By Lynnette Kelly.
Lynnette Kelly is executive director of the Municipal Securities Rulemaking Board (MSRB), the organization established by Congress to protect investors, state and local governments and other municipal entities by promoting a fair and efficient municipal securities market. She can be reached at lkelly@msrb.org or (202) 838-1500.
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Financing a public project with municipal bonds is a team effort in which many professionals work together to achieve the city’s goals. But as government officials considering issuing municipal bonds, keep in mind that it’s your deal.
You are the stewards of taxpayer dollars, and you make the decision to borrow. You decide whether to hire a municipal advisor to act as your fiduciary, and you select the underwriter through the process — competitive or negotiated — of your choice. Throughout the life of any municipal bond, you assume responsibility for providing investors with information that is timely, accurate and complete.
And while the issuance of municipal bonds is your deal, cities have an important ally in the Municipal Securities Rulemaking Board (MSRB), the national regulator responsible for promoting a fair and efficient municipal securities market. Protecting municipal bond issuers is a central aspect of the MSRB’s mission. It’s important to note that the MSRB does not regulate state or local governments; its rules are designed to make sure you are treated fairly by the underwriters and with the utmost good faith by municipal advisors you hire.
The MSRB also operates a public platform called the Electronic Municipal Market Access (EMMA®) website, which is your key to accessing important information about the municipal market and communicating information to investors. In addition, the MSRB provides free, objective educational materials for municipal issuers.
Because issuing bonds may be only an occasional event for some cities, it’s helpful to understand how the MSRB can support you when your city decides to issue bonds.
The Decision to Borrow
The decision to access capital from the $3.8 trillion municipal securities market is always handled at the state and local levels. Government officials have a responsibility to their taxpayers to make informed decisions about how to finance a public project. Understanding conditions in the municipal securities market and evaluating your city’s existing bonds are important steps in the decision to borrow.
The EMMA website provides free access to information and data about the municipal market and nearly all existing municipal bonds. Before deciding to issue bonds, you may wish to visit EMMA’s Tools and Resources page to:
• See which issues are scheduled to come to market and how they are priced;
• Monitor the trade activity of your city’s existing bonds; and
• View upcoming federal economic reports or other events that can have an impact on the municipal bond market.
Working With Financial Professionals
After a municipality has decided to issue bonds, an important step is assembling the deal team, which can include municipal advisors and underwriters. Visit the MSRB website (www.msrb.org) to ensure that any firm you are considering is properly registered with the MSRB and that individual professionals have passed the appropriate professional qualification examinations. Working with unregistered or unqualified financial professionals puts a city at risk.
MSRB rules and professional qualification requirements are designed to ensure that the advice you receive from a municipal advisor is in the municipality’s best interest. MSRB rules require underwriters working with a city to deal fairly, disclose potential conflicts of interest and honor your wishes about some of the ways bonds are marketed and distributed to investors. You can read more about protections for municipal bond issuers in the Education Center on the MSRB website. If at any time you suspect a municipal finance professional of violating MSRB rules or acting unfairly, report it to the MSRB by phone at (202) 838-1330 or by email to complaints@msrb.org, and the MSRB will forward your complaint to the appropriate enforcement authority.
Continuing Disclosure
After a city’s bonds have been issued, it is the city’s responsibility to provide investors with required ongoing material information in a timely and complete manner. Annual financial and operating information, notices of major events that may affect bondholders and other information are essential to helping investors make fully informed decisions about buying, selling or holding a municipality’s bonds. The EMMA website serves as the official platform to disclose this information to investors.
Cities can schedule free email reminders from the MSRB to alert key individuals of upcoming filing deadlines. The MSRB also offers free phone support, how-to videos and educational resources to support state and local governments in understanding and fulfilling their continuing disclosure obligations.
Whenever your city decides to issue bonds, remember — it’s your deal, and the MSRB’s rules and resources are there to help ensure the process is fair. Take advantage of these tools and resources to help you make informed decisions about issuing municipal bonds and communicating with investors.
California Debt and Advisory Commission Issues Guidance on Debt Reporting Requirements
Effective Jan. 1, 2017, and in accordance with SB 1029 (Hertzberg, Chapter 307, Statutes of 2016), state and local issuers are required to submit an annual debt transparency report for any debt issuance for which they have submitted a Report of Final Sale during the reporting period. The annual debt transparency report is due to the California Debt and Investment Advisory Commission (CDIAC) within seven months of the close of the reporting period, defined as July 1 to June 30. Issuers of any new debt must also certify on the CDIAC Report of Proposed Debt Issuance that they have adopted local debt policies and that the proposed debt issuance is consistent with those policies. More information is available at www.treasurer.ca.gov/cdiac/sb1029/guidance.pdf.
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