished a draft of the most comprehensive municipal bond disclosure guidance for attorneys and other market participants in more than 15 years, and is asking various market participants for comments before finalizing it.

The Municipal Securities Rulemaking Board announced yesterday that it will hold a joint seminar with the Regional Bond Dealers Association on May 13 in Memphis to review the MSRB's latest rules and recent initiatives.

CHICAGO - Cook County, Ill., Board President Todd H. Stroger named his chief of staff, Joseph Fratto, to serve as interim chief financial officer after the surprise resignation of Donna Dunnings from the post Friday over her ties to a fired county employee.

City National Securities has agreed to pay $315,000 and to submit a plan to buy back at par certain municipal auction-rate securities to settle charges with the Financial Industry Regulatory Authority that it failed to disclose ARS risks to customers and properly supervise sales.

WASHINGTON - Securities and Exchange Commission chairman Mary Schapiro said yesterday that the SEC will propose new rules for rating agencies, stemming from a broad but "intense review" of how to restore confidence in the financial system.

BRADENTON, Fla. - Tennessee will conduct a comprehensive review of a program required by state law that is designed to educate cities and counties about using derivatives such as swaps and forward-starting purchase agreements, the state's new comptroller said Tuesday.

The Government Finance Officers Association and 11 other issuer groups are urging House Financial Services Committee chairman Barney Frank to reintroduce legislation that would require rating agencies to rate municipal and other securities on the basis of default alone. The move came after Moody's Investors Service last week assigned a negative outlook to the entire tax-backed local government sector.

WASHINGTON - The Municipal Securities Rulemaking Board yesterday asked the Securities and Exchange Commission to approve changes to EMMA that would allow issuers to voluntarily file non-required financial or operating data as well as event-based disclosures, including rating agency presentations and communications from the Internal Revenue Service.

CHICAGO - Detroit Mayor Ken Cockrel Jr. Monday unveiled a 2010 budget that features a slew of layoffs while leaving open the possibility of leasing city assets to wipe out an estimated $300 million deficit.

WASHINGTON - State tax collections for the fourth quarter of 2008 declined for the first time in more than six years, and sales taxes were dealt a record-setting blow during that period, according to a report issued yesterday by the Nelson A. Rockefeller Institute of Government.

CHICAGO - Former Illinois Gov. Rod Blagojevich pleaded not guilty yesterday to federal corruption charges alleging his drive for financial gain influenced state legislation, jobs, and contracts - including the selection of Bear, Stearns & Co. to lead the state's $10 billion pension bond sale in 2003.

WASHINGTON - Two lawsuits in federal courts seeking class action status that claim it's illegal for tolling authorities in Rhode Island and Massachusetts to discount tolls for certain residents and not others could spell trouble for toll-backed muni bonds and potentially affect issuers in other states, some market participants said.

CHICAGO - A lawsuit filed by five southeastern Wisconsin school districts against several financial firms the districts charge misled them over the safety of a $200 million investment involving synthetic collateralized debt obligations will be heard at the state court level, a federal judge has ruled.

SAN FRANCISCO - Standard & Poor's suspended its credit ratings on three Victorville, Calif., agencies after the Southern California city failed to garner unqualified audit opinions for its just-completed 2007 financial reports.

WASHINGTON - Standard & Poor's is defending the practice of municipal bond and other issuers paying for their own ratings, arguing in a white paper released ahead of tomorrow's Securities and Exchange Commission roundtable on rating agencies that "issuer-pays" is the most effective business model for fostering high-quality ratings and a transparent ratings process.