No. of Recommendations: 2
Prophet43M,

Sorry for the delayed response. Took a quick trip to visit family.

I would love to see this message board spend some time of muni bonds.

If you find something post it. I'm sure all of us can learn from whatever we stumble across. It is a useful and unique corner of the debt market and we would all benefit from exploring it more deeply. Now is a good time to learn because I don't think now is the time to grab a shovel and back up the truck. It would be good to be solidly grounded in the basics if or when the back the truck up moment comes.

(2) The financials for municipalities are extremely "dark" and out of date. She seemed to imply that the lack of good disclosure probably means municipal finances are worse than can be easily detected in the dated disclosure documents.

I'm not sure I completely agree with this assertion of hers. Getting fundamental data is a pain in the arse but I would not describe it as "dark." She has been studying the market in large chunks and each bond issued is very, very local. These are public entities, every thing they do is of public record. Digging through it is a different game. It is not laid out neatly like publicly listed companies lay things out. These are often line item budgets and we need to chase the right rabbits down the correct hole, a tedious task. The budgets are built for internal use to manage the entity not for investors ease of financial stability analysis. I do agree that many who are defending the stability of the muni market are probably under estimating the risks because of the difficulty in digging up the specifics of some budget numbers. I get the impression that they often accept the easy answer and the local equivalent of a "headline" number. Total debt servicing to revenue numbers are not often used on the local level because project X is funded by ymils, project A is funded by Zmils and so on. For their purposes it is often easier to look at the parts, dept by dept, project by project.

In the town I grew up in they put in a street light tax to defer the city costs of lighting and maintaining street lights plus the service on the debt of revamping of the downtown lights into something more esthetically appealing; it was billed by the local electric company. Specific tax for a specific purpose. The money for the revamp was part loan, part loan guarantee and part grant. Did they qualify for the grant based on general revenue? Were the bonds revenue bonds? I don't know and they would have a great deal of flexibility in setting it up.

Often a good place to look for places to dig deeper is in the local newspaper, some carry a report of the last public meeting or the even publish the minutes if the community and the docket is small. If something newsworthy is going on the paper will be printing something. If its a slow news week and the editor is a local irritation they may send a reporter to scratch something up. Finally, letters to the editor are also useful; we have to sort out the crack pots from the material. All of the above can provide clues to the budgetary health of an entity.

Often the best source is someone who lives there who understand local culture and politics. It helps to know who is making noise so they can be seen and who is asking a question out of deep fiduciary concern. In my neck of the woods half the count commissioners are blow-hards who love a good headline.

jack
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